Friday, May 16, 2008


In this post, I commented on the disparity between what is being reported as inflation and what it more like really is.

There are several economic items that on their face appear to be holding their own, but looking further you can see the rot spreading.

The inflation factor means the government (and anyone else) that bases raises and entitlements can get away with lower increases. So there is incentive to cheat.

It appears that the banks that make up the basis for calculating LIBOR (the London version of the Fed rate) have been cheating about how much they have really been paying each other. The result has been a lower rate than is actually occurring.

The question is, if banks and others are lowering interest rates AND inflation is actually a lot higher than being reported....isn't the spread killing investors? Duh. Well, only if you are the idiot actually ponying up the actual money. Those that create the instruments of demise are doing, well, not so well either.

Why then is all this slight of hand going on? Because a 500 trillion dollar derivatives market is poised to collapse and the banks, the majority of the top 100, will collapse with them. The Fed and the ECB can't, won't let that happen.

Unemployment is skyrocketing. What you say, the numbers don't show that. Of course they do, unless all you are looking at is a reported measure of the numbers someone else is reading for you. Hours worked fell substantially in April. The equivalent loss of 400,000 jobs. AND, the job rate is based on a modifier called the birth/loss. This is where the gooberment estimates how many jobs were created by the birth or loss of small businesses - too small to actually report actual numbers. Over the last almost year, this measure has been, to put it nicely, nuts. It continues to show increases in jobs in new businesses in construction, real estate and finance. Without this incredibly false increase, the joblessness rate would be almost a full point higher.

The rate of building new homes has dropped almost 2 million per year. How many people do you think that has cost them their jobs? If you said, a lot, congrats. If you said, the industry added almost 200,000 jobs over last 10 months, then you can go work for the gooberment.

Inflation understated, unemployment understated, interest rates, understated.

Oh, by the way, foreclosures and bankruptcies are climbing.

I am on the look out for good news, so far, the only good news is that Victoria's business is going to continue to get better this year.

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