WHY the economy is WORSE THAN WE KNOW -- (honest inflation measures would mean 70% higher SS checks)

[nashville_brook]

Ever get the feeling that the measures we use to determine our economic health are being manipulated? I knew that during the Bush-43 administration we had stopped reporting many important measures of inflation, unemployment and growth -- but I had no idea it was as bad or as longstanding as Kevin Phillips reports in this month's Harper's Magazine cover story, "Numbers Racket" Why the economy is worse than we know."

Here's one amazing snippet from the article:

"...if you were to peel back the changes that were made in the Consumer Price Index (the inflation rate) going back to the Carter years, you'd see that the CPI would now be 3.5 to 4 percent higher -- meaning that, because of lost CPI increases, Social Security checks would be 70 percent greater than they currently are.

Below is a longer snippet from the story that I typed it up b/c the story isn't available online for non-subscribers, and it's TOO IMPORTANT TO MISS. If you're a subscriber, you can use this link to read the story:
http://www.harpers.org/archive/2008/05/0082023

If you're not a subscriber, pick up a copy, or better yet, go ahead and subscribe. Harper's consistently catches these stories that are falling thru the cracks of the mainstream media.

(from the last section of the article)
THE US ECONOMY EX-DISTORTION

The real numbers, to most economically minded Americans, would be a face full of cold water. Based the criteria in place a quarter centruy ago, today's U.S. unemployment rate is somewhere between 9 and 12 percent; the inflation rate is as high as 7 or even 10 percent; economic growth since the recession of 2001 has been mediocre, despite a huge surge in the wealth and incomes of the superrich, and we are falling back into recession. If what we have been sold in recent years has been delusional "Pollyanna Creep," what we really need today is a picture of our economy ex-distortion. For what it would reveal is a nation in deep difficulty not just domestically but globally.

Undermeasurement of inflation, in particular, hangs over our heads like a guillotine. To acknowledge it would send interest rates climbing, and thereby would endanger the viability of the massive buildup of public and private debt (from less then $11 trillion in 1987 to $49 trillion last year) that props up the American economy. Moreover, the rising cost of pensions, benefits, borrowing, and interest payments -- all indexed or related to inflation -- could join with the cost of financial bailouts to overwhelm the federal budget. As inflation and interest rates have been kept artificially suppressed, the United States has been indentured to its volatile financial sector, with its predilection for leverage and risky buccaneering.

Arguably, the unraveling has already begun. As Robert Hardaway, a professor at the University at Denver, pointed out last September, the subprime crisis "can be directly traced back to the (1983) Bureau of Labor Statistics decision to exclude the price of housing from the Consumer Price Index...With the illusion of low inflation inducing lenders to offer 6 percent loans, not only speculation run rampant on the expectation of ever-rising home prices, but home buyers by the millions have been tricked into buying homes even though they only qualified for the teaser rates." Were mainstream interest rates to jump into the 7 to 9 percent range -- which could happen if inflation were to spur new concern -- both Washington and Wall Street would be walking in quicksand. The make-believe economy of the past two decades, with its asset bubbles, massive borrowing, and rampant data distortion, would be in serious jeopardy. The U.S. dollar, off more than 40 percent against the euro since 2002, could slip down and even rockier slope.

[napi21]

1. Lots of things are based on the inflation rate. Congressional saleries,

military pay, SS, welfare payments. AFAIK all of them are based on the published inflation rate, and of course the real reason they lie about what's real!

[nashville_brook]

2. there's information in this article that made my head swim -- and the author said as much

as what you say -- that they started fudging the numbers in order to skimp on these kinds of payments. the really scary thing is that now the money doesn't exist to make real payments, should the real numbers be used again.

[napi21]

12. I don't know if you can ever put the Genie back in the bottle.

The BS has been going on for so long, I'm not sure we ever could bring back reality. The catchup would kill the economy.

Can we ever go back to reporting the CURRENT numbers correctly? Maybe, but who the hell do you think would ever even think about it?

