Busted: Bankers and The Global Economy

May 12, 2011

Dangerous Inflation is on the Way

Filed under: economy, inflation, recession, stagflation — Tags: , , , — digitaleconomy @ 12:01 pm

I’ve written about false inflation figures for years. The U.S. government continues to pretend that Americans won’t be facing dangerous inflation by 2012. The facts show otherwise.

The Producer Price Index (PPI) increased 0.7% last month. This equates to 8.4% annual wholesale inflation in America! Prices are rising much faster than wages by any means.  April wholesale inflation data reflects an ever-accelerating cost of living in 2011.

Can official government statistics be trusted? Not according to John Williams at Shadowstats.com, whose alternative inflation index shows costs rising four times higher than “official” rates. Since 1980, the Bureau of Labor Statistics (BLS) has changed the way it calculates the Consumer Price Index (CPI) in order to account for the substitution of products, improvements in quality and other things.

“Near-term circumstances generally have continued to deteriorate,” says Williams. “Though not yet commonly recognized, there is both an intensifying double-dip recession and a rapidly escalating inflation problem.”

July 24, 2010

U.S. Worries Over Deflation

The nation has a nasty case of stagnation, fueled by significant employment issues and rising defaults. Prices are falling while most consumers resist buying. When deflation begins and prices fall, it seems like a good thing. Then, lower prices cut into business profits which results in trimming payrolls. This further undermines buying power, which leads to lower profits, fewer jobs and lower wages. All this results in economic contraction.

With all the cutbacks, buyers that have the funds wait for better deals through even lower prices, which magnifies deflation. As a result, the nation plunges into a downward economic spiral that is hard to escape. This is exactly what the United States faces.

The nation’s capital is feeling the guilt as they look at other in dismay about the rising deficit and inflation, even though they advertise to the world that inflation doesn’t exist here. Economists around the world see great potential for deflation of the dollar, which already would be the case, were it not for declining currencies across the globe.

The statistics say it all. Consumer prices have declined each month for the last three months, putting inflation above last year. They claim that the core inflation rate is at a 44 year low at less than one percent. So why are they worried? The Federal Reserve likes to see an inflation rate of 3% because this puts more money in their corporate pockets.

Private economists and financial experts are more concerned. Some of them see the possibility of deflation at more than fifty percent. This is compounded by unemployment, lack of production and lower spending.

Should deflation occur, the central bank has the tools to reverse it according to Ben Bernanke, even though the Federal Reserve has interest rates at historical lows and has pumped trillions into the financial system. The books have been cooked baby, to the loss of the United States. Bernanke claims the U.S. economy is more vibrant and productive than Japan’s was in the 90s. The difference is supposed to be that Japan’s labor face was actually declining, while the States has plenty of labor.

In my words, there are plenty of financially-broken and impoverished Americans to take advantage of, with the hope of restoring the economy on their collective backs. Wall Street and multinationals aren’t suffering beyond the losses of jobs they incurred during the recession. Let’s face facts, they didn’t suffer much at all. Their employees did. That’s the way it is.

The little guy at the bottom, so far, is the one that has truly paid for the recession and the remainder of its fallout. They are ones that will continue to pay.

March 20, 2008

U.S. Central Banking and Inflation

U.S. business and consumers paid more for food, energy, gasoline, automobiles and most other products last month. Recently, the government confirmed an inflation rate of 8%, which is still vastly underestimated and underreported. The rate is closer to 18% and 20% for food prices. This double-digit increase is a fairly recent event. Whether the Fed or the U.S. government care to admit the full truth, inflation is rising to new heights, due in part to continuous reductions in the central banks’ interest rates.

Most of you are no doubt familiar with the Consumer Price Index (CPI), that broad inflation measure the Bureau of Labor Statistics publishes once a month. The BLS’ monthly report includes another inflation measure, known as “core inflation,” which excludes food and energy. Once a month, the Bureau of Economic Analysis releases headline and core versions of another closely watched price index known as the Personal Consumption Expenditures (PCE). Food and energy items have been deliberately and systematically removed when most economists look at price movements. Removing food and fuel is the economists’ effort to eliminate “noise” in inflation measures.

