[Rhodes22-list] Economics - More Good News

[DCLewis1 at aol.com]

In a message dated 7/16/2007 6:21:34 A.M. Eastern Daylight Time,  
flybrad at gmail.com writes:

The  prime result of 'printing' money is inflation.  Inflation is low.   Show
me the money!

Brad





Brad,
 
Inflation is low?  The price of my house, and probably your house,  doubled 
in the last 6 years.  That’s more than 12%/yr compounded  appreciation.  I 
believe housing is about 1/3 of the CPI, so if the price  of nothing else at all 
increased over the last 6 years you have minimum of  4% inflation per year - 
the Feds have been claiming 2.5% to 3% growth in the CPI  this year and less in 
earlier years.  But in addition we know the price of  gas has more than 
doubled in that time frame, again that’s more than 12%/yr; gas  won’t have nearly 
the same weighting in the CPI as housing, but it will  add.  And virtually 
every other component in the CPI will add as well,  except for underwear made in 
China.  There is absolutely no way inflation  is even roughly what the Feds are 
claiming.  They distinguish between  “core” inflation and “non-core” 
inflation, it’s BS - from your and my  perspective there is only inflation and the 
number they report should have the  qualifier “would you believe?”.  They tell 
you inflation is “contained” -  what in the world does that mean?  My guess 
is that inflation is at least  5%, maybe more - actually, in Greenspan's last 
years I think inflation  approached 10%, because of housing inflation.  If 
your income and the price  of all your goods and chattels have not increased 
dramatically over the past 6  years, you've fallen behind.
 
Your government does very well when they under report inflation.   The 
leadership looks good.  At least as important as looking good, it  allows them to 
inflate out of the fiscal mess they have created.  Example:  income tax receipts 
are intrinsically indexed to inflation (unless the $ is  moving abroad), but 
by understating inflation they can provide a reduced COLA to  all those 
military and government pensions they have to fund - over time the  government will 
do all right, and the retirees will be impoverished.  It  works!  Example: if 
the gap between real inflation and the CPI were 2% to  3% (the Fed is 
currently reporting inflation of 2% to 3%, I claim it’s at least  5%, the gap is 2% to 
3%) the value of a military retirees pension would decrease  by 16% to 24% in 
constant dollars after 8 years.  The military retirement  system looks 
extremely generous, but the Feds have figured out how to inflate  the burden away.  
Of course people with private pensions have similar, and  generally worse, 
problems.
 
Seriously, we need a independent organization that will track  inflation.  
The government has a massive vested interest in reporting low  numbers and it 
has been a lot less than straightforward with the American  people.  You can’t 
believe their CPI numbers.  Don’t believe me do  your own due diligence, dig 
out some medical bills, or gas receipts, check out  your home assessment, 
property tax, etc from 5 or 6 years ago, and compare  against your current costs, you
’ll see that I’m not making this stuff up.
 
One down side to reporting accurate inflation numbers might be that the  
general public would see how bad the situation really is and they might bail out  
of the US dollar.  That could really kill the economy.  
 
Ed’s claim is the inflation is a result of competition from China and India  
for commodities, there is  measure of truth in that.  But it also  appears 
your government has been running it’s printing presses overtime,  increasing the 
money supply - perhaps to help fund the war in Iraq etc and  still have a tax 
cut - that’s a guaranteed way to generate inflation (and kill  the foreign 
exchange rate, which is being killed) - of course, if they tell you  there's no 
inflation, there's no inflation, right?.  Finally, we have  started to import 
inflation from China, India, etc - early on the impact of  China, India etc was 
deflationary (i.e. cheap goods) but now wages are going up  as those 
countries develop - wages are still cheap, but not as cheap - and we’re  seeing that 
inflation as we import those goods and services.  I think this  last effect is 
particularly obvious in the Indian based software and software  support 
service sector.  Part of the “joy” associated with the development  of a complex 
global economy is that the US becomes vulnerable to events and  circumstances we 
can’t control - importing inflation from India and  China is an example.
 
As for giving the president line item veto authority - I once thought that  
would work, but Mr Bush is a case study showing it won't work.  If it's not  a 
faith based issue or about the war in Iraq there's no suggestion he'd veto  
anything.  I can't think of a single thing he's done to try to control  spending 
or balance the budget,  that's why he's called a  new-conservative.
 
Finally, as for the US debt/GNP being no worse than France - I'm perplexed  
that you would make that comparison.  I never thought you'd hold up  the 
pseudo-Socialist government of France as a benchmark.   I remember  the day in my 
youth that the government of France declared bankruptcy.  We  should do better.
 
Dave



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