Post 217

A snapshot of what’s going on in the world’s economy.  Financial Ructions and book reviews can be a bit more technical so feel free to skip them.  See disclaimer at the end of this note.


  • Victoria’s Secret sales have been falling for almost two years.
  • Starting to see some softness in cosmetics.
  • Employment in Canada is steady, but unemployment is rising as immigration numbers outpace job creation.
  • Many prices are either disinflating (still rising, but doing so at a slower pace) or are in outright deflation.
    • But even those prices still tend to be significantly higher than pre-COVID.
  • Some arrogant economists and journalists think that consumers are too stupid to realise how good their financial situation is.
  • More signs that the world may be suffering from a manufacturing recession.
  • Exports are finally growing again in South Korea.


Lingerie Slipping: This Is Getting Serious

Victoria’s Secret latest results

  • Adjusted sales were down 7%.
    • Down 11% in their stores.
  • Almost two years of comparable store sales declines.
    • By quarter:
      • 4Q/21: +12%
      • 1Q/22: -3%
      • 2Q/22: -7%
      • 3Q/22: -10%
      • 4Q/22: -7%
      • 1Q/23: -14%
      • 2Q/23: -14%
      • 3Q/23: -11%

A Lauder Ground To Makeup

Estee Lauder results:

  • Adjusted sales down 11%.
  • By category:
    • Up:
      • Makeup: +1%
        • Fragrance: + 5%
    • Down:
      • Skin Care: -22%
        • Bid declines in:
    • Asia travel retail business.
    • Mainland China.
      • Hair Care: -6%
  • By region:
    • Americas: +6%
    • Europe, Middle East, Africa: -27%
    • Asia/Pacific: -3%

From my post in November of 2022:

Estee Lauder, the founder of the company said “I never dreamed about success, I worked for it.”

  • She started the company with four skin care products and a simple premise: that every woman can be beautiful.
  • Estee would demonstrate her products on women while they were sitting under hair dryers.
  • She and her husband officially launched the company in 1946.
  • Estee Lauder has many brands including:
    • Bobbi Brown
    • Clinique
    • Mac
    • Smashbox
    • Tom Ford Beauty

Sales Growth Disinflating

Ulta Beauty is the largest specialty beauty retailer in the US.

  • It started as Ulta3 in 1990 in Chicago.
  • In 1999 the name changed to Ulta.
  • It sells over 600 different beauty brands.

 Sales are comprised of:

  • Cosmetics: 42%
  • Hair care & styling products: 21%
  • Skin care products: 17%
  • Fragrance and Bath: 14%

They have 1,374 stores across 50 states.

Ulta Beauty Results

  • Comparable sales up 4.5%
    • Price: Down 1.4%
    • Transactions: Up 5.9%
  • Profitability was down due in part to shrink (theft).

Comparable sales by quarter:

  • 2Q/22: +14.4%
  • 3Q/22: +14.6%
  • 4Q/22: +15.6%
  • 1Q/23: +9.3%
  • 2Q/23: +8.0%
  • 3Q/23: +4.5%

Its main competitor is Sephora which started in New York in 1998 and has 500 stores.

  • It sells 340 different brands.

See article ‘here’ comparing Ulta Beauty with Sephora.

And that’s Sephora as it goes.

Supply Up, Demand Down.  You know the rest.

The price of corn (cents per bushel):

Pre-COVID: 368

Peak Apr 2022: 814

  • Up 121%
  • As a result of high prices:
    • Demand fell.
    • Farmers planted more corn.

Dec 1, 2023: 485

  • Down 41% from peak.
  • Up 32% from pre-COVID.

As corn is used for animal feed its price decline should help lower food costs.

Employment In Canada: Slow Deterioration

Jobs created in Canada:

  • November: 25,000
    • Private sector employees: Up 38,000
      • The first increase since June.
    • Self-employed down
    • Public sector flat
      • The number of public sector employees since June: Up 98,000

Unemployment rate:

  • April: 5.0%
  • May: 5.2%
  • June: 5.4%
  • July: 5.5%
  • August: 5.5%
  • September: 5.5%
  • October: 5.7%
  • November: 5.8%
    • More people are unemployed due to being laid-off than because they voluntarily quit their job.
    • Job vacancies are down 37% from the peak in 2022.


  • November: +4.8%

The employment rate is the percentage of the working-age (15 years+) population that is employed.

  • 61.8%
  • This number has “generally trended down since January.”
  • Outside of COVID, it equals the lowest number over the last five years.
  • Job creation cannot keep up with the number of new immigrants entering the country.
    • The percentage of the population who are immigrants hit a record high of 23.0%.
    • From July 2022 to July 2023, immigrants accounted for 98% of population growth.

