Wednesday, October 28, 2009

The Wal-Mart Economic Stimulus Plan

1. In just a three-week period from October 7-27, Wal-Mart announced the opening of 22 new stores and expansions of existing stores that have added 5,340 new jobs to the local communities in 18 different states.

2. Wal-Mart recently announced
Hundreds of Millions of Dollars in Price Reductions, with unprecedented savings each week this Holiday season.

Wal-Mart also recently announced that total capital spending for the fiscal year ending Jan. 2010, is projected to be between $12.5 to $13.1 billion, up from $11.5 billion in fiscal year 2009. Total capital spending for the fiscal year ending Jan. 2011 is projected to be $13.0 to $15.0 billion. Note: More than 50% of Wal-Mart's capital spending is for its U.S. operations.

Call it The Wal-Mart Economic Stimulus Plan: Thousands of new jobs for American workers, millions of dollars of savings for U.S. consumers, and billions of dollars of investment in local communities around the country. And it all happens in the private sector, without any new legislation and without adding a dollar to the U.S. deficit.


At 10/28/2009 9:22 AM, Anonymous Fred Rogers said...

Ironic that all that new shelf space will be made to sell Chinese stuff!

At 10/28/2009 9:41 AM, Anonymous Anonymous said...

It's obviously time for the Democrats and their union thugs to start protesting. That is if they can drag themselves away from their Whole Foods protests.

At 10/28/2009 9:59 AM, Blogger C. August said...

Well, it's certainly time for an antitrust suit. They're clearly restraining trade... wait, they're increasing it? Hmm... well, they're competing too well. That's it.

At 10/28/2009 10:48 AM, Anonymous gettingrational said...

China's one way valve for U.S. dollars continues grow and glow in headlines and sound bites. A recent article from Jesse's American Cafe states:Walmart produces enormous earnings but adds nothing to U.S. Profits and Savings -- National Wealth is not affected at all!

The article cited is somewaht perpincicular to contemporary economic analysis in the U.S. I had to read slowly (could be just me} but the populace sentiment makes sense in that a lot of U.S. GDP is not wealth adding but bubbly froth.

At 10/28/2009 11:14 AM, Blogger PeakTrader said...

The American people don't mind the government's huge spending spree too much, because they haven't received the bill yet. They're better off spending at Walmart now, because they won't be able to afford as many goods later.


Earnings is profit. U.S. GDP and trade reflect enormous real wealth creation. Consequently, there are too many houses, too many autos, too many home appliances, etc.

I stated before, U.S. multinationals offshored high cost or heavy goods to emerging export-led economies, e.g. China, rather than discontinue operations of those goods, imported them for big profits and at lower prices, and shifted limited resources either into Information or Biotech Revolution firms or high quality "core" goods with market power in older industries.

When prices and interest rates rise, saving will increase.

At 10/28/2009 3:32 PM, Blogger juandos said...

"Ironic that all that new shelf space will be made to sell Chinese stuff!"...

The solution is simple Fred Rogers, you get to vote with your wallet and go find a store that has shelf space dedicated 'made in America' stuff...

"Yet Wal-Mart produces no new national wealth"...


That's right, no one at WalMart gets a paycheck...

At 10/28/2009 5:41 PM, Anonymous Anonymous said...

As has been noted elsewhere the US percentage of world manufacturing is fairly stable. What has happened that consumer goods have moved offshore because they are low tech. For example clothing is low tech using essentially the same tech used 100 years ago, (the sewing machine being the last big breakthru). Now if labor cost got to high it is possible to conceive of computer driven clothes assembly which could mean that all clothes became custom made.

At 10/28/2009 6:59 PM, Anonymous Dr. T said...

I recently helped my daughter move to Germany. We learned to our dismay that shopping for the items needed for an apartment was a nightmare. The Germans (at least in the Dortmund area) have no shopping malls and no stores like Wal-Mart. Wal-Mart tried to build seven stores in Germany, and began construction on the one in Dortmund. But, governments, competing stores, and local activists raised so many roadblocks that Wal-Mart gave up. (The same attitude also keeps low-productivity family farms operating within city limits.)

At 10/28/2009 8:55 PM, Anonymous Anonymous said...

This comment has been removed by the author.

At 10/28/2009 8:58 PM, Anonymous Anonymous said...

I think you mean Federal deficit/ debt, not "U.S. deficit". If Walmart's expansion is partially or totally financed by debt, the national debt is increased, which is a good thing, and an increase is typical during periods of optimism and growth.

Am I being too simplistic?

At 10/28/2009 10:35 PM, Anonymous Steve said...

Great time for the market leaders to take more share away from the weaker competitors that aren't able to expand.

At 10/29/2009 1:58 PM, Blogger OBloodyHell said...

"getting rational gets irrational"

Whoda thunkit, with a name like that?

1) Let's cite an obscure mishmash article that is ALL OVER the place with a complete lack of actual facts or supported justification.

2) Let's attach a link phrase which has little or nothing to do with the article in question.

3) Let's throw in an non-existent, but realistic and exotic looking word, "perpincular", in an effort to look educated and knowledgeable.

1+2+3="moron attempting to look relevant".

At 10/29/2009 2:17 PM, Blogger OBloodyHell said...

> Consequently, there are too many houses, too many autos, too many home appliances, etc.

Absolutely ludicrous. Really. Beyond the pale, over the top, utterly and incredibly ridiculous as an assertion.

The quick summary:

The government inflates the money supply with cheap credit.

People gain access to that credit.

People start buying things with that credit, not necessarily wisely, because, hey, "it's cheap money".

