This articles sure has a whole lot of economic information and it is easily understood with the aid of his graphs. It does not paint a pretty economic picture for the U.S. for the next few years. Being a realist I agree with what it implies. I think we have yet to feel the real economic pain. If you want to look at the reality of it all take a good look at the data in the article.

The economy probably will be even worse than anyone imagines because we can already see that government is going to screw up the economy even more through failed socialistic interventions. Government also helped make the bubble in the first place by government intervention of easy credit and overspending or it would have corrected itself long ago. The bubble will completely deflate and go at least 10 or 20 percent negative to what it was at the start of the bubble before any balance is restored, if that is even possible in this generation.

The only thing that might allow you to think the economy is not going in the tank fast is inflation but you will soon figure out that you are in an economic decline when your income is not keeping up with rapidly rising prices. Of course the economic downturn could turn into a world price war and a full fledged world depression and then we will not see stagflation but instead we will see a great depression like in the 1930’s with low prices but few jobs and little income to buy anything.

I guess it is possible that we could have some economic miracle but with socialists in control of congress I personally do not see how that is possible.

Guest Commentary

The Great Consumer Crash of 2009

* by James Quinn
* August 19, 2008

James Quinn is senior director of strategic planning, the Wharton School, University of Pennsylvania.

“It is easy to ignore the storm if you look at the opposite horizon. When the storm reaches your location there can be no more ignorance.”

I hate to tell you, but the storm has reached your location and it is a Category 5 hurricane. The levees are leaking. Ignore it at your own peril. The 6,000 sq ft McMansion buying, BMW leasing, $5 Starbucks latte drinking, granite countertop upgrading, home equity borrowing days are coming to an end. The American consumer will not go without a fight. For the last seven years the American consumer has carried the weight of the world on its shoulders. This has been a heavy burden, but when you take steroids it doesn’t seem so heavy. The steroid of choice for the American consumer has been debt. We have utilized home equity loans, cash out refinancing, credit card debt, and auto loans to live above our means. It has been a fun ride, but the ride is over. We can’t get steroids from our dealer (banks) anymore.

There has been and will be resistance to the inevitable deep recession that is coming. The American consumer is not cutting back willingly. They are being dragged kicking and screaming towards the joys of frugality. The “material generation” needs to dematerialize. My biggest concern is that our politician leaders and their cronies running our government will continue to try and reverse the normal capitalistic course of recession and expansion. Companies need to fail, housing needs to find its bottom based on supply, demand and price. Those who gambled must be allowed to lose and suffer the consequences. If the government attempts to shift the losses to those who lived lifestyles of thrift, an angry uprising will ensue. Government intervention in this natural process could lead to a decade long depression. Let’s hope that reasonable heads prevail.

Full article

Obama will lead us into stagflation worse than Jimmy Carter but we are going to have stagflation under any of the major party choices for President. The debt in this country makes it inevitable but it will be worse if the Keynesian’s get in and try to create a social state with new taxes and government printing presses.

Obama’s Excremental Economics - CWN

The key elements of Senator Obama’s proposed economic policies, as in
the New Deal and the stagflation of the 1970s, are much higher taxes,
along with a pervasive increase of business regulations and price
controls in healthcare and energy (which sharply depress business
activity and employment rates), full-frontal embrace of labor unions
(which will push up wages and benefits to levels deterring profitable
expansion of industrial production), and massive new government
deficit spending (which will accelerate the already dangerously high
rate of inflation and devaluation of the dollar). Carried out as he
proposes, Senator Obama’s polices will lead us into the swamp of
stagflation.

The government has increasingly manipulated the economic data to its own advantage for decades. When you realized that it now takes two wage earners to support a family when it took one in the 1960’s you will begin to get the picture that things are not as government reports. Nevertheless, you have seen nothing yet. Understating Inflation does not prevent it. Americans are about to experience a rapid decline in their standards of living. They might not call it a depression or hyperinflation but the impact will be the same. Americans standard of living will fall 50 percent in the next decade. Are you ready to live on half of what you do now? Most of us will. If the socialists get control of government the fall can be even more dramatic unless you are on the dole.

