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Archive for the ‘Core CPI’ Category

Unemployment Claims: Back To Reality?

Inflation by any other name – Rising rents have pushed up the CPI to highest monthly change in three years. Shifting the Fed bailouts onto the working class and poor.

The Consumer Price Index (CPI) attempts to measure the change in price for a basket of American goods and services.  I say attempts because measures like the “owner’s equivalent of rent” are simply an estimation as to what a home owner’s place would rent for.  In the early 2000s with home prices surging, it missed a glaring trend that a place that would rent for say $1,000 was now costing the home owner $2,000.  This was missed and the data understated this important fact.  Since housing is the biggest line item for Americans and the CPI is heavily relied upon, many just assumed overall inflation was “healthy” during this time.  Today we are facing a situation very similar to stagflation where unemployment remains elevated while the standard of living decreases.  Those that claim inflation is nonexistent or healthy point to the CPI but ignore the headwinds that are starting to emerge.  The last two months have seen the biggest increase in the CPI since the middle of 2009.

The CPI is now being impacted by rising rents

There is an odd situation occurring in the US right now.  The Federal Reserve essentially owns the mortgage market and has caused interest rates to drop to record lows.  This was all in part to conduct a shadow bailout of the too big to fail banking industry but the repercussions are being seen in other areas where the quality of life for most Americans is being squeezed.  Just take a look at rents:

Rental rates have gone up strongly since 2008 at a fragile time when household incomes have fallen.  So you ask, how is this feasible?  First the housing market is now controlled by the Fed and banks while inventory is incredibly low.  Many homes are being purchased by Wall Street investors and are put back on the market as rentals for higher prices.  The lack of supply and demands of a growing population has simply pushed prices up.  Ironically the same financial system that turned a stable American item like housing into a casino are now back at it profiting hand over fist thanks to the Fed and generous rewriting of accounting rules.

It is important to always remember the most important fact and that is household income is stagnant.  We are also seeing continued inflation in food and energy:

Yet income remains the same.  This is the slow eroding process of losing the standard of living in America.  Millions are living this every single day.

Read the rest at My Budget 360

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But, but, but….. as Professor Kack (or is that “Hack”) said, there’s no indication of inflation:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in July on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.6 percent before seasonal adjustment.

This is “no indication of trouble”, right?  1.005 ^ 12 = 6.2% annualized inflation.

Not a problem, right?

What’s been flying upward?  Gasoline, clothing, electricity and groceries.

You don’t need to buy any of those, right?  You can hide out in things that aren’t going up much, like commodities less food and energy?

Yeah, right.

Oh, and Bernanke?  He claims he wants to see 1-2% inflation despite clear language in The Federal Reserve Act that mandates stable prices.  Well, how’s he doing?

The Consumer Price Index for All Urban Consumers (CPI-U) increased 3.6 percent over the last 12 months to an index level of 225.922 (1982-84=100). For the month, the index increased 0.1 percent prior to seasonal adjustment.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 4.1 percent over the last 12 months to an index level of 222.686 (1982-84=100). For the month, the index increased 0.1 percent prior to seasonal adjustment.

Why did we have The Coinage Act of 1792 again?  Oh that might be so that the common man doesn’t get screwed, blued and tattooed by those who would otherwise intentionally destroy his saved capital.

It’s time to bring it back, including the penalty clause, with sentences to be carried out in public on The National Mall.

Does inflation even matter?  The growing secrecy of the CPI and how average Americans face budget squeezes through financial maneuvering and the chained CPI.

Things seem to be progressively getting worse for the middle class as most of the debt ceiling talks revolve on sticking it to working Americans as if they were financially able to handle any more austerity moving forward.  While the too big to fail banks swim around in pools of bailout money like Scrooge McDuck both sides seek to squeeze more pennies out of working class Americans.  One way that the middle class has been hammered over the past few decades comes from the way we measure inflation.  The CPI measure through the Bureau of Labor and Statistics does not even examine actual home ownership carrying costs and uses a very open method of calculating home costs by using an owner’s equivalent of rent.  This is why during the most obvious housing bubble in history home prices seemed to be increasing at a moderate pace according to the CPI while the more accurate Case Shiller Index was registering annual increases of 15 percent or more.  This is important because so much rides on accurately measuring inflation in our country and more is trying to be done to stifle information that reflects the real changes to our overall economy.

Inflation growing slowly if we exclude food and energy

I always find it amazing how some pundits like to remove food and energy from measuring the CPI yet so much spending goes into these two items.  This is also important since stagnant paychecks don’t go as far in covering these monthly budget needs.  As we go forward we start getting a more inaccurate perception of inflation.  For example, housing is the biggest item in the CPI because most Americans spend the largest amount of money on housing per month.  So with that said, you would expect an accurate reflection in the CPI for housing.  But if we look at the CPI housing measure versus the Case Shiller Index we realize a serious problem is occurring:

Read the rest at My Budget 360

We have this gem of an article today from Bloomberg:

“Headline inflation is beginning to have a greater influence on monetary policy, but not yet at the Fed,” said Crescenzi, who helps manage $1.2 trillion at Pimco in Newport Beach, California, as executive vice president. The central bank “remains anchored or hinged to the core rate,” which excludes food and energy costs.

So, Mr. Bernanke is purposely only considering ‘core’ inflation when judging the overall inflation rate.  So, the soaring prices in your energy costs to drive your car and heat your house don’t count.  Also not considered are your rapidly increasing food prices.  I’m sure for you and I it’s no problem to forego heat and food, right?  These are apparently, discretionary items to Mr. Bernanke.

The article goes on to specify what would cause Mr. Bernanke to become concerned about inflation:

“The dominant driver” of core inflation “will still be wage inflation.”

High U.S. unemployment will keep salaries in check, limiting the biggest influence on broader prices, Crescenzi said. Bernanke’s strategy of focusing monetary policy on the core rate contrasts with European Central Bank President Jean- Claude Trichet and Bank of England Governor Mervyn King. They are signaling growing discomfort with prices, prompting investors to anticipate faster interest-rate increases in the euro area and U.K.

Uh huh.  Essentially, the only thing that will concern the Federal Reserve would be if wages started to rise.  Yes, the one thing that might actually relieve a little of the massive financial stress the American people are experiencing would signal a serious problem to Mr. Bernake.   It appears that our friends over in Europe have made loud enough objections to this insane and evil policy to cause their Central Banks to at least take note and acknowledge that price inflation in essentials is becoming alarming and concerning.

However, here in the US, this article makes it pretty clear:  Ben Bernanke and the Federal Reserve think rising prices, especially in items necessary for survival are a-okay — no problem!  Rising wages?  Forget it.   That will elicit immediate and swift action by the Federal Reserve to stop that in its tracks.  They purposely want to keep your wages low and the prices of necessities going up!

Considering wages in the United States have been stagnant at best for the past decade and falling on average 30-40% over the past three years, while core inflation (you know, the necessities Bernanke doesn’t even consider) is running +8-10%, this is clearly a 50% reduction on buying-power.  FIFTY PERCENT.  Let that sink in.

US monetary policy is robbing you blind and destroying not just you and your family, but your family generations into the future.  And why are they doing this?  Same reason we’ve been talking about now for 3 years:  to hide the insolvency of all the big TARP banks.  You know, the same ones that are fraudulently foreclosing on millions of homes.   You’d think that Americans would at least be as angry as their European counterparts by now.   I guess all that protesting might conflict with American Idol.