For core-age (25-54 years-old) the employment rate is much higher:

  • Men: 87.3%
    • Peak of 88.2% in June
  • Women: 81.6%
    • Peak of 82.2% in January

Over the last year, only three sectors had job losses with the largest decliner being:

  • Finance, Insurance, Real Estate: Down 36,800


Italian winery Vini Lunardelli used to produce wines known as “historical” wines which would have a picture of a dictator on the label.

  • One category within their historical wines line was “Der Fuhrer” with pictures of Hitler or Hermann Göring etc. on the wine label.
    • The most popular was Hitler.
  • They started selling the wines in 1995, but after numerous complaints the company announced that they would discontinue the “historical” line of wines.

Infant Mortality Rates

Infant mortality rate (deaths per 1,000 live births) by country in 2021 (World Bank) report ‘here’:

  • Somalia: 71
  • Pakistan: 53
  • Philippines: 21
  • Brazil: 13
  • US: 5
    • In 1916 the rate in the US was 100.
  • Canada: 4
  • France: 3
  • Japan: 2
  • Monaco: 1


First, we had economists effectively calling people stupid for not realising how great the economy is and now we have journalists joining the fray.

  • I assume they do this because they’ve been championing all of these reckless policies over the years and want to convince people that it was the right thing to do.

FT journalist John Burn-Murdoch is pissed off that US consumers are not feeling great about the economy.

  • University of Michigan Consumer Sentiment Survey:
    • Pre-COVID: 101
    • Low Jun 2022: 50
    • Jul 2023: 71.5
    • Nov 2023: 61.3
      • Down 14% from the recent high in July.
      • Down 39% from pre-COVID.

He says that if you want to know how people really feel about their financial conditions then look at their spending patterns.  He says that they’re buying more stuff than ever i.e. insinuating that people feel much better about the economy than they’re letting on.

  • Uh no.
  • As we have seen, many people are spending “more” but receiving “less”: with many companies enjoying higher sales with higher prices that come at the expense of lower volumes i.e. “less” stuff.
  • Also, there are many anecdotal stories of people spending all of their money simply because they’ve given up on the hope of ever being able to afford a home.
  • Finally, much spending is fuelled by debt, which of course doesn’t help one feel great about one’s future financial conditions.
    • As well, people see their government taking on record amounts of debt which they know is going on their backs.

As evidence of consumers being “wrong” about their own economic circumstances, he points to a poll showing more Americans believing that inflation is still rising rather than falling.

  • We have previously talked about how these terms can often be confusing.
    • Yes, inflation is falling (disinflation) but prices are still rising.
    • Not only that, but even if inflation goes to zero, prices will still be significantly higher than they were pre-COVID:

US Food price index:

  • Pre-COVID: 262
  • Oct 2023: 325
    • Up 24%

US average price of a gallon of gas:

  • Pre-COVID: $2.43
  • Nov 2023: $3.24
    • Up 33%

Used car prices are finally falling but still 30% higher than pre-COVID.

New car prices (Cox Automotive):

  • Pre-COVID: $37,876
  • September 2023: $47,899
    • Up: 26%

Meanwhile, nominal earnings are up only 18% over the same time period (FRED)

  • Or “down” adjusted for inflation:

Real median household income in the US (FRED):

  • 2019: $78,250
  • Pre-COVID: $76,660
    • -2.0%
  • 2021: $76,330
    • -0.4%
  • 2022: $74,580 (latest data available)
    • -2.3%
    • And down 4.7% from 2019.
  • And also, as we have recently noted, home affordability in the US is the worst that it has been in forty years.

And so, in summing it up, as long as you don’t need to eat, drive a car or raise a family in a home, you should be feeling pretty damn good about the economy.


WSJ article by Spencer Jakab.

Cruise ship passengers:

  • 1980: 1.4 million
  • Estimate for 2024: 36 million
    • Growth of 8% per annum over 44 years.

OECD population:

  • 1980: 1.02 billion
  • 2022: 1.38 billion
  • Growth of 1% per annum over 42 years.

The largest cruise ship ever built, Royal Caribbean’s Icon of the Seas, is due to launch in less than two months: see “here.”

  • It’s five times bigger than the Titanic.

China Blacklist: No Soup For You

China has a sort of social credit system (started 2014) where if you behave in an unbecoming way, such as not paying your debts, you get put on a blacklist which can prevent you from purchasing train or airline tickets etc.

See article ‘here’ from Business Insider.

The FT reports that a record 8.5 million people are now blacklisted.

Electric Vehicle Repair Costs

The average cost in 2022 to repair a car after a crash (CCC Intelligent Solutions):

  • All cars: $4,215
  • Electric vehicles: $6,587

However, maintenance costs for electric vehicles are supposed to be lower.

Eurozone Manufacturing Contracting

The HCOB Eurozone Manufacturing Purchasing Managers’ Index (PMI).  A number below 50 means contraction:

  • October: 43.1
  • November: 44.2
    • France: 42.9
    • Germany: 42.6

South Korea Bucking the Trend

Exports from South Korea are now up two months in a row following 13 straight months of declines.

