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Why Wal-Mart will save America

Posted Feb 25 2008, 05:44 PM by Anthony Mirhaydari
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What is probably the most-hated corporation in the United States is poised to become its private-sector savior.

Wal-Mart rang up monster sales last quarter as cash-strapped American consumers flocked to its stores for its famous "everyday low prices." Profit rose 4% to $4.1 billion as consumers redeemed holiday gift cards for basic necessitates like groceries and toilet paper. The company's stunning earnings report shows that during a holiday season in which its rivals faltered, Wal-Mart won by going on a price-slashing rampage, marking down more than 15,000 items by up to 30%.

This is how Wal-Mart will help the average American: By stretching the purchasing power of their dollars. While the Federal Reserve frantically stimulates the economy with liquidity injections and interest rate cuts, the dollar remain weak. This stokes inflation. And of course, continued economic growth in developing countries only adds to the pressure on food and fuel prices.

Wal-Mart, thanks to its vast scale and hard-nosed negotiating tactics, is shielding hapless consumers from price hikes by the likes of Kraft, General Mills, and Procter & Gamble. Also, through the addition of health clinics in its stores, it’s fighting rising health care costs too. Recent research estimates Wal-Mart saves the average family around $2,500 each year. That’s a pretty big deal when you consider the median household income is around $48,000. Simply put, Wal-Mart is reducing the nasty side effects of the Fed’s economic voodoo.

By acting as a disinflationary force, Wal-Mart is actually giving the Fed more room to maneuver by keeping published inflation measures lower than they would be otherwise.

Keep in mind that it’s absolutely critical for inflation expectations to remain low. If they become unanchored, and people start demanding higher wages, all hell would break loose. The Fed would be forced to return to its inflation-fighting congressional mandate, interest rates would go up, and the housing sector would be reduced to a smoldering crater. It’s not coincidental this has been a popular topic lately.

So, on one hand Wal-Mart is helping people live paycheck to paycheck as they suffer through an epic consumer-led recession. On the other, it’s helping Ben Bernanke and his cohorts juice the economy back into high gear. That combination should be enough to put a big happy face on anyone holding a grudge against Sam Walton’s baby.

Comments

 

you must be a front man for Wal-Mart! This savior idea has to have been cooked up by the PR dept. as it makes very little macro economic sense. How does one save money purchasing an item when one doesn't have a job or the job is so low paying that you qualify for food stamps?

I cannot believe how Americans complains about not having enough money. Eating out at restaurants for lunch or dinner, women going to the mall to buy clothes, shoes or any other junk item they can buy with their credit card, bleaching their hair blond, buying SUVs, taking vacation trips and now Joe Blow and his trendy wife buying their expensive house--- Are you kidding me. I don't feel sorry for this country one bit.

Americans need to do a lot of growing up with a health dose of reality check. It seems like you're having a hard time adjusting to the increasingly global nature of the market. Good for China and all the other foreign countries who are smarter that most extravagant American men and women's lifestyle.

What kind of a country do you live in where the media tells you that it is the consumer who will save the economy by continuous spending. America is one big joke for the 21st century.

Walmart is just playing the game of supply and demand.  Asian country's are taking jobs from America because there is a demand for jobs over there.  In America, unemployment is relatively low.  In fact we are importing cheap labor from Mexico.  Many of there jobs were created here in America.  Soooooo....... you could make the argument that America's chief export at this time is low wage jobs.  Other country's get our low wage jobs, we get cheaper lead based toy's.   S'all good.

IF YOU CAN GO TO WAL-MART AND BUY AN ITEM FOR $ 5,00;WHY WOULD YOU WANT TOM GO MELSEWHERE;AND PAY $ 10.00??????????????????

CASE CLOSED..

THANK YOU;

DENVER,CO.

Get a clue.....Wal-Mart  all in all has damaged this country in so many ways that they control it and are making small American businesses close at a record rate in rural small town american. There will be  No MIDDLE MAN in the America soon.

How much did Wal-Mart pay for this ad spot?

I agree that most of Wal-Mart's efforts ultimately are a net benefit to American consumers.  The addition of the health clinics should only enhance that benefit.

However, the one area they fall short is in gasoline sales.  Wal-Mart should increase it's efforts in gas distribution and retail, and constantly monitor their prices to ensure that they are selling at the lowest market price.  They should bring their purchasing power to bear in this area, just as they've done in prescription drugs.  It's the increase in energy costs that consumers trade off against the goods inside their stores.

Hurray! Finally somebody in the media understands the free market system. Walmart is the consumer's best friend. It's funny how so many people hate Walmart because they're big. The reason Walmart's big is because they give people what they want!

i LOVE walmart

walmart coulda raised prices instead

and you woulda shopped there - still.

Walmart should threaten price increases

to congress as leverage to get what they want.

If congress does'nt allow them to move

into banking then they should raise prices or

threaten 1%-5% register surcharges ala Sam's club,

co-op clubs, ebay, etc.

Yes, maybe one day china sovereign wealth fund

will just buy walmart and vertically integrate the whole

enchilada.

Anthony, I can only assume you're a very clever fellow. How much Wal-mart stock did you say you owned, silly me you're too clever to slip up and say.

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