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How
Tinkering with Inflation Measurements May Have Led to the Current Financial
Crisis COMMENTS
New
Inflation
in the UK
Posted,
Monday, March 9, 2009 10:27 am The 'shopping basket' of goods used to calculate the UK
rate of inflation comprises a constantly changing sample from more than
100,000 items. In addition, these items may be 'weighted' according to quite
arbitrary factors. So it is perfectly possible to start out with some desired
number in mind, 4.7% say, and mix and match the items in your shopping basket
together with how they're 'weighted' and arrive at exactly 4.7%. John
New
COLA
Clauses
Posted,
Friday, March 6, 2009 9:00 pm This is nicely reasoned. I am a teacher and our
contract negotiations are always based off of the "official"
inflation rate. We've been getting screwed for several decades
now. Brian
New
This
Was Intended
Posted,
Friday, February 27, 2009 10:58 am Thank you for your most interesting article entitled
"How Tinkering with Inflation Measurements May Have Led to the Current
Financial Crisis". In your article you thoroughly and convincingly
describe how the US Consumer Price Index (CPI) was increasingly manipulated
for politico/economic reasons starting in 1982 (in the midst of the hyper
inflationary recession that followed the second oil shock of 1979). There is
no doubt that a manipulated CPI was used as an instrument to mask the true
general inflation level during the aftermath of the second oil shock and
during the 2002-2004 period. This manipulated CPI in particular provided
the US Fed with a good apparent reason to maintain its low interest rate
monetary policy during the 2002-2004 period. One should however avoid from inferring that top level
US policy makers were naive enough to believe their own faked CPI numbers
and, as a result, make an "honest" mistake of setting a free for
all monetary policy that was one of the essential causes of the present
market and economic turmoil. 2004, as you rightly mention, was an election year in
the US. The US was at that time (and still is) fighting a war on two fronts.
This war had to be financed while allowing "W" to be reelected. One
way to do that was to convince consumers that they were much wealthier than
they really were. A fast rising housing bubble did just that by allowing them,with
the complicity of the financial institutions and their regulators, to borrow
heavily and cheaply against the inflated value of their houses and to spend
that money on consumer goods as if they were all millionaires, thereby
creating the illusion that the overall blooming economic activity was based
on sound and robust GDP growth factors. The calculations of those policy makers was good in the
sense that they allowed the reelection of "W" in 2004, while the US
was in the middle of a very expensive war on two fronts! Their strategy even
almost succeeded in getting another republican elected in 2008 (Obama only
won 52% of the popular vote in early November 2008 and, if it had not been
for the September 2008 Lehman debacle, he would have possibly lost to McCain
as a result of a strong Bradley effect). You mention in your article the very interesting fact
that Alan Greenspan, the Fed Chairman, personally lobbied the Bush-Cheney
team in favor of an "unprovoked" attack on Iraq. Why would that be?
Why would a Fed Chairman do that? Would it be that there were serious
long-term economic/strategic implications in that decision? Greenspan's
Memoirs contain a full chapter on energy... If you have seen the recent film entitled "W"
by Oliver Stone, you have probably enjoyed the scene during which Dick Cheney
presents his "grand plan" for the Middle-East to "W" and
a few key members of his cabinet. If you have not seen the film, I would
suggest that you take the time to enjoy at least that part. Jonatan New
People
on Social Security Have Been Short Changed
Posted,
Thursday, March 5, 2009 12:34 pm Bravo on your piece on how fudged inflation rate
reporting has caused huge damage to the global economy. I have said this to my neocon friends for years, only
to be dismissed. The people on Social Security have been shorted due to phony
inflation rate reporting, many of whom are now in poverty. It is unbelievable
that we can pump trillions at Wall Street, but let our seniors and disabled
go broke. Thanks for a great article. It is too bad the American
news media does not report what has and is really going on. Alan Nouveau
Mesures
Falsifiées
Posté,
jeudi, le 3 mars 2009, 9:15 am Je viens de lire votre dernier article sur le CPI
falsifié, je suis totalement d'accord avec vous et je crois que toutes
mesures sont en partie la cause des déboires actuels que l'on vit. J'accumule de l'information depuis environ 2 ans sur
l'économie, sur tous les marchés financiers au cours des 2
derniers siécles, entre autres, sur powerpoint, etc... Yves
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