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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Washington Detached From Reality Producing Phony Inflation Statistics

Economics / Inflation Apr 26, 2010 - 07:06 AM GMT

By: Larry_Edelson

Economics

Best Financial Markets Analysis ArticleOur leaders in Washington are so detached from reality, I am thoroughly convinced that they are smoking something.

And I’m not talking about the insane amounts of spending that’s going on in our capital, or even about the patently unpayable debts and promises they’re making to all of us and our foreign creditors. Although I think these things, too, result from whatever drugs they’re on inside the beltway.


No, what I am referring to here is the way Washington manipulates its official statistics.

Consider the absurdly bizarre inflation figures Washington puts out each month.

Case in point: March’s Consumer Price Index (CPI) data. The so-called “core” inflation rate rose a modest 0.1%. So every politician on the Hill plus all the idiot Wall Street analysts grabbed onto that figure to proclaim that inflation is “dead.”

Inflation? “Not a problem” … “tame” … “easy to deal with” — those were some of the comments and headlines that came out after the figure was released.

Give me a break! No, give us all a break. Anyone with half a brain in their head can see that prices are going up all around them.

Here are just a few examples …

  • The price of oil is up 14.9% since the first week of February
  • Soybean prices are up 7.4%
  • Cotton is up 20.1%
  • Copper prices are up 13.1%
  • Lumber prices are up a whopping 51.7%
  • A gallon of unleaded gas is up 10.4% since February

Now, you tell me, is that 0.1% inflation? I don’t think so! The average price appreciation of the above, which are pretty much staple items, is almost 20%.

Contrary to inflation figures coming out of Washington, average price appreciation for various staple items is almost 20%!
Contrary to inflation figures coming out of Washington, average price appreciation for various staple items is almost 20%!

That’s even a bit higher than the action we’ve seen in the Commodity Research Bureau’s Index (CRB Index) of 19 widely-traded natural resources and commodities. According to the index, prices of raw materials are up nearly 8.5% since the beginning of February.

And that’s just recent figures. College tuitions are projected to increase into the double-digits in many cases for the 2010-2011 school year.

The cost of a first-class postage stamp increased 4.8% in 2009.

Moreover, where are the deals in hotel room rates … or in airline fares? I don’t see any. A junior executive suite at a 5-star hotel in Asia cost about $165 a night a few years ago. Today it runs nearly $500 a night.

I used to fly business class round trip from West Palm Beach to just about any big city in Asia for about $1,800. Now, a coach seat runs more than $2,000.

My auto insurance rates in the U.S. are up about 12% in the past year. Health care costs are still exploding higher. Property taxes and a whole slew of other items are jumping like crazy all over the country.

Haven’t you had it with the people in Washington (and on Wall Street) that buy into the “no inflation” scenario. I mean, are they living on another planet? If not, perhaps they should be.

Or, perhaps they should all be sent to rehab to dry out from whatever drugs they’re on!

Meanwhile, the value of the U.S. dollars you get paid in … you invest in … you save in … continue to lose purchasing power as Congress spends even more money that doesn’t exist — until the Fed prints it up to cover their spending.

And that just means even more inflation is coming down the pike.

So I urge you — no, I implore you — do NOT buy into the low inflation B.S.!

If you do, the money you’ve worked so hard for will disintegrate right before your eyes. It will crumble in value, just like the U.S. dollar is inevitably going to continue to do …

The U.S. Dollar Now Sits On the Edge of the Worst Currency Crisis of All Time

There have been dozens of currency crises over the last several hundred years. But until recently, currency crises were confined primarily to either emerging third-world economies or fascist political systems like Germany and Italy in World Wars I and II.

Now, the currency of the world’s foremost superpower is about to enter its next leg down.

Already, in just the past couple of months, we’ve seen the central banks of Australia, India, and Norway, and even our northern neighbor Canada is about to jack up their short-term interest rates to defend their currencies  — while our Federal Reserve, month after month, not only prints more money …

But also makes it perfectly clear to all of us — including our foreign creditors who are increasingly getting upset with our profligate ways — that it is going to keep interest rates low in this country for as long as the eye can see.

What’s more, Singapore has just jacked up the value of its currency versus the dollar — a prelude to an inevitable dollar devaluation against China’s yuan!

It's just a matter of time before the U.S dollar is devalued against China’s yuan.
It’s just a matter of time before the U.S. dollar is devalued against China’s yuan.

That one really gets me. Do the folks in Washington really think that by pushing China’s yuan up — and the dollar down — they’re going to save the U.S. economy?

Unfortunately, that’s exactly what they think. Because Washington’s solution is to pay its debts with cheaper dollars.

I’m not the only one who has caught on to this scheme. Consider these other notable people and what they have to say …

“It’s the … official policy of the central bank and the United States and to … debase the currency.”                    — Jim Rogers, Co-Founder of the Quantum Fund

“The current crisis is … it’s basically the end … of a 60-year period of continuing credit expansion based on the dollar as the reserve currency.”                    — George Soros, The world’s #1 global investor

“Holding dollars today represents risk … without … reward!”                    — Joseph Stiglitz, Nobel Prize-winning economist

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth.”                    — Alan Greenspan, Former Chairman of the Federal Reserve

Pay particular attention to this one …

“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens … in a manner which not one man in a million can diagnose.”                    — John Maynard Keynes

Please Take Steps to Protect Yourself!

If you have not already done so, consider the following …

First, keep your emergency funds SAFE! In my opinion, money market accounts, especially Treasury-bill only money markets, are a great place. But only keep a small portion of your liquid cash in them, because they are in U.S. dollars … the yields are effectively nothing … and those funds are completely exposed to a loss of purchasing power in the dollar.

Second, stay away from long-term government, municipal, and corporate bonds as well. They’re a disaster in the making.

Third, keep the bulk of your investing money in REAL WEALTH! I’m talking assets and companies that specialize in tangible contra-dollar investments such as gold, oil, base metals, and foods.

These investments give you great inflation hedge protection … and insulate you from the deflating dollar.

Best wishes,

Larry

This investment news is brought to you by Uncommon Wisdom. Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. From time to time, the authors of Uncommon Wisdom also cover other topics they feel can contribute to making you healthy, wealthy and wise. To view archives or subscribe, visit http://www.uncommonwisdomdaily.com.


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