This is a good article that explains how we are being lied to by our own government.

Numbers Racket: Why the economy is worse than we know KEVIN PHILLIPS / Harper’s Magazine v.316, n.1896 1may2008

The real numbers, to most economically minded Americans, would be a face full of cold water. Based on the criteria in place a quarter century ago, today’s U.S. unemployment rate is somewhere between 9 percent and 12 percent; the inflation rate is as high as 7 or even 10 percent; economic growth since the recession of 2001 has been mediocre, despite a huge surge in the wealth and incomes of the superrich, and we are falling back into recession. If what we have been sold in recent years has been delusional “Pollyanna Creep,” what we really need today is a picture of our economy ex-distortion. For what it would reveal is a nation in deep difficulty not just domestically but globally.

Undermeasurement of inflation, in particular, hangs over our heads like a guillotine. To acknowledge it would send interest rates climbing, and thereby would endanger the viability of the massive buildup of public and private debt (from less than $11 trillion in 1987 to $49 trillion last year) that props up the American economy. Moreover, the rising cost of pensions, benefits, borrowing, and interest payments—all indexed or related to inflation—could join with the cost of financial bailouts to overwhelm the federal budget. As inflation and interest rates have been kept artificially suppressed, the United States has been indentured to its volatile financial sector, with its predilection for leverage and risky buccaneering.

Arguably, the unraveling has already begun. As Robert Hardaway, a professor at the University of Denver, pointed out last September, the subprime lending crisis “can be directly traced back to the [1983] BLS decision to exclude the price of housing from the CPI. . .With the illusion of low inflation inducing lenders to offer 6 percent loans, not only has speculation run rampant on the expectations of ever-rising home prices, but home buyers by the millions have been tricked into buying homes even though they only qualified for the teaser rates.” Were mainstream interest rates to jump into the 7 to 9 percent range—which could happen if inflation were to spur new concern—both Washington and Wall Street would be walking in quicksand. The make-believe economy of the past two decades, with its asset bubbles, massive borrowing, and rampant data distortion, would be in serious jeopardy. The U.S. dollar, off more than 40 percent against the euro since 2002, could slip down an even rockier slope.

The credit markets are fearful, and the financial markets are nervous. If gloom continues, our humbugged nation may truly regret losing sight of history, risk, and common sense

This is about the best article I have read that explains why costs keep going up but the consumer price index (CPI) hardly budges at all. The government CPI pricing scheme does not reflect the true cost of living but yet all cost of living adjustments are tied to it. Read the article and you will get the deceptive drift.

CPI Two-Step -

Why the CPI Matters

Why, you ask, does the BLS go through all this trouble? Simple: Because the CPI is the single most important index in the world. No matter who you are, this index has a direct impact on the wages you earn, the taxes you pay and the benefits you receive.

Here’s why: Each year, the government uses the CPI to make cost-of-living adjustments (COLA) to Social Security, military and federal pensions and food stamps. They also use it to fine-tune the cost of school lunches, to determine the yield on inflation-protected bonds (TIPS), and since 1985, to adjust the federal income tax structure to prevent inflationary tax bracket creep.

A few percent a year may not seem like much, but when you compound it year after year and apply it to programs covering hundreds of billions of dollars in spending, it really adds up. That goes double for the federal government: With all those programs tied to the CPI, CPI-related adjustments alone amount to one of the larger items in the federal budget

This article clearly explains much of what you need to know about the American economy. If you wonder why the economy has been reported as being so good over the years but you cannot make ends meet or find a good job this article just might clear up the matter for you. You have been lied to by your government for decades.

Now add to the facts in this article the $10 Billion and rising national debt, the over $50 trillion in unfunded liabilities coming due, rising taxes, rising food and energy prices caused by environmental radicals and carbon loons, and the cost of socialism and wars and you will understand that things are going to get much worse very soon. America’s standard of living will be less than half of what it is today within a decade.

