csua.org/u/am2 -> www.kitco.com/ind/Benson/printerfriendly/dec302004p.html
Now that the Pentagon has won the domestic war over the United States in telligence services, our blinders have been removed and we are allowed t o see the real reason that the Pentagon wants to control intelligence: t o run disinformation campaigns against Americas enemies around the wo rld. If our military industrial complex is serious about understanding d isinformation, they should become students again and participate in a ca se study to learn how to get disinformation right. The Federal Reserve has done a masterful job of distributing disinformati on. Last year, they were scaring Americans by announcing that deflation was a threat. This year, they continue to announce inflation is contain ed so interest rates can be raised at a measured pace. The Federal Fu nds Rate has moved up from 1 percent to 225 percent while the CPI has r isen from 2 percent to 35 percent! The real interest rate the Federal Funds Rate less inflation remains clearly negative. Loose as a goose as in continuing to goose the money supply might be a good analogy. Meanwhile, everyone is fighting deflation and totally focused on the cor e inflation rate, which is running at about 2 percent. The reason the co re rate goes up so slowly is because it is carefully designed to leave o ut the key expenses that really affect our lives and go up in price such as energy costs, food, and housing. The essence of disinformation is ba sically to get everyone to look the other way when something like inflat ion is really big and in your face constantly. Critically, the mainstream press has been a big help to the Fed in this e ndeavor. For the most part, they simply print what they are told without doing any factual digging or additional research, or actually examining the real inflation numbers. When the Fed claims that all that matters is the core rate, you really need to go to the BLS and find out what th e year-over-year rate is. Price increases are downright ugly and the las t thing the government wants you to do is take a closer look. Well, lets peek anyway at some of the governments numbers on prices, co urtesy of the Bureau of Labor Statistics (BLS): Price Increase November 2003 to November 2004 Producer Price Index (PPI) Gasoline 475 percent Crude Materials 259 percent Intermediate Materials 97 percent Groceries at Supermarket 61 percent Finished Goods 51 percent Consumer Price Index (CPI) 35 percent Bensons Economic & Market Trends, December 28, 2004 Page 1 of 3 Price Increase Office of Federal Housing Enterprise Oversight OPHEO National Housing Prices Third Quarter 03 to Third Quarter 04 ------------------13 percent Third Quarter 04 Annual Rate ----------------------------185 percent The prices above surely indicate there is a whole lot of inflation going on now and in the price pipeline. The magnitude of real inflation is a round us everywhere. An example of this could be seen in New York where taxi cab prices increased by 25 percent, while nationwide college tuitio n, health care, insurance, drug prices and property taxes are, in most c ases, running near or above double digit annual rates of price increase. First, many of the items going into the CPI are adjusted for quality changes, referred to as hedonic adjustment. The idea is that si nce a new computer has twice the memory and processing speed for the sam e amount of money, the price actually fell in half. Even Bill Gross at P IMCO has caught on to this hedonic scam and estimates that these conveni ent but false hedonic adjustments pull the CPI down a full percentage po int from where it would otherwise be. However, our favorite disinformation trick in the CPI is the grand assump tion that everyone in America rents their house. In calculating the CPI, a full 295 percent of the index is related to the direct costs of hous ing. Looking at the price weights, 62 percent of this fraction relates to people who rent, while 234 percent of the total CPI relates to the t otal costs associated with home ownership but the CPI assumes these home owners rent, not own! As you can imagine, rents have not been moving up as fast as housing prices. If the national housing prices as published b y OFHEO were used in the CPI, that 234 percent weight of the index for prices rising at 13 percent a year would alone have added 3 percent to t he CPI (that is if gasoline, groceries, and everything else had not incr eased in price and only rising housing prices were affecting it). If we assume that housing prices are only increas ing at three times the rate of the cost of renting, and the hedonic adju stment is only 05 percent, I think we can safely assume the following: Real Consumer Price Index Reported 35 percent Including Housing Prices 20 percent Hedonic (fudge factor) 05 percent Real Consumer Inflation 60 percent Bensons Economic & Market Trends, December 28, 2004 In looking at these numerical facts and the actual world around us, we ca n truly appreciate the magnitude of disinformation on the inflation fron t The Fed needs inflation, wants inflation, and is getting inflation. W ithout inflation to inflate away a massive amount of personal, corporate , and government debt, our financial system could collapse. A lower doll ar and higher inflation will ease the federal deficit while the foreign central banks, that have purchased US Treasuries, will end up paying f or the war in the Mid East as Americas debt is inflated away. To make t he disinformation plan work, it is critical that even if inflation is no t contained, the knowledge and perception that inflation is kicking up, is contained. Unfortunately for savers, they are being slaughtered by inflation very si lently but at least they are alive to work like a wage slave for another day. The average American is so busy trying to make ends meet that when it comes to inflation, they dont even know whats happening. We can on ly hope that the Pentagon will learn from the masters at the Fed how to have that soft touch when it comes to propaganda.
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