Coffee or gas?
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On Monday (July 7), Starbucks Corp shares fell close to 4 percent, a new low, on news that the ubiquitous coffee retailer is responding to collapsing sales by closing 600 outlets across the United States. The 61 cent drop is seen by investors as a reflection of the deepening economic recession driven by the housing crisis and food and gasoline http://www.wvwnews.net/story.php?id=4965.
The traffic in discretionary income purchases has long been tracked to indicate how healthy an economy is. After all, if people are able to spend their earnings on Cokes, McDonalds, new cars and so on, the general feeling among economists is that economic confidence is high, reflecting economic well being. Of course, with the explosion of cheap credit the picture is distorted somewhat, but with recent economic crises investors are panicked by a sharp decrease in discretionary spending.The Starbucks battering has important social implications, considering that great socio-political and cultural changes happen at periods of economic upheaval. One sign of this has been the increase in http://www.wvwnews.net/story.php?id=4991 from the suburbs to urban areas in response to the gas and housing crises.
The image of outwardly well-off white people clutching ostentatious Starbucks “grande” cups, complete with a little cardboard heat sleeve, is an iconic symbol of America in the early 2000s. But form is finally catching up with substance. “The U.S. consumer is hurting more now than they have in the last 18 months,” said John Langston, a Hodges Capital Management analyst interviewed by Reuters. “People look at spending $4 on a latte or $4 on a gallon of gas, and they’re probably going to pick the gallon of gas,” he said.
Those old enough to remember will recall the frozen yogurt craze of the late 1980s, while muffins were the in thing before that. Given the nature of consumerist capitalism, white Americans tend to follow the herd in their discretionary spending.
Starbucks, like Wal Mart, has become an easy target for social commentators of left and right. The company’s chief executive, Howard Shultz has been denounced as a militant Zionist who was awarded the “Israeli 50th Anniversary Tribute Award” from the Jerusalem Fund of Aish Ha-Torah, a hardline group. Shultz has given speeches to Jewish groups touting the extreme political views of Israel’s expansionist Likud. Workers rights groups have also complained that Starbucks keeps many of its employees, who have no union, in an economic limbo of part time work, a practice that is increasingly common across the economy, and which often burdens local communities with costs of healthcare and other services.
Essentially, while the eviction of thousands of families as a result of the subprime meltdown sent a signal that the economy is on the rocks, the impending doom of Starbucks is a wakeup call that things are changing.