Black Flag Friday: Could Yesterday Be A Harbinger Of A Tapped-Out Consumer?

Authored by Charles Hugh Smith via OfTwoMinds blog,

If Black Friday is a bust, it may be a harbinger of what the mainstream has long considered impossible: the American consumer is well and truly tapped out.

Could Black Friday be a complete bust this year? Let’s explore the potential sources of a Black Flag Friday. Black flags are used to denote mourning, as in state funerals, and to warn of danger, for example, black flags posted at beaches mean “don’t go in the water.”

Drivers in auto races who receive a Black Flag must return to their pit–their race is over.

Exhibit One is the Federal Reserve report which stated the bottom 80% of American households have fewer financial resources than they did pre-pandemic. 

The authors project that the cash reserves of this vast cohort would be depleted in the third quarter of 2023, i.e. right now.

Exhibit Two is a report that indicates half of employed consumers have side gigs to earn extra money. Side Gigs Help Ease Paycheck-to-Paycheck Consumers’ Financial Stress This Holiday:

According to findings detailed in The Supplemental Income Edition of ‘New Reality Check: The Paycheck-to-Paycheck Report’ by PYMNTS Intelligence and LendingClub, half of employed consumers now have supplemental income sources in addition to their regular paychecks. This includes side jobs, other types of supplemental income and active side incomes.

This is critical because the holiday season has emerged as the most financially challenging period for a significant number of individuals, according to separate research from PYMNTS Intelligence, with over 20% pointing to vacation costs as a key contributor to their financial stress.

Exhibit Three is the “revenge spending splurges” on vacations and other luxuries have already depleted savings and boosted credit card balances. Vacations are prime examples of “greedflation” in action, as resorts, AirBNB hosts, et al. jacked prices to the moon knowing that households desperate for a splurge vacation would pay any price without question.

In street parlance, consumers have already shot their wad. There’s not much left to blow on Black Friday.

Exhibit Four is the long-term deterioration of the bottom 80%’s share of financial wealth as indicated by the charts below, courtesy of the Federal Reserve. These charts reflect the reality that the vast majority of financial gains have flowed to the top 20%.

The bottom 50% of America’s 132 million households, representing 165.5 million of the nation’s 331 million residents, owns a meager 2.3% of the nation’s financial assets. There simply isn’t much wealth to tap for splurge spending.

The share of total assets owned by the middle class–those between the 50% and 90% percentiles–has been in decline for 30+ years. No wonder half of all employed consumers are working extra hours on side gigs.

Exhibit Five is the devaluation of Black Friday by “front-running” pre-Black Friday sales. Which one offers the best deals–pre-Black Friday sales, pre-pre-Black Friday sales, or post-Black Friday sales?

Like many other aspects of American life, whatever is modestly successful is ground to dust via crapification and “Calculated Misery” in which the consumer experience is intentionally degraded so consumers are forced to pony up for “premium” or “elite” service–that is, the same mediocre service that was once standard but now requires a hefty fee if you wish to avoid immiseration.

The “Crapification” of the U.S. Economy Is Now Complete (February 9, 2022)

Stainless Steal (February 26, 2023)

The decay in quality reveals that the collapse of the neoliberal-hyper-financialization-hyper-globalization model has already occurred.

If Black Friday is a bust, it may be a harbinger of what the mainstream has long considered impossible: the American consumer is well and truly tapped out, eviscerated by inflation and disgusted by rampant greedflation. It may also reflect a growing awareness of some of the populace that splurging with zero savings is not a stress-free strategy, and not worth the financial anxiety.

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