Hmmmm.....You'd think centrally set rates would be a lot smoother. You know, rates shall be 5% would show zero movement up and down, until the next rate setting announcement.
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.
Excellent!
It is affected by supply and demand fundamentals.
Kind of like interest rates.
Toddler, it’s been great learning from you, but it’s time to run. I recommend you download and read that desoto book, it’s 900 pages though, so it will probably take you about 5 years to finish it. That will be good timing though, as we can then catch up on what the inflation rate is 5 years from now. Maybe cash will still buy what it can buy today!
That will be good timing though, as we can then catch up on what the inflation rate is 5 years from now.
Can't wait for you to show everyone that all our prices doubled. LOL!
Hmmmm.....You'd think centrally set rates would be a lot smoother. You know, rates shall be 5% would show zero movement up and down, until the next rate setting announcement.
I, too have NO SYMPATHY for anyone who complains about inflation. The "little people" should eat cake and keep their foolish little mouths shut.
I only pray that JESUS will forgive them for their foolish spending habits....
Congress is COMPLETELY to blame for the drop in buying power of a legal consumer dollar.
The premium paid on everything from a gallon of milk to a gallon of gas is essentially a ‘global warming tax’ or alternatively a subsidy on ‘cheap imported labor’.
And I thought the original proposition was "It is not that difficult to stay ahead of inflation." No mention of rate, true or hidden.
Cash! Why so much talk of cash. Keep some for emergencies and liquidity, ready to invest in equities.
The guy who is worried about the price of food should get a second job.
yitbos
The secret is to eat bread and mac and cheese and invest the difference. Invest in learning how to save and invest. Libraries don't ask to see your 1040.
Try going without for 30 or 40 years and see what you have afterwards.
yitbos
“Cash! Why so much talk of cash. Keep some for emergencies and liquidity, ready to invest in equities.”
Generally speaking, we are paid in cash. So if the value of the cash is decreasing, you will be purchasing less until your income catches up.
I said, "There are ways to beat inflation." Do you disagree with that simple statement?
yitbos
Yes, of course there are ways to beat inflation. Mainly consists of borrowing depreciating money and then paying off the loan in the future. Funds must be used for speculation or investment during the period the loan is outstanding.
The average American is not in a position to take advantage of this - they pulled it off for short periods during the tech bubble and the housing bubble. The latter will burst as the former did. You need to be quick.
Thankyou, I said that in #17.
Mainly consists of borrowing depreciating money "
Not true. I have said nothing concerning "speculation" or ""depreciating money", margin buys, shorts, futures puts or calls, currency carry trades, preferreds Not even interest rates. Not even borrowing at all.
Unless you count my paltry borrowing on a credit card that I always pay off at the end of every month.
If others lack fiscal discipline, frugality, hard work, I cannot be responsible nor can the government.
See #88.
yitbos
The housing costs in the CPI are based on rent, not home prices.
In the Seattle area, home prices have gone through the roof the last seven years, yet rent has actually stayed flat or even gone down.
So, a massive increase in the most expensive monthly payment of most homeowners is not even factored into the inflation rate. That makes the figures useless.
Actually rent and owners equivalent rent.
In the Seattle area, home prices have gone through the roof the last seven years, yet rent has actually stayed flat or even gone down.
So, a massive increase in the most expensive monthly payment of most homeowners is not even factored into the inflation rate.
Everybody in the Seattle area bought a new house in the last seven years?
| U.S. Bureau of Labor Statistics Postal Square Building 2 Massachusetts Ave., NE Washington, DC 20212-0001 |
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You sure about that?
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