  • October: +5.1%
  • November: +7.5%
    • Semiconductors: +12.9%
    • Cars: +21.5%
    • Ships: 38.5%
    • Shipments to:
      • US: +24.7%
      • China: -0.2%

Book Review

The Mystery of BankingMurray N. Rothbard (1983)

Chapter 14 – Central Banking In The United States II: The 1820s To The Civil War

After the financial crisis of 1819, the Jacksonian movement started which was represented by:

  • Laissez-faire
  • Hard money
  • The separation of money and banking from the State.

The new Democratic party was started by Martin Van Buren and Andrew Jackson with the goal of abolishing the second Bank of the United States: its charter was up for renewal in 1836.

  • They were keen to stop the inflation that the bank had engendered.
  • From 1823 to 1832, its notes and deposits had increased at an average rate of 27.9% per annum.
    • Total money supply grew at 10.2% per annum.
  • Incredibly, productivity was so great at the time that prices didn’t rise i.e. the rate of growth of the stuff produced off-set the increase in the money supply.
    • MR points out that the same thing happened during the 1920s as loose monetary policy was off-set by great productivity.
    • And that by increasing the money supply, the people were denied the benefits of productivity through falling prices.
  • State banks were largely in favour of renewing the Second Bank of the United States charter as it enabled them to rapidly expand their notes and deposits and was in no way a restraint on their expansion.
    • PM: Similar to the founding of the Federal Reserve in 1913.
      • The Fed has always been there to bail-out the banks rather than restrain them.
  • From 1830-1831 the money supply increased 35%.
    • This was driven in large part by the central bank which had expanded its notes and deposits by 45.2% from 1830 to 1832.
  • Jackson effectively “disestablished” the central bank in 1833 by transferring Treasury deposits from the central bank into a number of state banks.

From 1833 to 1837 the money supply increased 21% per annum due to a significant inflow of silver from Mexico.

  • The Mexican government had tried to keep debased copper coins at par with their silver coins.
  • PM: From what I understand, when governments attempt to do such a thing, the bad money, copper,  typically drives out the good money, silver.
    • This is known as Gresham’s Law.
    • I believe that the way it works is that when people pay off their debts or pay their taxes, they’d rather do it with the money that they know is not really worth as much as the government is saying that it is and they keep the more valuable money for themselves.

There was a significant deflation from 1839 to 1843 which served to “liquidate unsound investments, debts, and banks.”

  • MR notes that this was a “good” deflation.
    • Despite real investment falling real consumption increased 21% and real GNP was up 16%.
  • MR also notes that this deflation had a very different impact than that of the Great Depression a century later.
    • He cites Professor Temin who notes that despite the fact that the money supply fell less during the Great Depression, real consumption and real GNP “fell substantially.”
    • The difference is that in the deflation of 1839 to 1843 wages and prices were flexible downward and so business could adjust and keep production rising.
      • During the Great Depression, both prices and wages were prevented by the government from adjusting.

In 1846, President Polk “installed the Independent Treasury System,” which served to finally separate the federal government from the banking system.

By the time of the Civil War, 18 or 33 US states had enacted free-banking laws.

  • Although MR points out that this was not real free-banking and economist Vera C. Smith called it “decentralization without freedom.”
    • In part MR felt this way because banks were still periodically able to suspend redemption in specie (gold) rather than go bankrupt.
  • MR notes that the most “pernicious” aspect of this free-banking era was that the issue of bank notes by the banks was tied to the number of state government bonds that they had invested in.
    • Therefore, the more state bonds the banks bought the more money they could issue and thus the banks were monetizing state debt and governments were encouraged to take on more debt.
  • Banks were also generally not allowed to establish inter-state banking which made it more difficult to clear notes and deposits quickly and thus discover which banks were issuing far in excess of their specie.

Finally, MR talks about a rapid clearing system that developed in New England in 1825 and it was called the Suffolk System, which was started by the Suffolk Bank of Boston.

  • Banks were required to permanently keep a set amount of gold on deposit with Suffolk.
  • Customers would show up at the Suffolk with bank notes that they had received in payment for something that they had sold, but those banknotes were issued by other banks.
  • When the Suffolk received those banknotes it would debit the gold account of that note issuing bank.
  • Then that gold would be credited to the bank of the customer who had shown up with the bank note.

The Suffolk clearing system served to restrain banks from over-issuing bank notes.

Obviously, banks were not too keen on this system but were forced to play by the rules otherwise their bank notes would depreciate in value.

The Suffolk clearing system ended in 1858 when a new clearing bank was established called the Bank of Mutual Redemption.

  • This clearing system was favoured by banks because it was apparently much “laxer’ than the Suffolk system.

Disclaimer: Note that Paulitical Economy™ should not be considered as investment advice, and I have not verified all of the sources of information.  It is meant for general interest purposes only.  Please consult an advisor if you plan on putting any of your hard-earned capital to work during these turbulent times.

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