The term core inflation was coined in the early 1980s. The practice of stripping certain components from consumer prices began in the late 1950s. The practice of reporting a CPI excluding both food and energy prices began when energy price volatility dramatically increased in the 1970s. Central banks desire to subtract the appearance of volatile swings in prices. Many of the arguments for excluding food and energy are based on the notion that an exceptionally large price increase today will be offset, somewhere down the road, by an exceptionally large price decline. When increases in food and energy prices represent trends, the arguments made for excluding food and energy prices are on shaky ground. This has been exactly the case since the 1970s. As a result of this simple accounting principle, inflation rates are skewed and inaccurate. Creative figures and inflation targeting have further reduced official inflation rates. Routinely excluding food and oil price movements from inflation gauges has been misleading at best, especially with the lowered costs of cheap imported food in the current U.S. economy.

The reality is that the interrelation between national economies within the global economy as a whole has become more important in measuring inflation and other economic factors. The growth of control by the world central banking community has become more important in establishing effective measures. This fact has been largely ignored by most economists.

March 4, 2008

Stagflation is in the Air

The United States economy has steadily lost steam and appears to be stalled. Prices have shot upwards at the fastest pace in thirty years. Energy prices further threaten the equilibrium of an already shaky national platform along with unprecedented spending on the Iraq and Afghanistan fronts.

bernanke-stagflation.jpgThe Fed doesn’t readily admit it, but the United States has sufficient inflation from continually extending credit to the government to the tune of 16 billion monthly for the two wars the Bush Administration has been fighting. The Fed has been pumping credit into the U.S. system for the last 5 years at an unprecedented rate. The government has earmarked the maximum amount of money available for a stimulus plan. The stimulus plan is already enhancing inflation, which in turn, will further devalue the dollar and its buying power when Americans need the buying power most. Whether the stimulus spending deflects economic stagnation remains to be seen. Stagflation, a combination of stagnation and inflation threatens the job market, industry and the entire economy as higher prices and declining demand result from consumers as they cut back their spending because of higher prices and shrinking paychecks. The Fed’s situation is already compounded by the banking liquidity crisis and the mortgage crisis. Right now, about $60 billion a month is being loaned on a short-term basis to banks that qualify by having enough collateral. The U.S. government has put the burden of nurturing the economy fully on the shoulders of the Federal Reserve. High gas and food prices, the effect of the housing bust, the credit crunch and a tougher job market put more pressure on the Fed.

stiglitz.jpgNobel-prize winning economist Joseph Stiglitz stated that the war has greatly contributed to the slowdown. “To offset that depressing effect, the Fed has flooded the economy with liquidity and the regulators looked the other way when very imprudent lending was going up. We were living on borrowed money and borrowed time and eventually a day of reckoning had to come, and it has now come.” The war is touted by Stiglitz as the reason for the credit crunch that exists in the United States, since $3.3 trillion have been invested in the Iraq War alone. While this might be considered a matter of perspective to some degree, the effect of the war cannot be ruled out when weighing the factors of the U.S. economy.

The sage advice of the past has been to “start saving” to prepare for stagflation. The reality is that saving money is not a complete answer to this complex set of economic circumstances. The value of money along with the buying power of the dollar is down. Your savings are already worth less than when you socked them away.

Concern yourself with reigning in spending. The sages recommend start paying off credit card balances and other bills in the biggest chunks possible. That might be good advice for those in good financial shape. Better advice is to be sure that you are not at the mercy of electronic money, debt cards and the banking system. Start setting cash aside in the event of an emergency. Refuse to use the bank as a tool to float your money. The bank, along with reckless spending, is part of the problem. If the bank can’t charge you, they can’t bankrupt you. If you can’t make a payment, sock aside everything you can in a safe place and don’t spend it to make yourself feel better. Make plans, but don’t be willing to put yourself under the bus financially to make a creditor happy. Set money aside. The worst part of stagflation is that circumstances make money harder and harder to save. The more cash you have to call on in an emergency, the less desperate or destitute you’ll be. These are short-term plans for success in your fight against stagflation.

E Manning

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