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The McDonalds Economic Index

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Business news readers are not only continually bombarded with various “indices” concocted by the Corporate Media, but we are regularly having new ones inflicted upon us. The purpose of these contrived numbers is obvious.

Any/every economic index is (supposedly) “derived from” economic fundamentals, while hiding the raw data from us upon which the index is based. This makes these indices wonderful propaganda tools. Much like many forms of “processed food” strip-out most/all of the food-value of the raw material which went into them, the same is true (in economic terms) with these indices.

I thus offer readers a refreshing change: an economic index which actually means something. Presenting the “McDonalds Economic Index.” The premise behind the index is simple. With McDonalds now being firmly established across the (decaying) economies of the West, and rapidly becoming established in the (dynamic) “emerging economies” of much of the Rest of the World; McDonalds sales now provide a useful snapshot of overall global economic health.

Note that unlike regular food consumption, purchases at McDonalds are discretionary. They will rise when the economy is robust, and sag as the economy slows. The one weakness in this “index” is that like all other retail sales data (and most economic data in general) it does not strip-out inflation from its sales numbers, so we will have to make that adjustment ourselves.

What also makes the McDonalds Economic Index useful (for all Western-centric readers) is that it reports its sales with a clear Western perspective. Sales are broken down into three regions: the U.S. (5% of the world’s population); Europe (5% of the world’s population); and APMEA (“Asia/Pacific, Middle East, Africa”) – i.e. the Rest of the World.

Of course such a classification makes sense from a corporate perspective. It separates its divisions into the already-saturated U.S. market (which presumably includes Canada); the nearly-saturated European market; and McDonalds’ still-growing, Rest-of-the-World operations.

In October, McDonalds reported something which it had not done for nine years: a drop in overall global sales. However, not only was there an overall decline, but there were large declines in all three regions.  Sales fell 2.2% (month-over-month) in the U.S. and Europe, and 2.4% in the APMEA region.

As noted previously, this is a drop in sales revenues, and thus does not factor-in soaring inflation. As I’ve mentioned in several recent commentaries, as recently as the month of July the World Bank was reporting global food-inflation increasing by 10% in one month alone.

As a low-margin food producer, McDonalds is forced to pass along that inflation to its customers in the form of higher prices. While I doubt very much that McDonalds has hit its customers with any sort of across-the-board 10% increase in menu prices in October, clearly food-inflation would have forced prices higher by at least a couple percentage points on average – effectively doubling the (real) size of this one-month plunge.

 

With the U.S. propaganda machine blaming any/every form of U.S. economic weakness on Hurricane Sandy, let me repeat that these are October numbers, and thus cannot be blamed on the hurricane. As a discretionary form of (relatively) low-cost consumption; McDonalds sales also make a reasonably good proxy for GDP. With that in mind we can now take a closer look at these numbers to see what else can be gleaned.

The obvious question is what are we to make of the fact that sales in McDonalds’ only “growth market” (with growing economies) declined by an even greater amount than sales in its established, dying markets? What we see is a crystal-clear illustration of how money-printing by global central banks (and primarily Western central banks) is destroying the global economy.

As all regular readers should now understand, “inflating the money supply” is the actual, original definition of inflation; and all price-inflation (what we now simplistically label “inflation”) is directly derived from that money-printing. Inflation obviously destroys both wealth and incomes, since the currencies in which our wealth/incomes are denominated are being relentlessly driven to zero – via the hideous euphemism “competitive devaluation.”

We see this banker-produced inflation not only decimating the crippled, debt-bloated economies of the West; but it has now reached such a rapacious rate that it is even causing the healthier, dynamic economies of the Rest of the World to sag as well.

The Achilles Heel of these economies is that even though incomes are steadily rising, they are beginning from a very low (near-poverty) level. This makes these economies (and their populations) especially susceptible to soaring food prices, which is why at the same time that food prices were exploding Asian governments were meeting to discuss “the global food-price crisis.”

