Discussion in 'Economics' started by The Kin, Jun 8, 2005.
I think Wal-Mart is probably the most visible presence of Chinese made goods because of their marketing and pervasiveness...they are everywhere. And most everything in their stores, it seems anyway, is made in China.
But make no mistake, Wal-Mart is just a fraction of China's output. The Chinese are into (or will be soon) making just about everything. Any industry they set their sites on is toast for U.S.A. or Euro companies.
Chinese and other off-shore cheap goods have been a major source of deflation in a least the finished goods they source.This is helping to offset the recent huge rises in raw materials. Of course it has no impact on goods like prescription drugs (a protected industry), oil, lumber, and other CPI related raw materials where we see big inflation. The cheap imports are finished goods, not raw materials.
As a seperate issue...when they start making our caskets (for cheap) you know we are goners...whoops, they already do. Major deflation in the furniture and casket industry...
A couple of different issues at work.
We are seeing inflation in this country and its being purposely under reported. However, thats not the focus of my reply.
One of the biggest contributors to muted inflation has to be labor costs. And the labor costs have been contained by the large number of illegal immigrants who will work for a smaller hourly wage without all the concomittant benefits packages that a normal US Citizen would demand and/or be entitled to receive.
As far as Walmart goes and/or Sam's Club, the prices have been rising steadily. If you do go to Sam's Club and carefully analyze the prices paid for alot of essential consumer goods, the prices have been creaping higher over the past 2 years. In fact, I dont even believe its that great a deal anymore. The interesting aspect is that a place like Sam's Club has a reputation of being a lower cost alternative. Its akin to some of the home shopping networks where people just assume that they are getting a deal, while in reality they arent.
Anyway, thats my brief reply, maybe I can add something later.
Wal Mart has a labor force that is subsidized by welfare and they are ahead of the competion in the area of computerization of inventory, have been for 25 years. KMarts level of employment of technology was abysmal and they paid the price eventually. Those are big factors in their success, as big as the cheap imports maybe. I have known more than one person that made a living wage in management at a Wal Mart BTW, the managers are not underpaid particularly.
I saw a Frontline program a while ago. They pointed out that Walmart was the best at using a price leader to get you into the store - for example a $10 microwave. However, when you got there and saw that is wasn't as good as an easy bake oven, you would end up buying a more expensive microwave which may not have been cheaper than a competitor's store.
By the way, if Walmart was a country, they would be China's 8th largest trading partner.
Let us not forget the impact of internet shopping and the ability to shop price with the click of a mouse. "You want how much for that?" "I don't think sooool"
Interesting Topic, I think the technology revolution along with stagnant wages has kept "measured" inflation in check for a long time. I believe its as simple as that.
As far as wal-mart is concerned, I just don't get it. Most everything they sell is complete junk, and believe me I am a bargain shopper myself. I think as a company they are completely saturated and I certainly would not invest in them. There recent stock price decline I believe is warranted and they have peaked.
if were defining inflation as in the CPI thenthe most often cited argument of late is:
"The Consumer Price Index has underreported price inflation because the government uses the rental value of housing, rather the actual price of houses, in their index."
The CPI is manipulated all the time just as interest rates are manipulated all the time. Or maybe the better example would be the S&P 500 where each year stock are dropped and added.
In 1999 I belive they switched over to "rental value" from actual house prices.
Had they stuck with actual housing prices it would obviously be much higher. My rent where I'm at is about the same as 2 years ago......the value of the house though has gone up roughly 50%.
There's a bunch of other stuff they do with it as well....it all depends on how their current CPI "basket" matches up with what you spend money on.
Walmart is opening stores in China full force.
In 10 years, Walmart will be a Chinese company ( ie all manufacturing and majority of its profits derived from China ) that just happens to have American management. I would'nt be too surprised if they moved their HQ to China after 10 years.
The last three electronic items I bought at walmart have all broke.
A shower curtain I bought from them smelled like old paint.
I gladly pay a few dollars more to shop at other places that place quality over price.
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