Good News – Retail Sales Have Fallen Two Straight Months

Bloomberg.com carried some good news it appears retail sales have dropped, as thankfully consumers are boosting their savings:

Retail sales in the U.S. unexpectedly dropped in April for a second month, indicating that rising unemployment is prompting consumers to boost their savings.

The 0.4 percent decrease followed a revised 1.3 percent drop in March that was larger than previously estimated, the Commerce Department said today in Washington. Excluding auto dealers, sales fell 0.5 percent.

Fewer jobs, falling home values and the biggest loss of household wealth on record may limit consumers’ ability to spend for years, analysts said. As long as the biggest part of the economy is constrained, any recovery from the worst recession in at least half a century is likely to be subdued.

Things are bad but there are signs of a recovery due to the government pushing massive taxpayer dollars into this giant bucket.  Unfortunately, spending is not what needs to happen.  Savings is what needs to happen? What is the U.S. citizens savings rate? How much debt does the average citizen, business, or government carry?  Unfortunately the government doesn’t want citizens to save money and be self reliant.  As Obama looks into raising taxes on capital gains this surely hurts savings rate.  Additionally, programs such as social security deincentivize savings rates as well as that money is taxed, the tax payer then depends on seeing the money again, without realizing they are actually not going to get back as much as they put in (if they get anything at all) creating a fake sense of “social security”.  

In general an income tax is an anti-savings tax because the goal of savings and planning for the future is to create an income for ones self.  The higher an income tax is for those that earn enough to actually owe income tax the less motivation their is to save.  The less motivation to save the less investment and loan reserves their naturally are to conduct investments and HEALTHY lending.    The only true way to a TRUE recovery is a massive change in our tax code to tax spending and not income.  This way those that spend money on non-neccessities such as nice cars, restaurant food, expensive toys, electronics, big homes, etc get taxed more while those struggling to save don’t get taxed and are encouraged to develop self reliance.  Until debt is paid down and healthy savings rates are established it isn’t a recovery but a proping up of a system based on reckless over leveraging, ill conceived and power hungry motives.   So, to me this is good news that consumers aren’t spending.  They shouldn’t be spending they should be cutting back, downsizing their homes and working harder to create value in their workplaces.  The same with Companies.  As a Chief Financial Officer we’re doing the right thing, as best as is possible, downsizing, increasing savings, paying off all debt, shoring up our banking relationships, and establishing new lines of credit for future unpredictability.  This also goes without saying for the government as well.   Unfortunately, this isn’t happening for them.

When the “recovery” get’s here that is when things will get dangerous.  Out of sight out of mind, will spending sky rocket, will savings decline again, etc.?  For me a “recovery” will be truly bad news and freedom will be in further danger.  Meanwhile, it’s good to hear the good news that spending is down!