I’m sure some will say I’m an alarmist. A grand conspiracy theorist. However, bailouts are all the rage for large companies these days. If we look at the reasoning given to us about bailing out the failed, antiquated, and obsolete GM and Chrysler, a Walmart bailout doesn’t seem that far fetched. GM and Chrysler were too large to let fail. That’s what we were told. Yet, they failed anyway, after taking billions of dollars. Let the economic meltdown begin!
Walmart is posting solid earnings you say? Walmart certainly has many things going for it. However, international economics are not working in favor of Walmart. The vast majority of Walmart products come from China. There is incredible pressure on the US dollar against the RMB. In fact, the USD buys a whole lot less in China today than it did a year ago, let alone a couple of years ago.
China has also changed their employment law. While many view it as good for Chinese workers, it has put additional pressure on the ability to get Chinese made goods. The long term effects of this policy are yet to be determined. However, it is highly unlikely that the new Chinese employment law is going to make Chinese made products more affordable.
China isn’t the only place where Walmart gets products. However, Walmart can’t just start sourcing products in another country where the dollar may be stronger and employment laws aren’t changing. First, international patents will likely prevent most of that from happening. That’s a topic for an entirely separate blog (that I’ll probably never get around to writing). As the USD falls, so will Walmart’s profits.
If Walmart executives choose to cash in on the scare tactics used by GM and Chrysler, they could easily squeeze billions of dollars in a bailout. After all, the total number of employees for GM was estimated at a quarter million. Walmart employs more than two million. That’s eight times as many people losing their jobs if Walmart fails. We can’t let that happen, right? Just think of the children!
If you’ve made it this far and think this has anything to do with Walmart, I’ll spell it out right now. I think GM and Chrysler sucker punched America! I think there is a special place in hell right next to people who talk during movies for the executives and politicians who sucked money out of our pockets for that ridiculous automobile bailout.