Today's Market
by Dr Invest
Peter Schiff writes: In the 1990s and 2000s, expansions of the money supply have been used to create permanent inflation in order to relive the symptoms of inefficient government. As new money stimulates consumer spending and increases the gross domestic product (GDP), it creates an illusion of healthy economic growth. By diluting the dollar's value, it artificially reduces the cost of social programs, the massive national debt and budget, and our huge current account deficit. Reflected mainly in asset bubbles (stocks, bonds, and real estate) and being exported to buy consumer products from Europe and Asia, this inflation is not reflected in official figures, such as the consumer price index (CPI). But inflation it is, and it is diminishing the purchase power of the dollar as this is written. What is now high, if largely invisible, inflation will become acutely felt hyperinflation as dollars being accumulated abroad come home to roost.
Peter's words are only significant, if indeed they are true. Here is the problem, THEY ARE TRUE! In 1990, the price of a package of cigarettes was $1.00 in the U.S., in 2014, the average cost of a pack of cigarettes in the U.S. is $6.00. In case you feel me to be unfair, a gallon of gas cost around $.97 in the 1990s as compared to $3.50 in 2014. When all this ADDED LIQUIDITY from stimulus is finally soaked up by our economy, inflation is sure to have risen. Stock prices will be higher, because the dollar is worthless. And wages will slowly climb, because it will require more income for people to live.
I think our politicians will succeed in raising the minimum wage, let's say to $15 per hour. But what about that manager at the store, who was making $15 per hour, finds that an untrained employee can command the same income he was making as a manager.....wouldn't he go and demand a higher wage from his boss? And so it goes on up the line. That hamburger that cost you $2.25 in 1990, and now costs $6.50 in 2014, will have to be increased again in price to cover all the additional increases in wages.
CONTRAINDICATIONS
No one would argue that the cost of living has gone up, in short...INFLATION has taken a bite from our economy since 1990. But look at the governments record of CPI since 1990.
When I look at this graph, I am ready to go to Washington to congratulate our Senators and Congressmen for keeping inflation so low. Since 1990, inflation has gone down. The government is saying that COST OF LIVING has decreased. This could only be true (a decrease in inflation), if we have either been in a long-term recession or we have an error in how we calculate inflation.
This is my concern, we have both. There has been a long-term recession and the government is calculating the cost of living incorrectly.
The Graph below shows that health insurance premiums have risen 182% from 1999 until 2013. Contraindications are those which go against other research. The price of auto fuel has grown, the price of food has grown, the price of housing has grown. In my area, a two bedroom apartment rented for $600 monthly, 15 years ago, and now rents for $850 monthly. The government's calculations don't agree with the real inflation seen by the consumer.
I could continue with a line-up of graphs proving my point about inflationary pressures in our economy, but you and anyone else reading this article will know that their cost of living is and has grown. They also know that the REAL INFLATION is much higher than 2.4% CPI. Finally, the above graph does not show increases of those UNEMPLOYED because they wouldn't have increases. The above graph would show worker's earnings growing 3.5% annually, but not the epic unemployment. The graph would not show the increases in income because of over-time worked. Varied earnings are simply averaged into the total.
So What We Have Learned
The government does not report accurately the real economic condition of the U.S. The FOMC (Federal Open Market Committee) projects and expected growth, the Federal Reserve projects expected growth, and all these reports are readjusted to a quarterly report to Congress. Finally, all these reports will not be finalized for years and ALWAYS, ALWAYS, ALWAYS, the projections and reports to Congress are downgraded with the economic realities falling well below the government's estimations and reports.
If you depend on the governments economic assessments, they will use your money to support their continued schemes to bolster a failing economy. When the government permits a recession, millions of consumer investors will lose 40 to 50% of their investments, amounting to trillions of dollars. Recessions are good for politicians, they can rush in and make promises for a economic recovery that will occur in spite of their efforts. On the other hand an extended Bull Market always means increased taxes to fund further government fopaux. Government manipulation of markets and consumers will not endure. People will get wise and eventually will cease to play the government's game.