Don't bother to tell me Barack or Hillary. When (I hope) either of them get elected, they will have so many more urgent problems to deal with, concern about reporting numbers isn't even going to make the list! I don't mean that to be a slam to either candidate. The fact is that ShrubCo has screwed up EVERY Fed. Dept. that exists, and just to get a handle on what's wrong is nearly an insurmountable task, and that has to happen before any of them get fixed.

Ya know, many talk about special interests having so much influence on congress. Well, WE need a special interest group, like AARP began years ago. One that haslots of money behind it to push their agenda through. If you think about it, it could easily be done if we all got together. Look at the $$ Barack raised in a month! I'd be willing to drop $100 to have a special interest group push through bringing back "truth in reporting" by our GAO! What about YOU? All we need is a strong group leader!!!!

[nashville_brook]

18. nightmare scenario -- it will our CREDITORS who demand transparency in the numbers.

seems there's got to be a tipping point where we "don't own" our economy anymore (prolly passed that point a few years ago).

this is a big interesting thought you put forth. a special interest group whose goal is clearly stated as truth in economic measures. such a pin-pointed mission. i like it!

[Supersedeas]

34. the Fudgemaker in Chief

[nashville_brook]

7. the b/f is reminding me that ALL SALARY RAISES are based on CPI numbers!

i didn't even think about that! but clearly, we're all getting royally screwed and it's no wonder the *superrich* are doing so well.

:grr:

[raccoon]

16. That's if you're lucky enough to get a salary raise in the first place. nt

[nashville_brook]

25. or a job!

[Muttocracy]

3. My mom's social security check went up 2.2% over last year

That's not even PRETENDING to keep up with inflation.

[nashville_brook]

5. 2.2 % is a giant, sad insult to people paying $3.50 a gallon for gas, to be $4 by summer.

[Muttocracy]

9. at least there is some public transit

she gave up being able to afford a car, insurance, and gas a few years back. So it's the bus or me (she chips in for my gas).

[nashville_brook]

10. holy cow. my parents, before they died, couldn't afford their medicines.

mother squirreled away her meds when she bought them, cutting pills into halfs and fourths.

we found this out when we finally convinced them they had to move up to Tennessee to live with the rest of the family to be taken care of. Their medicines were taken care of by the family once we knew what they had been doing. But, I think they're conditions had been made much worse from years of not getting the drug therapy they needed.

[Muttocracy]

11. I've read somewhere about that being VERY common among the elderly

Sorry about your folks :(

My mom has just been avoiding going to the doctor for years. I figured out how to get her on state low-income health insurance and now we're negotiating the adventures of Medicare. It's actually absurd
that she will have better coverage now but has more extensive problems than if she had gotten help years ago (kind of like the emergency room substitute for doctor's office, but in slower motion).

[nashville_brook]

31. good luck with your mom's healthcare adventures -- and GOOD for you for

getting her into a program that will help!

[knitter4democracy]

39. Hubby asks his patients about that.

He gives them as many samples as he can and goes through the paperwork and all to get them on the free prescription plans. If someone takes less of a beta blocker or statin, they could get another heart attack and die. It happens too damn often in this country, and it's time to get national health care now!

[nashville_brook]

40. that is so important to get social info from a patient (e.g. can they afford meds).

i think that if there's the opportunity to talk about it people won't feel as ashamed, and hopefully you'll get better compliance.

[knitter4democracy]

42. That's why Hubby keeps up on med prices, too.

We hadn't gotten to our deductible yet and needed to get refills, so I called four area pharmacies and found the cheapest one. He tells his patients about it now.

[tnlurker]

4. I recommend that every body reads this

[nashville_brook]

6. timely news from LBN -- US BANKS REVEAL FRESH $15BN LOSS

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3267321

US banks Citigroup and Merrill Lynch reveal fresh $15bn loss

Source: times

CITIGROUP and Merrill Lynch will heap further pain on Wall Street this week as they reveal additional sub-prime write-downs totalling $15 billion (£7.6 billion) or more.

In another sign of the intense pressure on leading banks, Deutsche Bank is attempting to offload some of its €35 billion (£28 billion) of toxic debt to a consortium of private-equity firms.

