Posted on 07/14/2007 11:02:40 AM PDT by bruinbirdman
I usually try to be timely, but this week in this column I admit I'm way behind. I unearthed a report released more than two years ago, but which contains such informational dynamite, its contents are worth dissecting even two years hence. So here goes.
I've often wondered why inflation is so clearly rampaging well beyond levels reported by the federal government. Case in point: On a fairly regular basis I buy 10 pound bags of carrots at my local Harris Teeter grocery store. When I started buying them two summers ago, a 10-pound bag was retailing for $3.99. It is now selling for $5.99.
I'm sure each and every one of you, dear readers, has a similar story. Or many, many, many such stories. How did we get to the point where $4 isn't shocking as the tab for a cup of coffee (or a coffee drink, as renamed by Starbucks.) How is it that when regular gas drops from $3.50 per gallon to $2.85 (as it recently did at my local gas station in suburban Washington, DC) we feel as if we're getting a bargain?
I've racked my brain trying to reconcile Labor Department reports of inflation running in the 2-3 percent range, while watching as housing, food, clothing, and transportation costs rise by double digits each quarter. Is the government hiding something? I'm no conspiracy theorist, so that explanation seems not to fit.
Here's one explanation, however, that might. In January 2005, Bear Stearns issued a report on America's growing underground labor force. It said in relevant part:
"The growing extralegal system in the United States has distorted economic statistics and government budget projections. The stealth labor force has enhanced many of the economic releases that investors follow closely. Payroll numbers understate true job growth and inflation has been artificially dampened by this seemingly endless supply of low-wage workers.....Real estate prices have been boosted by the foreign population infusion. The productivity miracle may be exaggerated because the government is incorporating the output of millions of illegal immigrants but not counting their full labor input."
In other words, illegal immigration and the underground, cash economy it creates has become so powerful a force, it artificially dampens inflation rates, boosts real estate inflation (putting home ownership beyond the ken of young Americans) and reduces the wages of the average American.
Wow, that's blockbuster news. This part of the report was barely publicized when it came out two years ago. Reporters noted its finding that there are something like 20 million illegal immigrants in the United States, compared with the popularly-cited 10 million figure. A Google search on the Internet revealed references to the inflation finding in Barron's and the Wall Street Journal.
The inflation finding should have been trumpeted on the front pages of the nation's major newspapers, on cable networks and on news Web sites. Instead, it was fairly buried. Did major news outlets bury this angle fearing its contents were not politically correct? Perhaps. But the American public may be getting the message nonetheless.
The U.S. Senate recently killed President Bush's signature effort at immigration reform that would have, in essence, granted amnesty over time to those here illegally. Senators reacted to polls showing the legislation was wildly unpopular with the American public.
Perhaps the public is beginning to wake up to the U.S. environmental destruction wrought by unfettered illegal immigration. The equation is simple. More people equals more development and consumption, more pollution and less open space.
Now we have another, this time financial, equation to contemplate. Unfettered illegal immigration boosts inflation while hiding the effects from the general public. Bear Stearns' experts could be wrong. But I doubt it. By "outing" this hidden impact of illegal immigration, let's hope we build the political will to end it, or at least slow it down.
Eh, eh. I actually found the article in the local leftist Las Vegas Sun, a newspaper with so few readers it has to be inserted in the conservative Las Vegas Review-Journal just so there can be "two daily newspapers" in the metro area. It was just easier to search for it at Scripps Howard.
yitbos
.... inflation would be 10-30% a year and general panic would hit the streets.
Maybe you should google the headline inflation numbers for June 2007 and let us know how close it is to 10-30%.
In the interest of not stimulating inflation even farther, food and fuel are ignored.
Ignoring something prevents it from increasing?
Food and energy are excluded from the “core” rate because they are considered too volatile.
Of course. But they are included in the headline number. Some people here think the Fed ignores food and energy. That's stupid. You can get inflation numbers with food and fuel or ex-food or ex-energy. Removing the most volatile components tells us with what the real underlying trends are. The Fed adjusts interest rates for long term impact. Some here think they should move interest rates with the price of a barrel of oil. Doing so would have no impact on prices but would make a mess of the markets. Fortunately, the people who manage interest rates are smart enough to ignore these folks.
