Helping Homeowners In Michigan
Archive for the ‘Personal Saving Rate’ Category
Income And Spending: Distortions Galore
February 28th, 2011 | 
Author:
Personal income increased $133.2 billion, or 1.0 percent, and disposable personal income (DPI)
increased $78.3 billion, or 0.7 percent, in January, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $23.7 billion, or 0.2 percent. In December, personal income increased $56.6 billion, or 0.4 percent, DPI increased $48.5 billion, or 0.4 percent, and PCE increased $56.5 billion, or 0.5 percent, based on revised estimates.
The problem is that this didn’t come from actual earnings:
Contributions for government social insurance — a subtraction in calculating personal income — decreased $94.9 billion in January, in contrast to an increase of $2.5 billion in December.
That’s the 2% decrease (temporary, right? Bahahaha) in FICA taxes. And it was most of the “increase” in income. There was an offset in unemployment insurance costs, but this was where most of the “gains” came from.
What’s disturbing through is that this “gain” didn’t pass through to spending. In fact, ex-inflation spending actually dropped.
Personal outlays — PCE, personal interest payments, and personal current transfer payments — increased $22.1 billion in January, compared with an increase of $54.4 billion in December. PCE increased $23.7 billion, compared with an increase of $56.5 billion.
So spending increased by far less than it did in December. Hmmm….. looks like that “tax decrease” didn’t go anywhere – it simply offset higher food and gasoline prices, effectively shifting that inflation onto the Federal balance sheet in the form of more debt.
That’s not going to work in the intermediate term.
Real PCE — PCE adjusted to remove price changes — decreased 0.1 percent in January, in contrast to an increase of 0.3 percent in December.
Posted in Debt, Economic Crisis, Economy, Financial System, Fraud, Government, Money, Personal Income, Personal Saving Rate, spending | 
Comments Closed
ZIRP Destroys Pensions
The same principal has left the nation’s public and private pension funds badly underfunded.
“We are actually more underfunded than we were at the end of 2008 because of the drop in interest rates since then,” said John Ehrhardt, who tracks fund performance for benefits consultant Milliman.
That “same principal” is The Fed’s ZIRP policy.
By picking winners – in this case the banks who made imprudent loans and should have been forced out of business, along with “protecting” the imprudent buyers of bonds in institutions that made those imprudent loans, the prudent are getting hammered.
There is no solution to this other than to stop doing that. And this means withdrawing liquidity and forcing the borrowing of money to have a reasonable cost, so that those who lend money through the purchase of bonds can earn a reasonable inflation-adjusted return.
The initial “impact” of low interest rates appears seductively good. It’s not – it’s always bad. It forces people to take imprudent risks (how do you think we got a housing bubble in the first place?) and destroys the prudent investor, lender of capital and saver.
As these people are eviscerated their ability to contribute positively to the economy is likewise destroyed, and in particular, capital formation is critically damaged.
This is the real story on how Japan lost two decades.
We will follow them unless we stop this insanity, and soon.
(PS: Are the unions still sheep on this issue, more than two years after I started sounding this alarm?)
Posted in Economic Crisis, Economy, Federal Reserve, Financial System, Government, Pension Underfunding, pensions, Personal Saving Rate, zero interest rates, ZIRP |
Comments Closed
proudly supports:
Bill Still For President
for Congress
Michigan 11th District
By Bill Still
There is only one answer for the world economic situation; monetary reform.
1. No More National Debt
2. No More Fractional Lending
PDF PowerPoint Congressional Patriots Federal Reserve Balance Sheet Paulson's Lies Bernanke's Lies FedUpUSA Archive Mathematics of Failure Media Kit Door Hanger Corruption Flier Bank Flier Made In America A list of products and services made right here in the USA. Choosing to buy American made products preserves and creates American jobs.