This also gives us yet another glimpse at the “hyperinflationary depression” which John Williams of Shadowstats.com has warned (for many years) looms directly ahead of us. Contrary to the mythology of charlatans such as B.S. Bernanke; “depressions” and out-of-control inflation can be simultaneous occurrences. For any/all of the dogmatic Deflationists who continue to bury their heads in the sand and proclaim that this could never occur, I invite them to explain “stagflation”; a known economic phenomenon which is nothing but a milder version of a hyperinflationary depression.

The mechanics here are simple and obvious. Soaring inflation destroys incomes (in real dollars) and thus purchasing power. The collapse in purchasing power causes a direct/immediate collapse in profit margins, as businesses also face soaring costs – but are unable to pass those costs along to their anemic customers.

This slowing economy causes deficits to explode higher (as we are already seeing). This leads to more money-printing (to “fund” the deficits); still more income destruction, still more profit destruction, still larger deficits; and the vicious circle continues to spiral downward out of control.

Meanwhile, as out-of-control money-printing causes the prices for ordinary goods to spiral higher; cash-strapped consumers begin defaulting on their paper debts. This is followed by governments/corporations defaulting on their paper debts (as we have already seen with Greece), and the hyperinflationary-depression picture is complete.

Brain-dead central bankers keep their printing presses cranked up white-hot, because (as Jim Rogers told us) “that’s all they know.” This ensures relentless inflation on hard assets, combined with the Mother of All Depressions for the paper assets which go to zero. It is also at the heart of why (reputable) precious metals analysts have been urging readers for years to swap their paper currencies which are being explicitly driven to zero for the ultimate hard-assets/“money”: gold and silver.

Unlike paper assets, hard assets cannot be driven to zero. While real estate also cannot be driven to zero; as countless millions of Western home-owners default on their mortgages (in what are already “bubble” markets) real estate is not what you want to be holding as your principal form of protection from what lies ahead. Mainstream shills regularly warn readers that “you can’t eat” gold or silver; but apparently consider condos to be “edible items” – since you never hear these talking-heads utter the same warning about our (bubble) real estate markets.

The McDonalds Economic Index is warning us that John Williams’ (predicted) economic Hell is now imminent. Lest apathetic readers get the urge to brush-off the October collapse in McDonalds sales as some one-month anomaly, it comes just weeks after McDonalds reported its slowest quarter in nine years.

When a 21st century world can no longer afford its “Big Macs”, the message is clear: head for the lifeboats – as this ship has just struck an iceberg.

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Comments (10)Add Comment
Jeff Nielson
...
written by Jeff Nielson, December 03, 2012
I'm wondering how this episode of hyper-stagflation or hyperinflation will differ from Weimar since everything is controlled by computers now. Maybe it will make it worse because the ponzi scheme has now reached such precarious heights that would not have been possible back in 1930 when they had no such complex instruments of control.

Also, I think at any time the central banks could step in and halt the inflation by imposing a gold standard with what little gold they have left...


Null, it would have been difficult to respond to your comment in any case; because you raise such a thorny issue. However, having just read the link supplied by DGierl in the previous comment, this complicates analysis much, much more.

(1) While we have a crude understanding of what lies ahead in economic terms, (as you point out) we can have no way of knowing PRECISELY how the meltdown will unfold.

(2) Our COMPUTERIZED, electronic currency system is badly-suited to any real, "physical" commerce -- meaning that a 21st century hyperinflation could easily be worse than a 20th century hyperinflation.

The fact that our imminent hyperinflation will be INTERNATIONAL (if not global) seals that fate.

However, I question your assertion that (a) our governments COULD halt a hyperinflation with their (dwindling) gold reservesp; and (after reading DGierl's link) I question if (b) they would even WANT TO...

I'm going to get into these things more on the forum with a brand-new "Hyperinflation Thread" in our Economics section.

http://www.bullionbullscanada.com/bulletin-boards/17-talk-economics/20924-hyperinflation-thread#20925
Jeff Nielson
...
written by Jeff Nielson, December 03, 2012
The problem with the link seems to be the period at the end of the sentence. http://www.usagold.com/germannightmare.html
The graph is a little over half way down the article.
+0


I got it this time Dgierl. Fantastic read!