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There is a shortage of labor in the U.S. due to a lack of population growth of our citizenry.ABORTION kills babies, and economies!
It isn’t just the illegal alien problem contributing to this misreporting of inflation. What isn’t often mentioned is that the powers that be continually change what is measured on the price side. When the price of something goes up dramatically, they take it out of the equation or add something on the negative side to balance it. Those inflation numbers are a complete misrepresentation. (I have an MBA in Economics from an excellent school.)
Agree.....you’re exactly right. Thanks for the thorough explanation.
Hack indeed. According to the BLS (Bureau of Labor Statistics) inflation calculator at the site identified above, $100 in 1982 had the buying power of $215.49 today.
I caught that as well. My wife responded — who is Bonnie Erbe?
My house is up 100%, my portfolio has doubled in the last 5 years. It is good to stay ahead of inflation.
yitbos
To me in a world where 2/3 of the population is starving it seems a sin to grow food and then burn it in the form of fuel. It is possible (since 1947) to produce ethanol directly from ethane gas and water. The process was developed by Shell Oil and has been used to produce ethanol on an industrial scale for forty years. Natural gas from the wellhead contains about 5 to 15% ethane and a variety of other gasses (the major constituent is methane at 70%). They are routinely stripped from the supply to leave almost pure methane to which is added an "odorant" to stink it up so people will notice leaks (methane has no smell!). The ethane is currently used mainly in the production of polyethylene. I would have more corn on the table and less polyethylene in the landfills. Yet all we hear about is production of ethanol from corn by fermentation and distillation which is fine if you are making "sipping whiskey". If you’re looking for the bad guys in this, its Archer Daniels Midland. Big agri-business is pushing this and the soybean diesel because of the huge government subsides involved. The real capper for this story is that ethanol is not a very good fuel. Any liquid petroleum has about 18,000 BTU per pound. Alcohol has about 12,000. In addition the difference in specific gravity is such that it's even worse on a volume basis. At the point of sale alcohol has about 60% of the energy content of petroleum. If that's not bad enough, alcohol is highly hydroscopic and will pull humidity out of the atmosphere to dilute itself down to 90% if it is exposed to air.
Regards,
GtG
Compared to the happy time, the hangover is short lived and there are remedies. Then again, not everyone at the party suffers an hangover.
yitbos
My neighbor owns a tattoo parlor. EVERYTHING he has done to his house is paid for with free tattoos! Lawn work, repairs, etc. No cash. Ever.
Back in the 80s I used to date a chiropractor. She belonged to an organization that acted as a broker for professional services (doctors, lawyers, dentists, accountants etc.)to which she paid an annual fee. Whenever she had need of professional services, she would contact the broker and be given a list to chose from. (she even got her own physician to sign up) All services provided by members was paid for in kind. No cash changed hands except for the brokers fee.
In case you haven't explained to her already, here's a one-page view that should tell her all she needs to know:
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# Biblio.com have at least 3 books and their best price is $ 150.00
I have no sympathy for someone who complains about inflation, real or not. There are always ways to beat it.
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I suppose you also have no sympathy for someone who complains about high taxes since there are always ways to avoid them. Inflation is just an undeclared tax. As far as saving and investing goes the whole issue is the fact that inflation destroys the value of savings. Your post is meaningless prattle which testifies to a muddled way of thinking coupled with arrogance.
Hack indeed. According to the BLS (Bureau of Labor Statistics) inflation calculator at the site identified above, $100 in 1982 had the buying power of $215.49 today.
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I started my own business in November of 82, for the first 10 months of that year I had been employed as a tech rep. at a salary of $18000. plus benefits. I had no financial problems at all living on that. Let those who say there is no inflation try living on $18000. now! Oh, and by the way, at that time I had a non-working wife who had health problems and no income of any kind. I would say the truth is considerably worse than the BLS admits, maybe we should drop the L!
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