Busted: Bankers and The Global Economy

July 16, 2008

Recovery Slow in U.S., Inflation Out of Control

For some time, the Fed has remained hopeful of a quick recovery, despite lingering signs of trouble. The Fed is lining up with the current reality. Ben Bernanke is fighting hard to keep the economy growing with fighting inflation as his top priority per his testimony before the Senate Banking Committee. He still refuses to admit that the U.S. economy is in a recession. His goal is to strengthen the economy over the strength of the dollar. He is uncertain about the value of a second economic stimulus move.

Because of the turmoil in the economy and banking industry, Bernanke has flagged his optimism somewhat, announcing that growth will eventually pick up over the next two years.

Years ago, no one would have expected oil futures to be running the economy, yet that is exactly what Mr. Bernanke is concerned about most now. Any downside risks in the economy and banking in general can be attributed to uncertainty in oil prices in his view. Despite a lively debate over the last few months, the media has recently continued to sound the alert that commodity trading is creating the tension in the oil market. A rumor in the “oil speculation market” supposedly set off a temporary decline the price of oil. The admission on all sides is that oil speculation is becoming considered an established fact in the cost of oil rather than the stuff of rumors. Like the mortgage banking debacle, could we see a similar financial scandal in the oil commodities market?

Bernanke also admitted that the dollar, weakened by credit expansion and the war fronts, has contributed to the price of oil. For years, the Fed has ignored the price of fuel and food when figuring inflation. This is no longer possible. Considering food and fuel alone, the yearly inflation rate is now at 21.6% based on June figures based on data from the U.S. Department of Labor. Naturally, these figures fluctuate from month-to-month, so the yearly total may be higher or lower over time. Curiously, the Department is claiming a 9.2 percent adjusted inflation rate for the last 12 months. However, the real facts and figures don’t lie.

The U.S. government continues to manipulate economic data, as it has for years. Reports typically confirm the deception if you are willing to watch closely. For example, more jobs were lost than official numbers indicate. Washington continues this deception to extend the illusion of economic growth in the effort to keep consumer confidence high with the promise of higher consumption of goods. Strength in the U.S. economy since 2002 has mostly been fueled by financing. Right now, most financing is heavily curtailed for multiple causes. Even worse, because Americans aren’t spending, the EU and other regions suffer as well in their economies.

Looking at foreclosure statistics and the like may be a better measure of the real state of the economy since these figures are much harder to manipulate or spread over time. Unfortunately, these statistics are rather grim and negative.

Meanwhile, the inflation of the dollar has deflated the value of the dollar as opposed to the Euro and other currencies. Even so, inflation is up in the European Union. An advertised 50 percent jump in crude oil prices this year has driven inflation and drained spending power as economic growth weakens. Even the EU is putting their faith in the stabilization of oil prices.

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