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The Inflation Crisis Is Worse Than Admitted – Will Interest Rates Go To Record Highs?
The Inflation Crisis Is Worse Than Admitted – Will Interest Rates Go To Record Highs?
Inflation is not a new problem in the US; there has been a steady expansion of price inflation and a devaluation of the dollar ever since the Federal Reserve was officially made operational in 1916. This inflation is easily observed by comparing the prices of commodities and necessities from a few decades ago to today.
The median cost of a home in 1960 was around $11,900, which is the equivalent of $98,000 today. In the year 2000, the median home price rose to $170,000. Today, the average sale price for a home is over $400,000 dollars. Inflation apologists will argue that wages are keeping up with prices; this is simply not true and has not been true for a long time.
In today’s terms, a certain measure of home price increases involve artificial demand created by massive conglomerates like Blackstone buying up distressed properties. We can also place some blame on the huge migration of Americans out of blue states like New York and California during the pandemic lockdowns. However, prices were rising exponentially in many markets well before covid.
Americans have been dealing with higher prices and stagnant wages for some time now. This is often hidden or obscured by creative government accounting and the way inflation is communicated to the public through CPI numbers. This is especially true after the inflationary crisis of the late 1970s and early 1980s under the Carter Administration and Fed Chairman Paul Volcker.
It’s important to understand that CPI today is NOT an accurate reflection of true inflation overall, and this is because the methods used by the Fed and other institutions to calculate inflation changed after the 1970s event. Not surprisingly, CPI was adjusted to show a diminished inflation threat. If you can’t hide the price increases, you can at least lie about the gravity of those increases.
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Why This Feels Like a Depression for Most People
Why This Feels Like a Depression for Most People
“And the little screaming fact that sounds through all history: repression works only to strengthen and knit the repressed.” – John Steinbeck, The Grapes of Wrath
Everyone has seen the pictures of the unemployed waiting in soup lines during the Great Depression. When you try to tell a propaganda believing, willfully ignorant, mainstream media watching, math challenged consumer we are in the midst of a Greater Depression, they act as if you’ve lost your mind. They will immediately bluster about the 5.1% unemployment rate, record corporate profits, and stock market near all-time highs. The cognitive dissonance of these people is only exceeded by their inability to understand basic mathematical concepts.
The reason you don’t see huge lines of people waiting in soup lines during this Greater Depression is because the government has figured out how to disguise suffering through modern technology. During the height of the Great Depression in 1933, there were 12.8 million Americans unemployed. These were the men pictured in the soup lines. Today, there are 46 million Americans in an electronic soup kitchen line, as their food is distributed through EBT cards (with that angel of mercy JP Morgan reaping billions in profits by processing the transactions).
These 46 million people represent 14% of the U.S. population. There are 23 million households on food stamps in a nation of 123 million households. Therefore, 19% of all households in the U.S. are so poor, they require food assistance to survive. In 1933 there were approximately 126 million Americans living in 30 million households. The government didn’t keep official unemployment records until 1940, but the Department of Labor estimated 12.8 million people were unemployed during the worst year of the Great Depression or 24.9% of the labor force. By 1937 it had fallen to 14.3% or approximately 8 million people.
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The Endless Emergency—–Why It’s Always ZIRP Time In The Casino
The Endless Emergency—–Why It’s Always ZIRP Time In The Casino
Based on the headline from the latest Jobs Friday report you wouldn’t know that we are still mired in an economic emergency—–one apparently so extreme that it might entail moving to the 81st straight month of zero interest rates at next week’s FOMC meeting. After all, the unemployment rate came in smack-dab on the Fed’s full-employment target at 5.1%.
But that’s not the half of it. The August unemployment rate was also in the lowest quintile of modern history.
That’s right. There have been 535 monthly jobs reports since 1970, yet in only 98 months or 18% of the time did the unemployment rate post at 5.1% or lower.
In a word, the official unemployment rate is now in what has been the macroeconomic end zone for the past 45 years. Might this suggest that the emergency is over and done?
Not at all. The talking heads have been out in force insisting on yet another deferral of “lift-off” on the grounds that the economy is allegedly still fragile and that the establishment survey number at 173,000 jobs came in on the light side. Even the so-called centrists on the Fed—–Stanley Fischer and John Williams—–have gone to full-bore, open-mouth, two-armed economist mode, jabbering incoherently while they await more “in-coming” economic data.
