Well, how is the economy doing? According to the government's own stats, it's not so hot. The number that normally gets reported in the media is the "core" Consumer Price Index (CPI), which does not include important things like energy or food. How they can realistically calculate inflation while excluding energy or food begs the imagination but that is what they do. However, there are additional numbers that the news media simply normally do not report that tell us what is really happening. So let's look at this chart:
These numbers are provided by the BLS themselves via a Java applet. You have the option, on this web page, to report against the original CPI base of 100 in 1967. I chose that option and then selected 1967 as my start year. So what is really happening in the world of inflation? Good question.
The media continues to report inflation rates like 0.4%. First of all that number is relative to the total for the prior month. Since the total is always increasing, the rate of inflation always appears to be going down. But that is also only the inflation rate for that single month. You can annualize it by multiplying it by 12 to see what that month's inflation would look like for the entire year (relative to the prior month). But what happens if we measure inflation against a constant base so that every month can be compared to every other month? Then January of 2007 to February of 2007 saw a change in the rate from 606.348 to 609.594. Against a constant base this was 6% inflation in a single month!! Furthermore, unless you are making 6 times what your counterpart made in 1967, your standard of living has fallen over the last generation. So, if a counterpart to yourself made $15,000 in 1967, you'd need to make over $90,000 in 2007 to be even comparable. Note also what happened between those two months - a 6 base point rise in prices, which annualized, becomes about 60 points, and against a 600 point starting base is about 10% inflation. Keep that number in mind for a moment as you think about the government reporting 2% inflation.
Now let's step away from the government statistics for a while and check out what John William's Government Shadow Stats has to tell us. What John does is "unwind" the yearly manipulations of government statistics so that you can actually compare year to year. The US government does not hide these manipulations. Indeed, they are clearly documented in the appendices to each annual report. But cumulatively these changes constantly attempt to make the current situation look better than it really is. By unwinding these changes to get a common base set of stats, John gets to see what is really going on.
First we get a look at the annual inflation rate:
John clearly shows us that the real inflation rate is vastly higher than the reported rate, something that we detected ourselves when we got the 10% inflation number, which agrees very well with John's own 10% number.
But let's go further and examine the annual GDP for the United States. Bush claims the economy is in better shape than every but is it? What has happened since the dot-com bubble burst?
What we see here is the result of understating inflation and overstating production - the US has been in a depression since 2001 with only a few months of even a fraction of a percent growth back in 2004 and everything else in a slow contraction. So what has kept the apparent bubble going? The housing bubble, which is now beginning to burst, has been the driver to mask the lack of any other growth in the entire economy over this time period. With the housing bubble bursting, this shows clearly that the ongoing depression cannot be hidden much longer unless the Federal Reserve resorts to even higher rates of inflation. Will they do that? That's not for us mere mortals to say but if they do continue to inflate without raising the interest rates, there will be a larger and larger gap between the value of a dollar and borrowing against that dollar. This also explains why so many other nations have, in the last 12 months, begun to unpeg their own currencies from the US dollar. They don't want to be hit when the house of cards collapses. This also explains why China is using its dollar holdings to buy oil and other natural resource deals from Africa. China clearly believes those resources are more valuable than the dollars they are trading.
So we have the climate getting worse and we have the economy actually worse than reported. What else could go wrong? How about our hollow Army? How about dangerously increasing levels of antibiotic resistant versions of old diseases? How about the ongoing problems with Russia rebuilding its arsenal as we try to ram a missile defense shield down their throats after having taken away all the nations that acted as buffer between Russia and a hostile Europe?
There are a whole bunch of dangerous balls in the air right now, folks, and dropping any one of them would be a disaster in itself but what if multiple balls dropped at once? Try to imagine that. And after you imagine that, think about where you are, what you can do to help and protect yourself versus what you have actually done so far.