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alstry (35.46)

The Ultimate Question????

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March 17, 2009 – Comments (6)

What happens if all the productive capacity of America is owned and under control of the banks and government???

Right now, the government is printing a bunch of money....but most of that money is going to the banks and they are hoarding the cash in their accounts.

In turn the banks are cutting off lines of credit, calling in loans, and pulling in credit cards across the nation.  In doing so, people are unable to borrow and unable to spend.  Business is slowing and millions of people are losing their jobs.

Those with cash are taking their savings and being forced to pay down debt extinguishing savings for many.  Those without enough cash are losing their homes, cars and businesses and ownership is transferring to the banks.

Basically the banks are getting bailed out and taking ownership of more and more of the assets of America.  Homes, Cars, Busineses, Shopping Centers etc.......

By the government taking posession of the banks toxic assets....derivitively the government eventually takes ownership of those assets that encumbered that debt.

In sum, the banks and government are taking ownership of much of the assets in America as the people become poorer and poorer and and can't afford to pay taxes to the government.

Right now, there are a significant number of Americans dependent on their pensions and credit card to live.  Pretty soon, as DWOT recently blogged, pensions will be out of money.  Credit cards limits are being cut back by the trillions as this blog is being written.

In the not too distant future, as we continue down this path, there will be millions of ADDITIONAL Americans unable to make ends meet causing further defaults and slowing in the economy.

As this process deepens, what happens if the majority of Americans can't afford to live at a subsistence level and the owners of the majority of the assets are either banks or government?????????

6 Comments – Post Your Own

#1) On March 17, 2009 at 2:11 PM, alstry (35.46) wrote:

As follow up to my previous blog on Best Buy....there is nothing wrong with Best Buy as a business or the service it delivers overall...sure there are people with gripes but all in all it is a pretty well run business serving its customer base.

The problem with Best Buy is that its CEO took a company with Billions of cash in the bank and no debt and spent those billions and MORE to buy back stock and invest in a British retailer levering up the company where Best Buy now OWES billions and its customers are running out of money and they are being cut off of credit.

To compound matters, financially strong compeitors like Costco and WalMart are ramping up their electronics operations.

The big issue with Best Buy is not its business or its general operations, it is the fact that it is now highly leveraged and focused on an American consumer who is being squeezed harder and harder everyday.

Not only that, pretty soon many of those squeezed customers may find it increasingly difficult to get loans to buy the electronics Best Buy sells.....what percentage of Best Buy's customers do you think borrow money to make those purchases???

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#2) On March 17, 2009 at 2:35 PM, QualityPicks (62.95) wrote:

On the other side, CC is now out of business, so that takes some pressure off Best Buy.

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#3) On March 17, 2009 at 2:49 PM, alstry (35.46) wrote:

Of course, but will it even be close to off set the inverse pressure of a significant portion of Best Buy's customer base unemployed and/or unable to borrow money to make electronics purchases????

FWIW....the problem is not Best Buy centric....this applies to all merchants selling to the American population in general.

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#4) On March 17, 2009 at 2:59 PM, Seano67 (80.07) wrote:

That's the ultimate question? I always thought the ultimate question was/is: what is the meaning of life? I know the answer to that is 42, but I don't quite 'get' that if'n ya know what I mean. Anywho....

RE: Best Buy, I agree. Be careful red-thumbing that one though, as I put the red thumb to it and got absolutely killed, just as I did with many other retail stocks. Take Dillards for example. I don't know how the hell they're doing it, but for whatever reason they seem to be totally defying the conventional wisdom which is that they're very close to a dead man walking. Well, look at their stock price today....

Back to Best Buy though, not only do they have discounters like WalMart and Costco to contend with, but also online electronics retailers. When I had to buy a new PC recently, I bought from Amazon rather than Best Buy because Amazon was substantially cheaper (and offered free shipping), and I was very pleased with that purchasing experience with Amazon, so I put the green thumb up on that one. :o)

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#5) On March 17, 2009 at 3:14 PM, alstry (35.46) wrote:

Seano,

You are still missing the point....it is Best Buy's customers running out of money.

Federal Income Tax receipts were DOWN 64% in February.

Car sales are DOWN 50%.....

Do you think that one retailer closing is going to beable to offset a revenue decline like we are experiencing???

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#6) On March 17, 2009 at 8:45 PM, Seano67 (80.07) wrote:

Well, apparently people are still buying, so maybe they're not running out of money so much as you might think. Or maybe we are just such a consuming and materialistic society that we will continue our consumptive ways until we are literally no longer able to do so anymore. But people are spending despite the fear. Hell, I bought an expensive computer system (only because I had to, because my old one was crapping the bed), but I spent money, and others are out there spending money too. Face it, spending can be a major panacea too, to make you feel better about things in a time of such anxiety and distress. It feels good to buy things, and we as Americans want the latest and greatest things, and we want them now. You look around and see a world going right down the crapper, and why not? Or maybe that's the thinking anyway....

But to the good side, gas and oil are cheap as hell right now, and with winter finally coming to an end (thank the fricken lord), heating bills will go way down. That's a big deal for me here in Maine, and really for anyone who lives in the northern 2/3 of the country. Unemployment is above 8%, but that still leaves an awful lot of people out there with a whole lot of purchasing power.

 

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