Self-evidently, the only “incoming” information that can matter between now and next Wednesday is the stock market averages. To wit, if last October’s Bullard Rip low on the S&P 500 holds at 1867, the FOMC will declare “one and done”, at least for the year; and if the market succumbs to another spot of vertigo, the Fed will concoct yet another lame excuse for delay.
Indeed, the Fed’s true Humphrey-Hawkins target is transparent. Namely, avoidance of a “risk-off” hissy fit at all hazards.
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The US Economy Continues Its Collapse
The US Economy Continues Its Collapse
Do you remember when real reporters existed? Those were the days before the Clinton regime concentrated the media into a few hands and turned the media into a Ministry of Propaganda, a tool of Big Brother. The false reality in which Americans live extends into economic life. Last Friday’s employment report was a continuation of a long string of bad news spun into good news. The media repeats two numbers as if they mean something—the monthly payroll jobs gains and the unemployment rate—and ignores the numbers that show the continuing multi-year decline in employment opportunities while the economy is allegedly recovering.
The so-called recovery is based on the U.3 measure of the unemployment rate. This measure does not include any unemployed person who has become discouraged from the inability to find a job and has not looked for a job in four weeks. The U.3 measure of unemployment only includes the still hopeful who think they will find a job.
The government has a second official measure of unemployment, U.6. This measure, seldom reported, includes among the unemployed those who have been discouraged for less than one year. This official measure is double the 5.3% U.3 measure. What does it mean that the unemployment rate is over 10% after six years of alleged economic recovery?
In 1994 the Clinton regime stopped counting long-term discouraged workers as unemployed. Clinton wanted his economy to look better than Reagan’s, so he ceased counting the long-term discouraged workers that were part of Reagan’s unemployment rate. John Williams (shadowstats.com) continues to measure the long-term discouraged with the official methodology of that time, and when these unemployed are included, the US rate of unemployment as of July 2015 is 23%, several times higher than during the recession with which Fed chairman Paul Volcker greeted the Reagan presidency.
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A Recession Within A Recession
A Recession Within A Recession
On Friday, the federal government announced that the U.S. economy contracted at a 0.7 percent annual rate during the first quarter of 2015. This unexpected shrinking of the economy is being primarily blamed on “harsh” weather during the first three months of this year and on the strengthening of the U.S. dollar. Most economists are confident that U.S. GDP will rebound back into positive territory when the numbers for the second quarter come out, but if that does not happen we will officially meet the government’s criteria for being in another “recession”. To make sure that the numbers for Q2 will look “acceptable”, the Bureau of Economic Analysis is about to change the way that it calculates GDP again. They are just going to keep “seasonally adjusting” the numbers until they get what they want. At this point, the government numbers are so full of “assumptions” and “estimates” that they don’t really bear much resemblance to reality anyway. In fact, John Williams of shadowstats.com has calculated that if the government was actually using honest numbers that they would show that we have continually been in a recession since 2005. That is why I am referring to this as a “recession within a recession”. Most people can look around and see that economic conditions for most Americans are not good, and now they are about to get even worse.
For quite a while I have been warning that another economic downturn was coming. Well, now we have official confirmation from the Obama administration that it is happening. The following is an excerpt from the statement that the Bureau of Economic Analysis released on Friday…
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Inaccurate statistics and the threat to bonds
Inaccurate statistics and the threat to bonds
Statistics have become very misleading: in particular we are being badly misled into believing that the US is teetering on the edge of price deflation, because the US official rate of inflation is barely positive, a level that US bonds and therefore all other financial markets have priced in without accepting it is actually significantly higher.
There are two possible approaches to assessing the true rate of price inflation. You can either reverse all the tweaks government statisticians have implemented over the decades to reduce the apparent rate, or you can collect a statistically significant sample of price data independently and turn that into an index. John Williams of Shadowstats.com is well known for his work on the former approach, but until recently I was unaware that anyone was attempting the latter. That is until Simon Hunt of Simon Hunt Strategic Services drew my attention to the Chapwood Index, which deserves wider publicity.
