Retail sales have been flattening as well.
Retail sales' recent "gains" are mostly related to increased spending on gasoline, not retail shopping. Retail sales excluding autos and gasoline in April only increased by 0.2%. Gallup's recent surveys also supports this trend. In fact, they show that upper-income consumer spending has flattened out as well. It does not help that real wages declined 0.3% in April.
Consumer Metrics Institute, whose methodology I do understand, is also reporting that retail sales have fallen off dramatically. "After a week-long pause our Daily Growth Index resumed its movement into record [negative] territory, setting a new all-time low representing a 6.39% year-over-year contraction on May 3, 2011."
Real Capital Destruction
Monetary inflation cannot create wealth. Only production can create wealth. I have discussed this many, many times, but I believe that our policy makers confuse the dollars they print with wealth. Things are wealth and money just is a means of exchanging some goods or labor for other goods or labor. This is Austrian Theory 101. If you print fiat money, it doesn't create goods or labor, it just allows those who get their hands on it first to bid away goods and labor (wealth) from other producers (and, all things being equal, cause prices to rise). Since the new money was not based on production, someone is getting something for nothing. Because the signals that cheap money sends to borrowers is not based on market realities, but rather time value distorted realities, cheap money leads to the production of goods people don't want. Such as homes. As we found in our current cycle, capital flowed into housing and some $6 trillion was destroyed (malinvested) in the boom. The bust is merely the process of liquidating malinvestment.
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