The iPod economy's sad song

What do sales of memory chips and iPods, along with rising bankruptcy filings, tell us? Nothing good.

By Andrew Leonard
Published March 4, 2008 2:38PM (EST)

As consumers of computerized gadgetry, we've come to count on infinitely falling prices as our birthright. So the news that 8-gigabit NAND flash memory chip prices have fallen to record lows this year isn't by itself alarming. Flash chips can be found in numerous iPod models, digital cameras, and suchlike. If their price is dropping, all the better for us, right?

But there's a difference between price drops impelled by Moore's law and price drops driven by slumping demand. And early on Tuesday morning, just before the stock market opened in New York, Dow Jones Industrial Average stock futures were falling , in part because investors were worried about the latter, after a report from Intel projecting lower gross margins due to lower prices for memory chips.

Coming one day after a Bank of America analyst predicted that iPod sales would fall in the second quarter of 2008 by 5 percent, as compared to the same quarter in 2007, the news could mean the markets are in for a rough day.

But who knows, maybe the stimulus checks due to arrive sometime in May will encourage a new wave of iPod and iPhone and digital camera purchases!

Or not. In other news, Credit Slips' Bob Lawless notes that February data show "bankruptcy filings in the U.S. are now at their highest daily rate since the 2005 changes to the federal bankruptcy law."

The stats are worst in states that are suffering the most from the housing bust, which suggests a relationship between the new bankruptcies and foreclosures. Lawless cautions against reading too much into any one month's figures but all the same, projects 1,000,000 bankruptcy filings in 2008, which he calls "a big number for a system after a law that made bankruptcy more expensive, more time-intensive, and less effective for the consumers who use it."

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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