This is from the website: “The Chapwood Index reflects the true cost-of-living increase in America. Updated and released twice a year, it reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation.” It is, therefore, statistically significant, and it consistently shows price inflation to be much higher than that indicated by the Consumer Price Index (CPI).
The table below shows this difference since 2011, and how it affects real GDP.
Sources: Chapwood Index, US Bureau of Labor Statistics and Bureau of Economic Analysis. Figures may not total due to rounding.
The Chapwood number in the table is the simple arithmetic average of the 50 cities. The year-in, year-out 10% inflation rate is notable. Furthermore, Chapwood shows cumulative inflation rate as shown by the CPI for the four years to be understated by 39.9%, and using Chapwood numbers in place of the GDP deflator, real GDP has slumped a cumulative total of 21.4% over the four years.
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16 Signs That The Economy Has Stalled Out And The Next Economic Downturn Is Here
16 Signs That The Economy Has Stalled Out And The Next Economic Downturn Is Here
If U.S. economic growth falls any lower, we are officially going to be in recession territory. On Wednesday, we learned that U.S. GDP grew at a 0.2 percent annual rate in the first quarter of 2015. That was much lower than all of the “experts” were projecting. And of course there are all sorts of questions whether the GDP numbers the government feeds us are legitimate anyway. According to John Williams of shadowstats.com, if honest numbers were used they would show that U.S. GDP growth has been continuously negative since 2005. But even if we consider the number that the government has given us to be the “real” number, it still shows that the U.S. economy has stalled out. It is almost as if we have hit a “turning point”, and there are many out there (including myself) that believe that the next major economic downturn is dead ahead. As you will see in this article, a whole bunch of things are happening right now that we would expect to see if a recession was beginning. The following are 16 signs that the economy has stalled out and the next economic downturn is here…
#1 We just learned that U.S. GDP grew at an anemic 0.2 percent annual rate during the first quarter of 2015…
The gross domestic product grew between January and March at an annualized rate of 0.2 percent, the U.S. Commerce Department said, adding to the picture of an economy braking sharply after accelerating for much of last year. The pace fell well shy of the 1 percent mark anticipated by analysts and marked the weakest quarter in a year.
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Our House of Cards
Our House of Cards
As John Williams (shadowstats.com) has observed, the payroll jobs reports no longer make any logical or statistical sense. Ask yourself, do you believe that retailers responded to the very disappointing Christmas season by rushing out in January to hire 46,000 more retail clerks?
Perhaps those 46,000 retail jobs is the BLS telling us that they have to come up with new jobs to report whether or not there are any.
As we have reported on a number of occasions, whenever the price of gold in the futures market starts to rise, massive uncovered shorts are suddenly dumped on the market. As the shorts dramatically increase the supply of future contracts all at once, the supply overwhelms demand, and the price of gold is driven down despite the fact that the demand for gold in the physical market is strong. (Remember, the price of gold is determined in the futures market in which contracts are largely settled in cash and seldom in gold. The physical market is where gold bullion is purchased, not paper claims on gold for speculation.)
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John Williams’ Take On The October Unemployment Report: “The Economy Remains In Terrible Shape” | Zero Hedge
When it comes to inflation data, there are two parallel sources: the BLS, and ShadowStats’ John Williams, who continues to plough through the underlying “data” using pre-pre-pre-revision protocols, and every month reveals a parallel universe in which something shocking is revealed: the truth. Here is his take on the October “weaker but really stronger than expected” jobs numbers. Here is what really happened.
From ShadowStats
Never Recovered, the Economy Remains in Terrible Shape. The large number of opening headlines in today’s (November 9th) missive reflects various stories, ranging from twisted unemployment data, to an election dominated by underlying economic reality, and to headline 2014 financial results on the federal government’s operations that should raise some troubling questions in the markets. The general outlook is unchanged
Twisted Unemployment Numbers. Headline October 2014 unemployment reporting, in particular, was skewed heavily by warped seasonal-adjustment factors that do account properly for last year’s government shutdown. When the U.S. government closed in October 2013, the shutdown encompassed the Bureau of Labor Statistics (BLS) base-period for determining the unemployment and employment detail in the household survey, as well as for determining employment in the payroll survey. The BLS was unable to determine fully the impact of the government shutdown on the monthly October labor data.
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