I'm going to post this on the forum. Not only because I want as many of our audience as possible to see/read this, but because there's simply too much important material to cover in a "comments" section.

Thanks for taking the time to post a second link!! smilies/smiley.gif
Null
...
written by Null, December 02, 2012
I'm wondering how this episode of hyper-stagflation or hyperinflation will differ from Weimar since everything is controlled by computers now. Maybe it will make it worse because the ponzi scheme has now reached such precarious heights that would not have been possible back in 1930 when they had no such complex instruments of control.

Also, I think at any time the central banks could step in and halt the inflation by imposing a gold standard with what little gold they have left. I think the US still has some, how much who knows. The question is, will the bankers let it get to the point where they have absolutely no gold left and the delivery default is what triggers the collapse, or will they end it while there's still some precious metals left to back up a currency?
dgierl
...
written by David Gierl, December 02, 2012
The problem with the link seems to be the period at the end of the sentence. http://www.usagold.com/germannightmare.html
The graph is a little over half way down the article.
Jeff Nielson
...
written by Jeff Nielson, December 02, 2012
Thanks a lot for the comment, Dgierl, but unfortunately I couldn't get that link to work for me.

I'm assuming the data exists to support your comment, so let me address both its GENERAL and SPECIFIC significance.

The general point here is the ILLUSORY nature of change/time -- when viewed in the present. We look at previous, historic events (through the prism of time) and they seem to occur "quickly" -- and homogenously.

However when we LIVE through events (or examine historical events in fine detail), we see that the unfolding of major events seems both "slower" and much more UNEVEN when viewed in the present.

The problem here is that the masses erroneously assume that they will RECOGNIZE any/all "major changes" as they are happening -- when History tells us that the masses never even UNDERSTAND these major events until viewed in HINDSIGHT.

Sadly, few of the Complacent will ever heed such warnings... smilies/sad.gif
dgierl
...
written by David Gierl, December 02, 2012
Just to make sure folks know, the Weimar hyper inflation didn't start and go straight up or strictly hyperbolic. It had quite a few ebbs and flows which fooled many people into thinking it was over, long before the end. I don't believe I can post a picture here, but a graph of the hyperinflation is in the article at http://www.usagold.com/germannightmare.html.
Jeff Nielson
...
written by Jeff Nielson, December 01, 2012
Jeff: how about hyper-stagflation?...


Something IN BETWEEN "stagflation" and a hyperinflationary depression, Apberusdisvet?

Yes, it's certainly possible that one of the STEPS along the way would be a PRELIMINARY, milder version of this. But understand that what is taking place is a PROCESS -- with (at this point) NOTHING to halt the progression.

Unless our Traitor Governments do a 180-degree turn on their totally self-destructive economic policies, a (full) hyperinflationary depression MUST be the final outcome -- which is why John Williams has remained adamant all these years.
Jeff Nielson
...
written by Jeff Nielson, December 01, 2012
"Stagflation" a term I never see in MSM and one you haven't mention in a while...


Earl, in fact I have NOT properly defined "stagflation". It is very high inflation combined with near-zero (or slightly below zero) economic growth.

Now that the definition is explicit, we can SEE that this is just a milder version of a (self-descriptive) hyperinflationary depression. Thus the Deflationists are people who argue that it's only POSSIBLE for our economies to "catch a cold" -- but we could NEVER "catch pneumonia"... smilies/smiley.gif
apberusdisvet
...
written by Andy Bergeron, November 30, 2012
Jeff: how about hyper-stagflation? This in-between Twilight Zone would be a reality since I truly believe that hyperinflation (a la Weimar and Zimbabwe) is highly unlikely; at even 10% a month, there would be massive civil unrest, a definite over reaction by the police state, and a likely Civil War, if not a revolution.
Earl
...
written by Tim, November 30, 2012
Jeff,

I love the angle and information of this commentary. "The McDonalds Economic Index". Global company serves "billions". What a pulse. "Stagflation" a term I never see in MSM and one you haven't mention in a while.
“stagflation”; a known economic phenomenon which is nothing but a milder version of a hyperinflationary depression. I appreciate you defining that.
Thank You
Earl

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