Don’t feel too bad much of the rest of the world will do almost as bad except for the rich elite, energy exporters and developing nations with nukes.

Can you live on half of your income or worse adjusted for inflation in the future? You better start thinking about how you will do that, because you certainly will if you survive the upheavals.

Numbers Racket: Why the economy is worse than we know KEVIN PHILLIPS / Harper’s Magazine v.316, n.1896 1may2008

The real numbers, to most economically minded Americans, would be a face full of cold water. Based on the criteria in place a quarter century ago, today’s U.S. unemployment rate is somewhere between 9 percent and 12 percent; the inflation rate is as high as 7 or even 10 percent; economic growth since the recession of 2001 has been mediocre, despite a huge surge in the wealth and incomes of the superrich, and we are falling back into recession. If what we have been sold in recent years has been delusional “Pollyanna Creep,” what we really need today is a picture of our economy ex-distortion. For what it would reveal is a nation in deep difficulty not just domestically but globally.

Undermeasurement of inflation, in particular, hangs over our heads like a guillotine. To acknowledge it would send interest rates climbing, and thereby would endanger the viability of the massive buildup of public and private debt (from less than $11 trillion in 1987 to $49 trillion last year) that props up the American economy. Moreover, the rising cost of pensions, benefits, borrowing, and interest payments—all indexed or related to inflation—could join with the cost of financial bailouts to overwhelm the federal budget. As inflation and interest rates have been kept artificially suppressed, the United States has been indentured to its volatile financial sector, with its predilection for leverage and risky buccaneering.

Arguably, the unraveling has already begun. As Robert Hardaway, a professor at the University of Denver, pointed out last September, the subprime lending crisis “can be directly traced back to the [1983] BLS decision to exclude the price of housing from the CPI. . .With the illusion of low inflation inducing lenders to offer 6 percent loans, not only has speculation run rampant on the expectations of ever-rising home prices, but home buyers by the millions have been tricked into buying homes even though they only qualified for the teaser rates.” Were mainstream interest rates to jump into the 7 to 9 percent range—which could happen if inflation were to spur new concern—both Washington and Wall Street would be walking in quicksand. The make-believe economy of the past two decades, with its asset bubbles, massive borrowing, and rampant data distortion, would be in serious jeopardy. The U.S. dollar, off more than 40 percent against the euro since 2002, could slip down an even rockier slope.

The credit markets are fearful, and the financial markets are nervous. If gloom continues, our humbugged nation may truly regret losing sight of history, risk, and common sense.

Here is an inconvenient truth about those inconvenient politicians who are the cause of the rising food prices and food riots all over the world.

Al Gore’s inconvenient food riots

Al Gore took it. It’s an “Inconvenient Truth,” says Al, “that the gasoline that runs our cars is ruining the planet, causing global warming.”

Responding to this threat, about 30 percent of the U.S. corn crop last season was diverted to ethanol production, mandated and subsidized by the government. The goal was to use less gasoline, reduce CO2 emissions and lessen our dependence on foreign oil.

After all the cost and effort, gasoline use was reduced only about 1 percent. However, corn prices shot up, causing a ripple effect for all food products containing corn from flakes to tortillas. Then wheat prices went up, too, because less wheat had been planted to make room for the mandated and subsidized corn.

In spite of these consequences, the all-but-tied Democratic presidential contenders, Barack Obama and Hillary Clinton advocate more biofuel production. Both would expand the 2005 mandate to 36 billion gallons by 2022, rising to 60 billion gallons by 2030. With the Iowa (corn growing state) primary looming last January, Obama advocated expanding the federal mandate for corn-based ethanol, and Clinton switched her 2005 opposition to mandates to support.

The Republican nominee, John McCain, lost the Iowa primary, famously opposed to biofuel mandates and biofuel subsidies and tariffs. He would abolish the $.51 per gallon subsidy the federal government pays to fuel blenders for using ethanol and the $.54 per gallon tariff imposed on imported ethanol, such as Brazilian sugar cane based ethanol.

Meanwhile the higher price of gasoline costs the average American family an additional $1,500/year.

