I'm going to quote from an excellent article I read today - The Core Rate
...what this caller was asking was how and when did they change the way they measure the rate of inflation? On a first hand basis he was experiencing
inflation in his personal life with rising food and energy costs. There was a major disconnect between what he experienced in real life on a
day-to-day basis and what he was told in published inflation reports. The host of the show and the financial reporter from the Times had no
In the early 90’s the government realized it had a problem with rising entitlement costs for Social Security, Medicare, and government pensions.
These entitlement payments were indexed by the inflation rate each year.
The solution was to change the way inflation is measured.
The Boskin Commission recommended several changes to the CPI...
The result of their implemented suggestions is the mish mash we have today, which bears no resemblance to reality. The Commissions recommendations had
widespread support in the Clinton Administration, a Republican Congress and from financial luminaries such as Alan Greenspan, who was expanding the
money supply at a very rapid rate as shown in the graph above.
He then goes on to explain the magic of hedonics, geometric weighting, substitution, and seasonal adjustments that are now applied to the reported
CPI. He then explains why the use of a "core rate" is a fraud. He concludes:
There is no such thing as the “core rate.” The core rate doesn’t exist in the real world. Next time you see an increase at the grocery store,
the gasoline station, your utility or cable bill, your children's tuition, your property taxes or your dentist's or doctor's bill, ask for the
That is when you will be confronted by the reality of its fiction.
That graph showing the CPI the way it was calculated before and the way it is now sure is interesting.
What we can say now is that the US is experiencing real inflation in the economy that is much higher than what is reported (6-8%). In
addition to real inflation in the economy, the US has experienced hyperinflation in the financial economy—first in the stock market (the tech bubble
between 1995-2000) and then in the mortgage, bond and real estate markets since 2000. If inflation continues to increase as I suspect in the real
economy, I can guarantee you it will never show up in the CPI and PPI. Real inflation will be removed statistically through the magic of
hedonics, geometric weighting, substitution, and seasonal adjustments.
Where do things really stand now for the United States and consequently Canada and other G8 nations?
As the US debt burden increases with each passing month, the Fed has only one option, which will be to print money. Up until now
foreign central banks have relieved the Fed of most of that burden. Foreign central banks have been doing most of the money printing in an effort to
sterilize capital inflows into their countries and keep their currencies from appreciating.
This issue has become more serious than is commonly recognized.
combined foreign purchases of Treasuries and agencies equaled a stunning 97.2% of total issuance, $486.8 billion, versus $500.8 billion.
As to the purchase of corporate bonds, foreign investors took down a net of $265.5 billion, 44.7% of total issuance of $594.3 billion.
As of 3/31/05, foreign investors held a total of $9.723 trillion of US financial assets...
As of 3/31/05, foreign financial liabilities totaled $4.634 trillion, resulting in a net foreign claim against the US of $5.089 trillion.
The following table taken from the same Gillespie report shows just how much of our debt has been acquired by foreigners in the last decade. The Fed
has had little need to monetize debt. Foreigners are doing the Fed’s dirty work.
In effect, the US is exporting its inflation and it will ultimately result in deflation in the rest of the world, ... and hyperinflation in the US
when foreigners no longer finance our deficits.
Interesting top ten list at the end.
I encourage you to read the essay in its entirety.
So we are being lied to (again).
Well I think there is an interesting place to start looking right here at ATS.
Have you seen this thread? Let's pop the bubble of Ignorance...
When will "foreigners no longer finance our debts
Well since China is one of the largest holders of US debt. All those assets in dollar denominations and the flow of interest payments (also in
dollars) have sent them on an investment, deal making and buying spree.
NEWS: China National Offshore Oil Corp Re-ups Bid For Unocal
China bidding for Maytag corp and Huffy bikes
China a Leader in Scramble for Oil
So I figure that US corporations and their indentured political class have two choices. One is to hold dear to their principles of capitalist "free
markets" and sell to the highest bidder. The other is to intervene in the name of "national security" with "protectionist" solutions.
If the later is chosen, I have a question.
What happens when China realises that all of those US dollars and other financial instruments it holds can't buy what they need (like energy)?
If that were to happen the latest CPlie numbers would be the least of our worries.
I forget when and where I learned the saying "you don't go to war with your banker" but what happens when the bankers are at war?