Dead Money

The shelves are full of goods. The lots crammed with cars.  There are more sellers than buyers. “10% off” has no meaning.

Money has little value as saving it in a bank or using it as mattress stuffing gives the same interest. In fact, it seems safer and more useful as a mattress.

Entrepreneurs who have wallowed in capitalism, happy to bring in crappy Chinese junk and sell it at triple the cost are stuck with warehouses of these goods.

Those who understand the concept of ‘dead money’ are likely to survive the recession, even prosper.

Those who can’t think out of the standard formula of $1 x $5 will not merely go out of business, but may lose more than they realise they had.

In usual capitalistic jargon, multiplying the cost price by five is how one usually sets the sale price. The reasoning is:
$1 to repurchase,
$1 as a hedge in case the price goes up,
$1 for utilities,
$1 for salaries,
$1 for profit                                                                                                                        = $5.

Obviously there is some elastic in the figures, and often the actual profit works out to far more than $1. However, the longer goods stay on the shelf, the more they ‘decompose’.

Smart vendors look at their stocked shelves and see dead money, see that the X dollars they spent on those goods is no longer available for the payment of bills. Getting those goods off the shelves and back into cash is survival.

Taking a ‘loss’ works out to survival, for where one has bills, being able to pay them is the focus, not ‘breaking even’.

As an example, imagine you have spent ten thousand dollars stocking that particular shelf. You have bills that fall due;
mortgage, utilities, plus you have to eat. You need seven thousand dollars now to survive. If you can sell those goods for eight thousand dollars, you don’t count the loss of two, you count the fact you will get to next month with one thousand dollars.

You can use that one thousand dollars to pick up goods at auction, for your competitor, so trapped in the idea of ’breaking even’ can not drop his price below ten thousand.

So, his goods are taken as payment for debt and put on auction. You may pick up ten thousand dollars worth of goods for one thousand.

This means you can sell them for so little, that they fly off the shelves. Your investment of $1k returns $5k or more, which you use to buy more goods at auction.

Your ‘markup’ may be extremely low, but $1 = $5 is no longer your equation.

Buyers, seeing the super bargains you are offering, buy more than they need as their own ‘hedge’.  After all, if toothpaste usually sells for $1 and you are selling it for .60c then buying two is knee jerk.

Further, buyers have to know how to negotiate.  It doesn’t matter what the price tag says.
This television is not going to sell for now. Not at that price. Yes, two years ago it sold for $300, but it’s been sitting on the shelf for two years. Getting $100 is $100 more than the vendor had this morning.

The people most effected by the crazy market are loss adjusters. What is the value of this vehicle? Or that house? There is no ‘market value’ as no one is buying.

For the average person, right now, it is a buyer’s market. Getting negligible interest on money saved when the value of money is declining doesn’t seem particularly wise.

Buying and renting property is a way to have a monthly income. Many consortiums are now forming to buy up property which has been foreclosed and rent it at a very modest cost. Tenants who could bearly afford a one bedroom can rent whole houses for less.

Those who understand the term ‘dead money’ will survive the crisis. Those who refuse to sell goods or services at less will see them carted away to auction.