Al Gore, Hillary Clinton, Barack Obama – when will you realize the damage your ideas have done to every American consumer?

The net effect on consumers is pain at the pump and at the supermarket. And the pain doesn’t get any easier knowing that it’s largely self-inflicted.

Every so often I read the daily news and I just get feed up with the inept leaders that are running this world. They do not seem to have a collective grain of wisdom between them.

Today we read that wholesale prices are up 1.1 percent in one month! Oil is at $113 a barrel and rising and food prices have gone up so much that people in poor countries are in danger of starvation.

Now who were the idiots that suggested we make grains into alcohol to run cars? I recall that Bush signed a piece of nutty legislation that will make 20 percent of our liquid fuel alcohol. The EU and other countries are also converting grains to alcohol. Meanwhile, people in poor countries are going hungry and are in danger of starving. Great thinking guys! With leadership and thinking like that you must of slept through your education classes and especially through your leadership training. These nutty polices must be reversed now!

I know the hype coming from Al Gore, had something to do with these government polices and that is why I say Al Gore is the most dangerous man in the world. Those that follow his leading will in the end bring starvation to millions.

Since you world leaders are clueless let me tell you the solutions?

1. Stop converting grains to make alcohol to run in cars. It was never needed. It is inefficient and the world does not have food to burn! Will this increase demand on oil? Not much. Any oil shortfalls can be taken care of quite easily as I will outline below.

2. Stop paying over $100 a barrel for oil to these vultures. I would not pay more than $50. How do we do that? First we DISBAND OPEC by world or U.S. decree. It is an illegal monopoly. If anyone whats to argue about it, that is why our taxes pay for all our aircraft carrier task forces. They were built to protect us from foreign enemies. If anyone thinks paying these extortion rates for oil (from wells that we developed in the Middle East) are not a huge danger to our country they are not living in reality. By the way, “our friend” Saudi Arabia alone could pump enough additional oil to bring the world oil prices down significantly.

3. Cut through the environmental red tape and allow for oil drilling off our coasts and in Alaska. There is significant oil there. All oil companies during this national emergency should be required to reinvest most profits into new energy production until balanced energy levels are achieved.

4. Vastly expand coal production and scrap all the restrictions put on new coal plants because of the global waring nonsense. We could make liquid fuel out of coal slurry for our cars and also use coal generating plants for spare electric generation at night for charging electric cars.

5. Build some damn refineries. Not one has been built in 30 years in this country mostly due to asinine environmental regulations. Meanwhile stop the insane laws that required scores of different types of fuel and fuel additives that adds to the costs and creates spot fuel shortages. Let the refineries we have produce 5 or 6 different major fuels and not be required to make 50.

6. Stop this crazy oil speculation in the markets. They are adding a third to the price of oil and they add nothing to our economy other than gambling. It can be stopped.

7. Government Incentives for mass production of reasonable priced electric cars for city commuting.

8. A major national project to develop solar energy production. They are doing it in Israel, we can certainly do it here. Solar energy at less then 10C a KW hour is easily achievable in the Southwestern deserts with today’s technology. The above ground land area in the Nevada Nuclear Test Site alone could produce much of the electricity needs for this country at reasonable rates.

Contact your representatives in Washington and demand action.

There is no painless solution to this crises since there are over 50 trillion dollars of unfunded liabilities coming due. The only significant thing that can be done about this is to reduce future benefits. If they just raised taxes to pay the costs it would further depress the economy and it would make the shortfall worse. Unless something is done really soon paying out these unfunded liabilities are going to rapidly add to our national debt. That means more erosion of our standard of living through stagflation.

Here is what I expect from the next government if the economy recovers:
- The full retirement age will be raised to 70
- Social Security and Medicare taxes will be increased
- Continued understating of inflation and CPI adjustments for benefit increases.
- Denial of some medical treatments.
- Means testing to receive full benefits
- Passing some costs on to the future.
If the economy collapses the government will default and just pay for the tents and soup lines.