The frenzy of buying jacks up real prices as the cheap and easy money goes after good deals. If you get in early, you're rich. If not, you're screwed.

Greed overpowers, almost everyone says "hey, me too!" and jumps on the easy-credit bandwagon.

The jacked up prices create a "bubble". People start to realize this.

The available buyers dry up. Everyone starts to get nervous. The bubble pops.

Now comes the butcher's bill -- all that stuff bought on credit, at inflated prices, now has to be actually paid for, with real money. People who don't have any real money wind up taken to the cleaners, people with a modicum of real money also get taken to the cleaners. The ones who were smart enough to mostly stay out, or to limit their borrowing to sensible levels manage to do ok.


What is so hard to understand about this? If you're 30-ish, it's visibly happened TWICE in your semi-adult life, in the 90s with the computer "boom" and again in the 00s with the housing "boom".

In both cases, exactly the same sequence of events occurred: too much easy money/credit inflate the value of worthwhile assets as well as create a host of either overpriced or high-priced "valueless" assets.

When credit is cheap, but prices are getting jacked up by lots of loose money floating around, it's going to happen every time as people "rent" money at 1-2% and use it to buy something inflating at 9-10%. DUH. Few of them ask what they will do when the money train jumps the tracks... or even have sense enough to watch the tracks ahead to know when to get the f*** off.


The heart of the problem lies with the Fed's control over the money supply, and its willingness/ability to push an Administration's agenda.

In actual fact, the total money supply should increase with the value of the goods and services produced each year, less the value of the goods and services "used up" each year. Any other numbers either create cheap credit, "easy money", and have a deleterious effect on the economy, or they tighten the economy and also have a deleterious effect.

The real trick here is to get the people in charge of this process to actually do their job correctly, and not to f*** with the numbers just because the admin wants it to happen.

At 10/29/2009 8:00 PM, Blogger juandos said...

Hey OBH did you catch this Frontline episode on PBS?

The Warning

There's a 55 minute video with it...

"We didn't truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission [CFTC] -- who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country's key economic powerbrokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?"

At 10/29/2009 8:49 PM, Blogger PeakTrader said...

Obloodyhell, you say "The frenzy of buying jacks up real prices as the cheap and easy money goes after good deals."

Housing prices have been rising for decades. When did it suddenly become a "good deal"? Normally, a good deal is when the price falls. Buying a $500,000 house that was worth $100,000 20 years ago may not be a "good deal," unless you know it's going higher.

Anyway, I was talking about the real economy. Perhaps, you didn't notice the homebuilding boom. Obviously, people who couldn't really afford to buy houses (e.g. no income) were able to buy them. "Real money" is a lot easier to create than real houses. If there weren't too many houses, why did homebuilders scale back sharply in building them, why are they being foreclosed, and why are prices falling?

Perhaps, you believe bubbles can expand forever, getting larger and larger, just by printing money, or you believe the Fed printed too much money and therefore created too many houses. Is 6% nominal growth too high? Is closing the output gap a wrong policy?

At 10/29/2009 11:10 PM, Anonymous Anonymous said...

Funny, it is possible that Walmart's Economic Stimulus Plan created more permanent jobs than President Obama's stimulus package.

At 10/30/2009 1:22 AM, Blogger PeakTrader said...

Houses became a "good deal" when there were too many houses. Lower income Americans were able to buy houses they couldn't afford when there were too many houses, not when there were too few. The "cheap credit" also came from capital creation, including efficiencies in production, and foreign capital inflows.

After Hurricane Katrina, Bush wanted Greenspan to stop the tightening cycle for a while. However, Greenspan continued to raise the Fed Funds Rate 25 basis points at each meeting.

At 11/01/2009 2:28 AM, Anonymous Anonymous said...

As of November 1, 2009, Walmart has not changed their support for nationalized healthcare that they stated on July 16:

"We are pleased that Walmart, Service Employees International Union and Center for American Progress can support three essential elements that should be included in any health care reform legislation--an employer mandate, strong efficiency provisions and a 'trigger' mechanism to ensure cost reductions.

"At Walmart, we believe in shared responsibility and support an employer mandate that is broad and fair. We believe the mandate should cover as many businesses as possible, and cover part-time as well as full-time employees. Any alternative to an employer mandate should not create barriers or disincentives to hiring workers with disabilities, entry level employees, or people from low income families.

"We are entering a critical time where those of us who will be asked to pay for health care reform will have to make a choice on whether to support this legislation. The choice will require employers to consider the trade off of a coverage mandate and higher taxes for the promise of a reduction in health care cost increases. We also believe that a mandate must be accompanied by provisions that will reduce health costs and dramatically improve the value we get for our health care dollar.

(Source: Walmart Statement Regarding Health Care Reform
Last Updated: Thursday, July 16, 2009

Employer mandates, higher taxes, and throwing in with the thugs from SEIU. Oh yes, that's quite an economic stimulus plan Walmart has.

At 11/01/2009 12:21 PM, Anonymous Craig said...

":Walmart produces enormous earnings but adds nothing to U.S. Profits and Savings"

That isn't true. Retailing doesn't create as much wealth as manufacturing or agriculture, for example, but it does contribute.

Retailers add value to the products they sell by holding large quantities in inventory so we can buy what we need as we need it. Much the same can be said for transportation -- a product isn't worth much to me if it's across the country in California. When a trucker transports it to New York, its value has increased dramatically.

Wealth creation consists in a long chain of events and processes; we mustn't be overly purist and limit it to actually digging something out of the ground.


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