Well, see, now some people are getting worried about the CPI.
And Dana’s not alone. A March CNN poll indicates that 91% of the population is concerned about inflation. I’d ask a member of the remaining 9% what they’re thinking - and what levels of relative fiscal comfort allow one not to be concerned about inflation - but I’m entirely surrounded by 91-percenters. So how do we account for the discrepancy between the Federal Reserve’s recent assurances that inflation is under control and the 91% of the population that’s worried it isn’t?
There are several possibilities: The first is that we’re all paranoid. We simply need reassurance from the authorities: Inflation rates are fine, nothing to see here, move along quietly. The second is that the Fed’s insistence on focusing on “core” inflation - a measure that strips energy and food from the consumer price index (CPI) because they’re theoretically subject to short-term volatility - makes inflation seem smaller than it is, or than we feel it to be when our gallon of milk that was 12% cheaper last year gets swiped across the grocery store scanner, beeping ominously like a tiny alarm bell. (While core inflation was just 2.3% in February, the CPI was 4%.) The third and most disconcerting possibility is that the CPI systemically understates inflation, in which case we’re paying for it taxwise, and the government is underpaying Social Security recipients. In the words of many a UFO spotter, it isn’t paranoia if they’re really out to get you.
Tim said a while back, when I interviewed him, that when he worked at the Federal Bureau of Labor & Statistics, that they knowingly and willingly fudged the numbers.
Apparently a common practice.
“Greenspan relaxed all of the lending regulations [after 9/11] and printed money like there was no tomorrow,” Morge said. “I think he thought he was the economic savior of America, showing the rest of the world that we were still strong … he was wrong, but he was being patriotic.”
Morge said a combination of politicians ebbing away at anti-trust policies during former President Bill Clinton’s administration, as well as bravado on the part of Greenspan, led to the sub-prime mortgage crisis, which many economists say has spurred the decline of the U.S. economy, if not a full-blown recession.
But the buck doesn’t stop there.
For the past three years, banks were giving interest-only mortgage loans at up to 125 percent of the appraised value of the house. When the value of the houses began to fall, millions of Americans were left with loans they could neither afford nor pay.
A bank like Citi Bank is probably holding $50 to $60 billion of these types of loans, Morge said. He estimates that 3 of the 5 major US banks will go “belly up” in 2008.
Banks, such as Citi, would bundle the loans, and in turn sell them to investment banks and hedge funds for a premium, who Morge labeled as “the greater fools.”
The problem, however, was much larger than the sub-prime mortgage, Morge said.
Oh what’s that, did you see the part about 3-5 banks going belly up?
There’s been One & Counting
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