>>Companies have to pay more for basic materials (input) and due to high unemployment they cannot pass all the rise in input costs into the prices of their products. Thus you see margin compression and a reduction in profit margins.<<
I see this on a daily basis at my restaurants. Many back of the house wholesale groceries have tripled in cost over the past 18 months and my bottom line retail margins are shrinking rapidly. With more and more competitors giving items away just to have warm bodies enter their doors, it has become a weekly battle to manufacture organic profit. Raising prices at this moment in time to offset wholesale cost increases would be retail suicide. This appears to be the case in many retail spaces not just in my industry. This weeks food crisis comes from a recent crop freeze in Mexico. My produce... specifically tomatoes and green peppers have tripled in cost. These items are used in bulk in virtually ever recipe in my Southwest restaurant. It is impossible for me to pass that kind of cost increase onto my ever so frugal customer. This type of increase is not isolated. We have seen it across the board in dairy, flour, meat, fish, etc. A crop freeze is typical hyped propaganda which is used to redirect consumer focus from the real elephant in the room. At some point many restaurants will dissolve due to ever increasing costs and shrinking profit margins. This is not necessarily a bad thing. It's just unfortunate for me, as it is my current livelihood. At some point however, this will burden the consumer more and more as the remaining restaurants that have survived the storm will begin to raise their prices dramatically at the onset of a diminishing supply and lack of competition. Again, this type of activity will be mirrored throughout more than just the restaurant industry. This economic cancer will move into grocery stores, then consumer electronics, clothing retail, automotive etc. Once people begin paying higher prices for the likes of groceries and gasoline, clearly the less likely they will be willing to spend their remaining paychecks on a new tv, cell phone, or car and so the ripple effect continues... Economics 101. So from a hands on retail standpoint, the snowball is forming, albeit very slowly. I still agree with you that a collapse is inevitable. The problem for me has been trying to time it. Good luck with all your recent tragedy and future endeavors. F4T.
