Associated Press Discount stores are slowly dying. Yesterday, Dollar Tree announced it would buy Family Dollar, a chain that is in the process of closing hundreds of stores and firing workers. Other discount stores have been struggling as well, writes Heidi Moore at The Guardian. Fashion discounter Loehmann's filed for bankruptcy, while Wal-Mart's sales have declined for the past five quarters. "Thereâs just not enough money deployed by American families to keep all the discount chains in business," Moore writes. Dollar stores saw their heyday during the recession, when middle-class shoppers came to buy smaller, cheaper packages of household necessities like toilet paper. While middle-class shoppers have enjoyed economic recovery, America's poorest consumers have not, write Paul Ziobro and Shelly Banjo at The Wall Street Journal. Money spent by households earning less than $30,000 has been flat since 2008, WSJ reports, citing the Bureau of Labor Statistics. Total income for that group fell 1% between 2004 and 2012. The merger of Dollar Tree and Family Dollar could further crunch Wal-Mart, according to WSJ. With 13,000 stores between them, the new dollar store will be in a better position to negotiate lower prices from suppliers. This could challenge Wal-Mart, which is already more expensive than dollar chains. But it's possible that no amount of discounting will win back these struggling shoppers. "A cash-strapped consumer canât keep buying forever, no matter how low prices go," Moore writes.
It's not a bad thing that consumers aren't buying. The artificially low interest rates for some time do boost consumption and investments. This though happens at the expense of savings. The credit expansion induced boom goes to bust and this lack of savings is the reason. It's at this time people curtail their consumption to build up their savings, and this curtailment is named the credit crunch or liquidity crunch. It is this building up of assets and savings that give people and as a result economies strength to have real and sustainable growth. We haven't hit another recession yet but the string is taut. From what I hear of those who are newer all there is to trading is to go long and buy the dips. I admit it has been working pretty nicely as well. Yet, with all things in life there's a yin for every yang and I cannot fathom how terrifying it's going to get when the stock markets goes kaboom. We're already at very low rates to really spur the growth again. The Fed might just juice the market again with more QE, which is going to help those who are market savvy. The main street as almost always is going to get shafted again. There really is no way to get out of facing a recession after a boom. Once the rot of the credit expansion has set in, it's only an amputation that saves the patient. I hope the pain isn't too debilitating. Corporatism and government go hand in hand and the government and big business marriage has caused serious damage to the way free markets (if they can be called free anymore) work. I fear there's a day or reckoning at hand. Whether the Fed is able to reflate one more time isn't the question, as the real question is what's going to eventually happen to the USA and Europe and all these debt ridden countries when the can be has been kicked far enough. Gringo
Unfortunately, whatever people learn doesn't last long. There was a lot of retrenchment in 2008, but how long did that last? Six months? How many of those backyard gardens are still going? We're doomed. The best we can do is go out with a song on our lips (as I posted in another thread, "always look on the bright si-ide of life").
Don't worry--there is a bottom somewhere. People still have to buy sundries, and you can count on them to find the cheapest place to do it. The space will get squeezed, but some retailer will survive. Plus, it's not just low-income shoppers. On my last trip to Walmart, I noticed mine was not the only Lexus in the parking lot.