Government Benefit Programs in Trouble

The first year that payments will exceed income for Social Security will occur in 2017, just nine years from now, reflecting growing demands from the retirement of 78 million baby boomers. Medicare is projected to pay out more than it receives in income starting this year.”The financial difficulties facing Social Security and Medicare pose enormous challenges,” the trustees said in their report. “The sooner these challenges are addressed, the more varied and less disruptive their solutions can be.”

Treasury Secretary Henry Paulson, one of the trustees, warned that the country was facing a fiscal train wreck unless something is done.

“Without change, rising costs will drive government spending to unprecedented levels, consume nearly all projected federal revenues and threaten America’s future prosperity,” Paulson said in releasing the new report. “Our nation needs a bipartisan effort to strengthen both programs for future retirees.”

Americans have been lied to by government for many years about inflation. The inflation rate is much higher then what the government reports. By lying about inflation they erode our standard of living by an average of 3 percent a year and then they tell you how good the economy is and Americans are making more then ever. If that were true how come it now takes two people to work in a family to make end meet when thirty years ago it took one? The buying power of the average wage earner or those who live on pensions or savings has been going down for many years.

The real puzzle to me is how the government gets away with it? Why has the government not been sued for this obvious fraud on the American people?

What’s America’s real inflation rate?

Greenspan’s own solution was to keep interest rates artificially low, as low as the 1 percent interest rates Greenspan in 2003 aspired to hold that low for years – while simultaneously rigging the CPI numbers.The Greenspan years can be characterized as a strategy of lying about inflation to avoid the adverse political consequences of being honest and facing the true cost-of-living music.

By lying about inflation, Greenspan justified 1 percent interest rates, which in 2003 were the lowest rates in 45 years, in a determined plan to keep the economy growing while he was at the helm.

But one result of the Greenspan liquidity party was to fuel real inflation.

So, when you wonder why food and gasoline cost so much when the government says inflation is low, just remember: You are being lied to – something we suspect you figured out long ago, just by going to the supermarket and the gas station.

This author makes the case for the Fed’s bailouts but he also makes it clear just how close we are to another great depression.

What is not talked about is the greed that got us into this mess. The Fed can try to bail out this sinking ship but even if it does temporarily keep it afloat it cannot stop the ship’s rotten timbers from leaking like a sieve. The ship will take on more water when the next tempest hits.

There are over $400 trillion in derivatives out there backed by almost nothing. If the banks and brokerages have to come up with real money to cover losses on this gambling debt there is not enough money in the world to stop the economic collapse.

For decades the banks and brokerages have been living like fat cats off of a derivative pyramid scheme making bets of 100 to 1 that property would continue to increase in value. They paid out high dividends on their gambling winnings and left nothing in the bank to cover future losses. Now this author suggests that as property values drop and these gamblers cannot cover their own losses that the Fed should cover their losses until property values start going up again. Maybe that is the only solution to keep out out of a great depression but of course if they know that taxpayers will bail them out when they are on a losing streak they will even be more reckless with their gambling in the future.

The Fed may have to do so much bailing out by creating more and more dollars that it will make hyper-inflation certain. That inflation could have the same financial impact on individual Americans as would any depression.

The truth is that almost everyone in the Western world has been living for decades beyond their means and now the bills are coming due. The economic system is going to crash and only after most assets and debts are wiped out can a new system be set up. Let them try to keep the world financial ship afloat as long as they can with their bucket brigade bail outs but the storm always eventually comes and this rotten ship will go to the bottom.

Sooner Fed bail-outs than the 1930s revisited - Telegraph

The crisis has since spread to prime mortgages. Fannie Mae and Freddie Mac - the fortress agencies that guarantee 60 per cent of America’s $11 trillion mortgage market - began to crumble last week. Even bodies standing at the top of the credit system are no longer deemed safe. As Barclays Capital put it, this was a “tsunami event”.Or in the words of City veteran David Buik at Cantor Fitzgerald: “No one in living memory has ever seen a banking crisis like this. I am older than God, and the outlook has never looked as bleak.”

