Hard numbers: The economy is worse than you know
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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.
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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.
Arguably, the unraveling has already begun. As Robert Hardaway, a University of Denver professor, pointed out last fall, 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 economy is in great shape. There was never a mortgage crisis due to the fact that less than 2% of overall home loans where involved. The international investments our domestic business and private investors have shown that there is still plenty of American Greenbacks floating around. Our employment numbers are fine as the unemployed need to go out there and get the millions of jobs available. Inflation is just a natural part of the economy because taxes go up every years. To deal with those rising prices, people just need to demand a bigger part of the extra cash companies are making. So to the passive people, things seem so horrible, but if you are aggressive, things couldn’t be any better!
Inflation is just a natural part of the economy because taxes go up every years
*cough*