Huge exposure to American mortgages is expected to result in Citi taking a $10 billion hit to its accounts, dragging the bank to a first-quarter loss of almost $3 billion. Some analysts believe Citi’s write-downs could stretch to as much as $12 billion.

Merrill will suffer $5 billion of write-downs, analysts say, which would push the bank $2.7 billion into the red.

It is expected to knock a further 20% from the value of its sub-prime holdings, in spite of the fact that it announced $18 billion of write-downs only three months ago.

The new rash of Wall Street losses and write-downs come in addition to the billions that have already been recorded.

[bluesmail]

8. make believe economy, HA! That's exactly what

Capitalism is. Consumerism, Capitalism Consumerism capitalism

[nashville_brook]

32. i think it's more complicated

than 'the nature of capitalism is obscurity and corruption.' i think we can and should use reason and law to make capitalism work for human beings. it's what we're stuck with, so we have to do *something* with it.

[fed-up]

13. k/r nt

[Junkdrawer]

14. If interest rates rose, the Stock Market would crash....

As soon-to-retire Boomers pulled their money from stocks and moved it to bonds...

[nashville_brook]

17. i think there's an attitude that a "correction" of any kind will heal the economy,

i know i catch myself having this magical thought. you know, just give us the truthful numbers, reset the system and go forward.

Kevin Phillips does a fairly good job of warning that this isn't a viable option b/c the blowback at this point would be catastrophic. I would love to see some writing that examines what the blowback of real inflationary/unemployment numbers would be. i can imagine the psychological outcome, but what would be the result for markets? right now the Dow reacts with glee every time the meaningless CPI or GDP numbers are released. if they are "good" the markets react with glee. if they are "bad" it seems the markets still go up, somehow finding a reason to squeeze lemonade out of the lemon. irrational exuberance indeed.

[Junkdrawer]

15. K&R

[havocmom]

19. . marking for later

[ThomWV]

20. The CPI is also used to fuck Federal Employees out of their deserved raises too

[nashville_brook]

21. according to the article, real inflation is currently at the "70s-style surge" in prices

Core inflation omits food and energy, which is the part of the equation that is killing families right now.

The price of imported goods has jumped nearly 14% compared with last year -- the biggest surge since record keeping began in 1982.

[T.Ruth2power]

22. K&R

n/t

[annabanana]

23. It is actually simpler than it seems...

The "Consumer Price Index" was neutered when they stopped including the price increases in food, shelter and fuel.

[nashville_brook]

24. additionally, the CPI has "been subjected to three other adjustments, all downward and dubious..."

(from the article)

PRODUCT SUBSTITUTION -- if flank steak gets too expensive, people are assumed to shift to hamburger.

GEOMETRIC WEIGHTING -- goods and services in which costs are rising most rapidly get a lower weighting for a presumed reduction in consumption.

HEDONIC ADJUSTMENT -- where additional quality is attributed to a good/service based on "consumer satisfaction." this fudge is used to reduce the effective cost of goods, which in turn reduces the stated rate of inflation.

[dixiegrrrrl]

26. CPI has as much connection to reality

as does the WH/Prateus numbers on the invasion of Iraq.

[nashville_brook]

30. amen.

[eShirl]

27. "today's U.S. unemployment rate is somewhere between 9 and 12 percent"

That sounds about right.

[nashville_brook]

28. if those numbers were further broken down into other demographics, it would be staggering.

for instance unemployment rate in the rust belt. unemployment rate in minority communities. underemployment rate of college grads. etc.

[truedelphi]

33. I agree with considering those groups. I'd add in as well

Those of us over 55 - we are told to our faces that hiring us means a whooping increase in the insurance premiums the firm that hires us would face.

[nashville_brook]

35. whoa -- so right. i'm 42 with more than 15 years in my field. i can't find a job

employers don't want this much experience. they won't hire me for lesser positions, either. i'm totally stuck. if i were 25-30 with 1-3 years experience, i'd be golden.

[truedelphi]

36. I've heard it said that we should just avoid dating our education

And what not and fib about our birth years, but it seems to me that they would get your graduation dates from HS and college somehow - if not from you then from the registrr's office. ANd probably if they can get that from the registrar's office, they can get your birth year as well.