Any smug assumption that this will remain a local American affair may soon be confounded. The IMF has abruptly changed its tune. “Obviously the financial market crisis is now more serious and more global than a week ago,” it said on Monday.

Property booms will soon be deflating across the Anglo-Saxon world and the eurozone’s Club Med belt. Japan is already on the brink of recession. Debt levels are higher now in most rich countries than they were in 1929. The levels of financial leverage are greater.

As the Bank for International Settlements wrote last year, we are more vulnerable to a 1930s dénouement than people realise - should the authorities botch the response.

Like some other free-market bears, I now find myself in an odd position. For years we castigated the central banks for inflating a reckless credit bubble by holding interest rates too low. Now we have flipped. We are on the other side, defending monetary stimulus, even defending the state takeover of Bear Stearns debt.

I have been warning for quite a while that an economic collapse is coming. I do not think the bankers and politicians will be able to end this downturn with a wave of their magic wand even if they may be able to pull off that illusion for a short period until the greater reality hits.

America’s have been spending beyond their means for many decades and very greedy people have been gambling with all their investments. Now the chickens are coming home to roust and the financial house of cards is about to fall.

When unemployment starts rising and debts are not paid you will see a downward spiral begin that will either lead to a great depression or great government intervention bringing hyper-inflation. Either outcome will be tragic for most Americans.

Then Americans might realize that even this nation is not exempt from judgment. The next President whoever he or she may be, will be seen as a total failure. The President will be sitting over the start of an American disaster that could last into the foreseeable future.

Economic winter is on its way

All that two decades of frantic bailing out and bubble blowing has accomplished is to enrich a few fortunate investors and delay the inevitable while significantly jacking up the terrible price that Americans will ultimately pay. The business cycle can be influenced, but it cannot be eliminated. For every economic action, there will be an equal and opposite reaction, and since the financial house of cards has been built ever higher and ever more vulnerable during this decades-long period of delay, chances are very high that the collapse will be swifter and more brutal than even the economic pessimists can currently envision. This is far from a failure of the free markets; it is merely more evidence of the futility of central economic planning.If we are fortunate, it is only a long and hard economic winter that is approaching. If we are unfortunate, it is the financial Fimbulwinter that will precede a political Ragnarok.

Although this economic assessment of the US comes from the Left and the solutions it offers comes from those on the Left. The facts and figures presented are true.Obviously the US has spent itself into economic disaster. Where I would differ is that higher taxes and pulling out of the world is not going to solve the problem. We are way past the point of no return. The future obligations of the US can only be paid in dollars that are worth far less than they are today.

That means the next few decades will see a period of hyper inflation in the US where wages and investments will not keep up with the cost of living. It will not be called a depression because prices will rise. Yet, it will have the same impact as a major depression on everyone. Prices for everything will rise much faster than income. Paper money not backed by something tangible will rapidly lose value worldwide.

The US will not pull out of all the areas of the world to save money. It will pull out of the world because it will not have the money to maintain a profession military anywhere in the world. Even military order at home will be done via conscripts.

There is no easy answer for this debt problem. Smaller government obviously would help if there were even a ray of hope of turning this thing around without the collapse of the dollar but there is no such hope.

The reality is that a collapse of the world economic system is only a matter of time. The only hope will be to start all over again with a new currency and new system. Of course doing that would wipe out most assets as well as most debts. Think about what that will mean to you.

Perhaps under the next economic system we will live within our means but I figure the next system will be globally and dictatorially controlled.

clipped from www.atimes.com the United States finds itself in the anomalous position of being unable to pay for its own elevated living standards or its wasteful, overly large military establishment. Its government no longer even attempts to reduce the ruinous expenses of maintaining huge standing armies, replacing the equipment that seven years of wars have destroyed or worn out, or preparing for a war in outer space against unknown adversaries. Instead, the Bush administration puts off these costs for future generations to pay - or repudiate. This utter fiscal irresponsibility has been disguised through many manipulative financial schemes (such as causing poorer countries to lend us unprecedented sums of money), but the time of reckoning is fast approaching