Grim economic indicators at home and abroad
Both in America and in China, there’s grim economic news and, in both cases, I’m feeling pretty darn ambivalent about these reports. Both reports bode ill for the economy as a whole, but both are happening to entities that kind of asked for it.
Target reported on Wednesday that its profits plunged nearly 90 percent last quarter after it was forced to slash prices to clear unwanted inventories of clothing, home goods and electronics.
In early June, Target warned that it was canceling orders from suppliers and aggressively cutting prices because of a pronounced spending shift by Americans as inflation cuts into spending on non-essential items.
On the one hand, this is terrible news. It means that ordinary Americans can no longer afford to buy even the well-priced, often discounted, goods that Target sells. It also means that one of America’s major retailers (and employers, with almost 2,000 stores and over 400,000 employees) may go belly up. This saddens me because I’ve always enjoyed shopping at Target, although, of late, that’s been a guilty pleasure.
The guilt part of the pleasure is why I’m ambivalent about Target’s possible downfall. Target is headquartered in Minneapolis, and its management has long reflected that city’s hard-left politics.
For years, it’s been one of the biggest retail promoters of all things gay. When my children were little, I wouldn’t even take them with me to the store in June. In 2016, in service to its LGBT supporters, Target announced that so-called transgender people could use the restroom aligned with their gender. The resulting boycott cost the chain $20 million. Target was also all-in on the George Floyd shakedown, donating $10 million to various “social justice” organizations.
In other words, this is a store that sides with leftists, which means that it helped foment a world in which Joe Biden could end up in the White House and Democrats in charge of Congress. Therefore, to my way of thinking, Target is kind of responsible for the recession, meaning it helped create this disastrous economic problem. Hence my ambivalence.
The news out of China is also bad:
Chinese developers have lost at least $90 billion in the last year, according to reporting from Bloomberg, as home prices have gone down for the last 11 months. Dozens of developers have defaulted on their debts, and many of them have stopped work on unfinished housing, which has sparked mass outrage and even protests as more than 80% of Chinese homebuyers take out mortgages and begin paying them down before their prospective home is completed.
This arrangement, which was once a source of easily accessible capital in a red-hot housing market, has left countless Chinese consumers holding the bag on half-finished homes that may never be fully constructed. Thousands of homebuyers are refusing to pay mortgages on unfinished properties in a mortgage boycott that has spread to nearly 100 cities and has affected over 320 development projects.
For a long time, the Chinese government encouraged people to put their excess wealth into real estate, so the real estate market makes up 30-50% of China’s consumer wealth. Evergrande, the biggest Chinese real estate developer, continuously hovers on the verge of bankruptcy. Estimates vary, but there seem to be over 60 million vacant properties in China.
Given China’s aggressive push to take over the world (the belt and road initiative, manmade islands in the South China Sea, corrupt trade practices, spying, etc.), it’s hard not to feel a bit, well, happy to learn that China is suffering economic woes. If nothing else, these problems may cause China’s aggression to slow, giving America some breathing space.
However, a broke, destabilized China is not a good thing. Even though China’s probably inflating its population numbers as it enters demographic free-fall in the wake of its one-child policy, it has around 1 billion people. It’s a bad thing if a country that big has a complete economic collapse—it’s bad for China, it’s bad for surrounding countries, and it’s bad for the world as a whole, especially for America, given the two nations’ economic interdependence.
We live in weird, worrisome times when it’s sometimes impossible to tell the good news from the bad.