SGM Metals: Paul Craig Roberts "Rigged Inflation Data Created a 'Virtual Recovery' & Nothing More"

Nov. 6, 2012 - PRLog -- Paul Craig Roberts reports: [ Since mid-2009 the US has been enjoying a virtual recovery courtesy of a rigged inflation measure that understates inflation. The financial Presstitutes spoon out the government’s propaganda that prices are rising less than 2%. But anyone who purchases food, fuel, medical care or anything else knows that low inflation is no more real that Saddam Hussein’s weapons of mass destruction. Everything is a lie to serve the power-brokers.

During the Clinton administration, Republican economists pushed through a change in the way the CPI is measured in order to save money by depriving Social Security retirees of their cost-of-living adjustment. Previously, the CPI measured the change in the cost of a constant standard of living. The new measure assumes that consumers adjust to price increases by lowering their standard of living by substituting lower quality, lower priced items. If the price, for example, of New York strip steak goes up, consumers are assumed to substitute the lower quality round steak. In other words, the new measure of inflation keeps inflation down by reflecting a lowered standard of living.

Statistician John Williams (shadowstats.com), who closely follows the collecting & reporting of official US economic statistics, reports that consumer inflation, as measured by the 1990 official government methodology has been running at about 5%. If the 1980 official methodology for measuring the CPI is used, the current rate of US inflation is about 9% which is more consistent with people’s experience in grocery stores.

Williams concludes that “the official recovery simply is a statistical illusion created by the government’s use of understated inflation in deflating the GDP.” In other words, the reported gains in GDP are accounted for by price increases, not increases in real output.

The result of the US government’s economic deception is the same as the deception Washington has used to start wars all over the Middle East. The government propaganda produces a make-believe virtual reality that bears no relationship to real reality. In history there have been many governments who have prevailed by deceiving the people, but Washington has moved this success to a new peak. As long as Americans believe anything Washington says, they are doomed.

Real median household income at the end of 2011 is back where it was in 1967-68. Moreover, Williams has deflated household income to get its real value by using the official inflation measure, which substantially understates inflation. If Williams had used the 1990 or 1980 official government methodology for calculating the consumer price index, the real median incomes of households would show a larger decline.

Moreover, the low 2011 real median household income is the summation, in most cases, of two household earners, whereas in 1967-68 one earner could produce the same real income. As Nobel economist Gary Becker, my former colleague as Business Week columnist, pointed out, when both husband & wife have to work in order to maintain the same purchasing power, household income from the wife’s in-kind household services is eliminated. Therefore, the monetary measure of the dual household income overstates income, because it is not adjusted for the lost benefits formerly provided by the wife who at home managed the household.]

Paul Craig Roberts is an economist that speaks from a position of authority in that he was in fact the “Father of Reaganomics” since he was the head of economic policy under President Reagan. Don’t mistake my efforts to dispel the recovery for something it is not, I simply would prefer truth & honesty in economic realms so that the people of the nation can properly protect themselves from whats coming.

There can be NO RECOVERY if the household income is currently below the average of 1971. More concerning is the fact that the figure from 1971 was the average household income of A SINGLE INCOME as opposed to the current figure that consist of a TWO INCOME HOUSEHOLD. This illustrates the fact that in the modern world its takes two incomes to equal what one paycheck used to bring into a home in the 70’s! This shows how much the cost of living has risen over 4 decades. Add on the fact that downsizing is a trend that has spread like wild fire across the nation in order pursue a leaner & meaner business model to protect their stock prices & you have a disaster that will make hurricane Sandy look like a summer rain shower. While the purchasing power of that one pay check was dwindling it created the need for the mother of the home to seek employment in order to fill the void. As a result of this new dynamic the cost of living for the family rose accordingly to offset the new expenses (that never existed before) for a dual income household such as childcare, house cleaning, laundry & the unavoidable expense of ‘carry out’ & ‘drive through fast food’ to compensate for the disappearance of home cooked meals since mommy is now pulling a lever at a factory or driving a school bus.

Why did the cost of living rise enough that mommy was forced into the workplace? Because during this period of time the federal reserve was pumping money into existence to cover wars that cost billions to tax payers, foreign aid to the tune of billions of dollars every year, welfare programs that began to pay for a growing percentage of the population to live, the war on drugs in central & south America, the Iran contra affair & so on. As the FED was pumping monies out of thin air & into the real air, the erosion of the dollars purchasing power in the real world was becoming very evident all while the govt. denied the existence of inflation all together. They managed to pull this off by simply changing the parameters of the inflation calculation formula over & over again until they got the outcome they wanted. This created a smaller inflation marker than what was experienced in the real world, but gave the govt. plausible deniability on the topic of inflation all together & boy did they run with that angle!

So lets recap, the purchasing power of the dollar has been raped & pillaged by those in govt., this has broken up the family dynamic & forced mommy to work to maintain their standard of living, the govt. has deceivingly altered the mathematical formula that calculates inflation & lied to the nation regarding the rise in the cost of living all so they could dodge the social security cost of living adjustments (COLA) that would be needed to keep retirees able to make ends meet in a higher cost environment. So what now? Maybe the wise play is exactly what the establishment has tried for decades to steer us away from, precious metals such as gold & silver. Not only was this the monetary marching orders of the founding fathers but also the very play book the banks follow to serve as the collateral for their giant ponzi scheme of fractional reserve banking. After all, the rules of banking state that they must have physical gold bullion as the base asset upon which they can leverage their fractional expansion of the fiat paper game, why else would they keep metric tons of the stuff under armed guard in underground high tech depository bunkers? Establish your underground financial bunker now with physical gold & silver bullion & begin to participate in the sound money debate. This inflationary razors edge may very well tip into hyperinflation territory after the election when the suits no longer need to spin a pretty picture for an election campaign story. This could take our recession into depression territory. If so there could very well be a panicked exodus into ‘flight to quality assets’ such as the gold & silver bullion. The currency war could very well degrade into a trade war at the rate things are going & China seems positioned well for this possibility. Remember that it is a far better strategy to PREPARE your portfolio than to attempt to REPAIR it once the damage has begun.