Statistics lie on the true cost of living

WHAT IS THE MATTER with the whiny American voters? They keep telling pollsters that they think America is on the "wrong path." But don't they read the statistics? Don't they know that unemployment is at a comfortable 5.6 percent, that inflation is almost nonexistent, that the economy is growing smartly at around 4 percent?

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In the case of health care, the government's consumer price index tracks the cost of medical services. But it is less precise about tracking who pays for them. If your employer's health plan is increasing your share of premiums and cutting the company's contribution or if the plan is increasing out-of-pocket charges or reducing what drugs it will cover, this shift is accounted for indirectly, after a lag of two years. But it hits your pocketbook immediately. And if rising medical costs deter you from seeing the doctor, that doesn't show up in the index at all.

Or consider housing. There are parts of the country where housing prices have been declining for a decade because few people want to move there. Statistically, these declines get averaged with astronomical housing costs in major metropolitan areas to show only modest average housing inflation. Around big cities, prices have plateaued at very high levels that are plainly outstripping incomes. Try telling a young person in Greater Boston or New York or LA that there's no serious housing inflation or that rents have not increased faster than earnings.

Another case of hidden inflation: A great many people in late middle age find themselves subsidizing their newly launched young. The causes of this trend are multiple: low starting salaries, skyrocketing rents, and the high cost of college tuitions and health insurance. Is this a dent in the cost of living for the middle aged? You bet. Does it show up in government statistics? Nope.

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http://www.boston.com/news/globe/editorial_opinion/oped/articles/2004/03/17/statistics_lie_on_the_true_cost_of_living/

Read it yesterday...I sent it to all my friends.

Welcome to DU, Harriette. I also believe that the stats are out of touch w/reality; those of us who are unemployed & underemployed surely know that the economy isn't doing well, as this administration would have us believe.

Keep the masses satisfied and thinking that it's okay to charge a flat screen tv on a credit card because great paying jobs are just around the corner.

And the masses keep buying that line of crap.

it's for the upper middle class and rich folks, so they can feel they have a license to act selfishly and, well, republicanly.

the middle class and lower look at their pocketbook and known damn well that the economy sucks. what the disinformation serves is to keep people from being sympathetic and therefore keep people from going democratic or objecting to corporate greed.

corporate greed is tolerable when the economy is ok, but not when people are suffering. so, cover up the fact that people are suffering and suddenly the corporations can once again get away with murder.

point is, there's no fooling the paycheck-to-paycheck or the paycheck-to-no paycheck. it's the folks who are not especially suffering that can be fooled.

B-)

Copays on medicines have doubled (I've spent >$300 on meds in 2.5 months, and we have drug coverage!)
Gas is up (but I'm not complaining about it; maybe the higher prices will help people learn to conserve.)
Most food prices are up at least a little
House payment went up $95 a month
And everyone is begging for help, saying they've lost govt. funding.

when they were talking about deflation? That is much more serious than inflation. Deflation is when the price drops on everything. Your nice little $150,000 is now worth $50,000 and you're sitting with a $130,000 mortgage. Same with the car. Same with your salary. Salaries are going down. Gas is going up. How are people going to keep feeding those SUV's?

And the government needs inflation to sneak more money out of us for taxes. And the high paying jobs are going overseas and the new jobs are being created at Walmart.

for some sectors. I'm worried that the averaging down of wages is going to kill our equity in our home if the market gets really soft.

One illogical aspect of the inflation/deflation subject is that the increasing prices of stocks and other financial assets is not considered inflation. Have you ever heard anyone besides me talk about stock inflation? This blind spot probably defines the nature of our political economy.


Greenspan led the charge in warning of the dangers of deflation. He was speaking of the deflation of financial assets however. That is the only thing he really cares about.

Well, that and residential real estate. You see housing inflation is now at the core of his vision that wealth is to be built upon the endless inflation of asset prices. Housing is not included in the inflation statistics for some good and some not so good reasons. Only a tiny percentage of all people buy a new home every year so to include the price increases would be misleading. In the CPI rents are used as the housing price measure. The bad thing is that this masks the true inportance of hosing inflation. That inflation has also been masked by the ultra low mortgage rates. Greenspan jabbers on and on about how debt levels are acceptable because payments are so low due to low rates. Low rates are the engine of housing inflation and the excuse for it.

Anyway asset inflation is the be all and end all of our economy now. Virtually everyone you see and hear in politics and bussiness, both players and commentators have high net worths which are BASED upon inflated financial assets and real estate. (Yes the bussiness/media wages are high also but that is a DIRECT result of the wealth effect that flows thru corporations thru stock inflation.) Thus that inflation is in their self interest. Furthermore they take it as a sign of their intellegence and savy that they are rich because of this inflation. So much so that they are incapeable of recognizing that it is inflation. (I hope you can follow that. It is a cognitive thing I'm talking about) For a dozen years an entire industry has sprung up to propogandize us about why stocks and homes are a good 'value' and 'investment'. In the end the reason is that they have been going up a long time. Stocks they say are rising for all sorts of reasons none of them having to do with the true reason. That reason being a flood of money into them which inflates them. This reason may sound facile but is in fact the ONLY reason stocks are high. (I'm squeezing homes into this arguement rather poorly. Sorry. The inflation of housing is the more 'democratic' avenue of wealth building thru asset inflation that keeps us in line)

Finally after 6 or 7 years of strong downward pressure on the prices of things from TV's to corn general prices are now increasing. That is why last years meme about deflation has been replaced by this years one about inflation.