(Note: the above information is for entertainment purposes only and not to be used as investment advice.)
by Dr Invest
Peter Schiff writes: In the 1990s and 2000s, expansions of the money supply have been used to create permanent inflation in order to relive the symptoms of inefficient government. As new money stimulates consumer spending and increases the gross domestic product (GDP), it creates an illusion of healthy economic growth. By diluting the dollar's value, it artificially reduces the cost of social programs, the massive national debt and budget, and our huge current account deficit. Reflected mainly in asset bubbles (stocks, bonds, and real estate) and being exported to buy consumer products from Europe and Asia, this inflation is not reflected in official figures, such as the consumer price index (CPI). But inflation it is, and it is diminishing the purchase power of the dollar as this is written. What is now high, if largely invisible, inflation will become acutely felt hyperinflation as dollars being accumulated abroad come home to roost.
Peter's words are only significant, if indeed they are true. Here is the problem, THEY ARE TRUE! In 1990, the price of a package of cigarettes was $1.00 in the U.S., in 2014, the average cost of a pack of cigarettes in the U.S. is $6.00. In case you feel me to be unfair, a gallon of gas cost around $.97 in the 1990s as compared to $3.50 in 2014. When all this ADDED LIQUIDITY from stimulus is finally soaked up by our economy, inflation is sure to have risen. Stock prices will be higher, because the dollar is worthless. And wages will slowly climb, because it will require more income for people to live.
I think our politicians will succeed in raising the minimum wage, let's say to $15 per hour. But what about that manager at the store, who was making $15 per hour, finds that an untrained employee can command the same income he was making as a manager.....wouldn't he go and demand a higher wage from his boss? And so it goes on up the line. That hamburger that cost you $2.25 in 1990, and now costs $6.50 in 2014, will have to be increased again in price to cover all the additional increases in wages.
CONTRAINDICATIONS
No one would argue that the cost of living has gone up, in short...INFLATION has taken a bite from our economy since 1990. But look at the governments record of CPI since 1990.
This is my concern, we have both. There has been a long-term recession and the government is calculating the cost of living incorrectly.
The Graph below shows that health insurance premiums have risen 182% from 1999 until 2013. Contraindications are those which go against other research. The price of auto fuel has grown, the price of food has grown, the price of housing has grown. In my area, a two bedroom apartment rented for $600 monthly, 15 years ago, and now rents for $850 monthly. The government's calculations don't agree with the real inflation seen by the consumer.
I could continue with a line-up of graphs proving my point about inflationary pressures in our economy, but you and anyone else reading this article will know that their cost of living is and has grown. They also know that the REAL INFLATION is much higher than 2.4% CPI. Finally, the above graph does not show increases of those UNEMPLOYED because they wouldn't have increases. The above graph would show worker's earnings growing 3.5% annually, but not the epic unemployment. The graph would not show the increases in income because of over-time worked. Varied earnings are simply averaged into the total.
So What We Have Learned
The government does not report accurately the real economic condition of the U.S. The FOMC (Federal Open Market Committee) projects and expected growth, the Federal Reserve projects expected growth, and all these reports are readjusted to a quarterly report to Congress. Finally, all these reports will not be finalized for years and ALWAYS, ALWAYS, ALWAYS, the projections and reports to Congress are downgraded with the economic realities falling well below the government's estimations and reports.
If you depend on the governments economic assessments, they will use your money to support their continued schemes to bolster a failing economy. When the government permits a recession, millions of consumer investors will lose 40 to 50% of their investments, amounting to trillions of dollars. Recessions are good for politicians, they can rush in and make promises for a economic recovery that will occur in spite of their efforts. On the other hand an extended Bull Market always means increased taxes to fund further government fopaux. Government manipulation of markets and consumers will not endure. People will get wise and eventually will cease to play the government's game.
(Note: the above information is for entertainment purposes only and not to be used as investment advice.)
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