[sicksicksick_N_tired]

37. I have resumes leaving out education and experience.

I had a pro tell me leaving out that stuff isn't like lying about something you don't have and would open the doors to more opportunities.

Crazy, huh! I just have to laugh! I HAVE TO! :crazy:

[nashville_brook]

38. wow -- could have save some money on student loans, then!

[sicksicksick_N_tired]

41. If only I had the status required to be bailed out rather than pursued to death by the fed.

But, I don't.

I'm merely an American citizen,...NOT a major fraud-fund.

Oh, well. We all have our curses. :shrug:

[sicksicksick_N_tired]

29. "Confessions of an Economic Hitman". Intentional mass fraud is being committed and,...

,...no one is stopping it. NO ONE!

[truedelphi]

43. Isn't part of it because We the People have been brainwashed?

Most Americans don't question the need for the Federal Reserve.

We allowed the concept of tariffs on imports to be abolished - and then our jobs went overseas within months.
And over the decades, most of the higher paying jobs are gone.

Now the 517 trillion dollar derivative market will perhaps plunge the world into a Depression that will make the Great Depression look like nothing.

[nashville_brook]

44. we've been told (and some have accepted) that *thinking* if for the *experts* to do

"little old me couldn't possibly make sense of all those big numbers."

but that's exactly what the Declaration of Independence and the Constitution/Bill of Rights sought to change -- we're supposed to overturn the Divine Right of Kings.

now we have the Divine Right of Professionals and (i guess) we're all too busy with our own professional lives (paying the bills) to participate meaningfully in the public life. these bastards figured out a long time ago that "participatory democracy" gets sick without the participation of the people. That's why Nixon went apeshit on the protesters of the late 60s and early 70s. too damn much participation. "uppity negroes." uppity women. uppity students. and the one no one speaks of uppity vets.

we need wireless wiretapping so that people will internalize the fear the will keep them in their place.

[truedelphi]

46. And somehow "the experts" are always in line with a convoluted

Scheme to separate the middle income person from his or her money.

That is why by 1984, the word "tariff" disappeared from the public vocabulary, while The Powers that Be had everyone discussing the term "trickle down."

Henry Ford knew decades ago that "trickle down" didn't work. In fact, he was quite certain that if he and his executives each made 483 times what the average auto worker made, then no one in Detroit would be able to afford the automobile. (It's true that the auto executives made maybe 6 to 12 times what the averge worker did - but Ford would have laughed the notion that his execs needed the 483 ratio of income right out the door.)

Yet with the election of Ron Reagan, Milton Friedman's idealized notions came into being and swept across the halls of Power.

Suddenly, we the middle class, were told that the only thing that was good for us was the closing of the local factory, the globalisation of the work force (thus ending the power that unions held) and other stuff and nonsense that got its initial stamp of approval from the halls of academia. And how could the average middle income person argue with any of that? Our philosophy about the economy did not get any sort of stamp of approval from The Heritage Foundation.

Even though we knew that "up" was not "down" we were not deemed to be experts. And so we kept quiet. However now that the entire world economy is about to collapse, we realize that we should have all taken to the streets the moment we first heard the odiuous term "trickle down." But instead we did nothing.

[nashville_brook]

47. damn spot on.

[high density]

45. It's total nuts

http://news.yahoo.com/s/ap/20080415/ap_on_bi_go_ec_fi/economy

"For March, energy prices jumped 2.9 percent, the biggest increase since November. The price of gasoline was up 1.3 percent while natural gas rose by 4.2 percent. Home heating oil shot up by 13.1 percent and diesel fuel, used to power the nation's trucking fleet, increased by 15.3 percent."

"Food costs rose by 1.2 percent in March, reflecting big increases in the price of vegetables, rice, and beef."

Annualize these monthly percentages and we're looking at a massive problem. 15% increase in diesel fuel in a MONTH?? How is that not going to raise the cost of everything else?

[nashville_brook]

48. by not counting it!

we're just dipping our toes into our economic hell -- this is going to be THE story of the year; presidential campaigns notwithstanding. by the time we get to the general election, there's not going to be anything else to talk about (unless, of course, we nuke iran).