That is not to say that deflation isn't still the number one concern of Greenspan and the elite. It is. The deflation they fear to their very core is the deflation of stocks and other financial assets and housing. You see if they deflate so does their wealth. Remember that they don't recongnize increases in those as inflation but they do recognize and fear decreases in them as deflation. The fear comes from the certain knowledge that if they start to deflate the financial world because of the oceans of debt underlying it will collapse. In other words the deflation of the Great Depression you allude to.

It is possible that we could have the worst of both worlds, which is the obverse of the prior period espceially from the mid 90's? Yes, of course. Suppose that asset prices deflated and the price of everything else inflated. That we are in for a period of general price inflation that is several months old and has more time to run is certain. What is uncertain is if asset prices can inflate or at least hold their own along with that.

Asset inflation has been based upon falling interest rates. Only if the financial markets can disregard inflation and keep long term rates low can financial and real estate assets hold their own or contiue to inflate. The pressures underlying the financial world are stupendous and growing again at this moment. Something that has become a twice annually occurance lately. Last year the mortgage bubble and then the foreign central bank dollar/T bond buying binge saved us. Can those miracles be used again or new ones born to save us? Stay tuned.

Again I urge everyone to consider that asset inflation has to be included in any thoughts on this subject. Absent that your missing the big picture. It is the reason why jobs and wages have been such a minor concern of the political/bussiness elite and also more importantly perhaps, the media elite. These people are of another class now. They are unwilling and probably incapeable of understanding the issues involved. Don't expect any media source to ever say stocks and rising home prices are inflation. In fact don't expect Democratic politicians to say it either. Kucinich possibly has some grasp of this and is thus so far out of the loop as to be a joke. The devil in this politically is that to run successfully against the status quo on such a fundamental level is to risk, if not insure, a massive economic dislocation which will cause pain on a level few can imagine. We are all trapped in the crowd praising the emperors clothes.

If stocks were to revert to historic valuations or below for some period every pension fund would fail technically. As many are in fact now failing on a legal actuarial basis. Continued stock inflation is assumed by pension funds. They have to. There is no alternative.

Everyones IRA and 401K would suffer, badly. Any politician whose name was associated with hurting everyones 'savings' would be scored and rejected.

If homes deflated that equity increase that tens of millions of households rely upon to tap into and use as a measure of security would evaporate. The repurcussions on general consumption and the economy would be gigantic.

Wages have been stagnet but asset inflation has been the grease to keep things going. Within that lies the reason for the growing disparity of wealth, both income and assets, to the top.

Asset inflation is very seductive. We are now totally seduced. We cannot scorn it for to do so would risk EVERYTHING the average person takes for granted. Asset inflation is so intertwined with the general economy that there is no seperating them.

That is why there is NO political alternative to the status quo. There is no alternative in a democratic, small d, system. The huge majority expect more, endlessly. Asset inflation has been our free lunch. Show me a politician who is calling for lower stock and home prices, or at least one pointing out that they are maladjusted currently and too high and I'll show you..... well not a politician but an internet crackpot. No politician can succeed with any message like that.

Your posts (and links) have helped me understand a great deal in a short span.
Your user-name is apt.

The long delayed release of the January Producer Price Index as most know finally came out last Friday and showed a "stonger than expected" .6% rise. However not so noticed was that yesterday the Labor Department made some revisions to that. Evidently all the stats pertaining to commodity prices were "erroneous".

The announcement linked below is however indecipherable as to what this means. We can assume it means that the PPI numbers will be lower in future, and in the past come to think of it.

It's pretty funny this was delayed 6 weeks and was still "wrong". Sheesh, you would think it would have been vetted by the White House after 6 weeks. By the way, the Feb number still isn't out.

http://www.bls.gov/ppi/notice03262004.htm

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Ordinary people may not be professional statisticians, but they are not fools. America's voters know better than the experts whether their own personal economy is thriving. Bogus economic optimism only reinforces the growing sense that this president speaks with a forked tongue.

:toast:

"A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services."

Low interest rates ... increase in consumer credit & debt ... home equity loans ... higher "assessed values" ... foreclosures ... bankruptcies ...

I once heard that inflation can be kept in check by keeping wages low. Does this sound familiar?

When gas prices increase, what you pay at the station is only the start:

Food prices are sure going up.

Heating costs are higher than they've ever been.

Everything trucked to outlets or stores will cost more.