Inflation is our friend!

If you don’t subscribe to http://dailyreckoning.com/, you should. It’s free, funny and a much needed bit of financial common sense. Today, Bill Bonner republished a portion of an old SNL skit.

Dan Akroyd pretending to be President Jimmy Carter on Saturday Night Live and 30 years ahead of his time:

“President Jimmy Carter: Good evening. On Tuesday, we Americans will have the opportunity to exercise our role as citizens in a free democracy. Yet, only a third of the eligible voters will actually cast ballots. The other two-thirds are, in a sense, very lucky. Because they do not know what’s going on.

“Last week, I delivered a message on inflation. Since then, the dollar has dropped in value, the stock market has sustained record losses, and the whole Dow price index increased 0.9%. In other words, our economic system is screwed, blued and tatooed! We just have to face the fact that there is simply no way to fight inflation in a capitally-intensive, highly-technological, conflict-riddled, anything-for-a-thrill world of today. That’s why, tonight, I want you to try to look at inflation in an entirely new way: Inflation is our friend.

“For example, consider this: in the year 2000, if current trends continue, the average blue-collar annual wage in this country will be $568,000. Think what this inflated world of the future will mean – most Americans will be millionaires. Everyone will feel like a bigshot. Wouldn’t you like to own a $4,000 suit, and smoke a $75 cigar, drive a $600,000 car? I know I would! But what about people on fixed incomes? They have always been the true victims of inflation. That’s why I will present to Congress the ‘Inflation Maintenance Program’, whereby the U.S. Treasury will make up any inflation-caused losses to direct tax rebates to the public in cash. Then you may say, ‘Won’t that cost a lot of money? Won’t that increase the deficit?’ Sure it will! But so what? We’ll just print more money! We have the papers, we have the mints. I can just call up the Bureau of Engraving and say, ‘Hi! This is Jimmy. Roll out some of them twenties! Print up a couple thousand sheets of those Century Notes!’ Sure, all these dollars will cause even more inflation, but who cares? Everyone will be a millionaire!

“In my speech last week, I said that America would have to undergo an austerity program, but since this revolutionary new approach welcomes inflation, our economy will be free to grow, and we can spend, spend, spend! I believe the watchwords for the ’80s should be ‘Let’s Party!’ And in that spirit, I’d like to say, ‘Live, from New York, it’s Saturday Night!’”

Don’t worry inflation isn’t a problem….except

I remember having a conversation with my portfolio manager nearly two years ago about inflation.    I was telling him that despite the official numbers, it seemed to be common knowledge that inflation was running rampant.    He agreed with me that the exclusion of Food and Fuel (the only two things you need to buy) from the CPI made the numbers incredibly misleading, but we had divergent opinions about how serious the problem was.   For my part, it seemed clear that it was taking a big toll on average citizens.

Even though it’s well accepted by nearly everyone I speak with, our “leaders” keep telling us that we’re just out of touch with the economic realities.    Meeting with economic journalists last week, President Bush dismissed several polls that show Americans are down on the economy. He expressed surprise that inflation is one of the stated concerns.

“They cite inflation?” Bush asked, adding that, “I happen to believe the war has clouded a lot of people’s sense of optimism.”

That’s right, Americans are just out of touch and have a clouded “sense of optimism”.    While it’s understandable that Americans might be a little pessimistic due to the planned “generation of warfare” against the “evil doers” (who they are exactly, no one can be sure.),  I think the pessimism comes from a source much closer to home.  The grocery eisle, for example:

According to McClatchy Newspapers– The Bureau of Labor Statistics said in its July inflation report that egg prices are 33.7 percent higher than they were in July 2006. Over the same period, according to the department’s consumer price index, whole milk was up 21.1 percent; fresh chicken 8.4 percent; navel oranges 13.6 percent; apples 8.7 percent. Dried beans were up 11.5 percent, and white bread just missed double-digit growth, rising by 8.8 percent.

These numbers get lost in the broader inflation rate for all goods and services, which measured 2.4 percent for the same 12-month period. Across the economy, rising food prices were offset by falling prices for things bought at the mall: computers, cameras, clothing and shoes.

If you’re in the market for a new flat panel HTDV,  you’re in luck.  If, however, you’re trying to feed your family, fill up your gas tank or simply save for the future you’re probably feeling like stretched to the max.    Add in the recent market, credit, and housing turmoil and it can seem like the sky is falling.   Or maybe that’s just my “clouded optimism” speaking due to the 41 tragic and unnecessary deaths of US soldiers in Iraq this month so far.

Are you feeling the effects of inflation?   What impact is it having on your daily life?   I’d love to hear your comments on this important topic.

Today I Met Tommy Thompson at Starbucks

Tommy Thompson, Former Governor of Wisconsin and Secretary of Health and Human Services under Bush was in Davenport, Iowa today and I had the opportunity to briefly speak with him one-on-one.

I slept in this morning, still being a little off schedule from our trip to Utah last week, so I was late picking up my daily dose of caffeine from Starbucks. Driving into the parking lot, I noticed a two-man TV “news” crew sort of casing the joint.

I walked in, ordered my Venti Coffee as usual. Not seeing anything out of the ordinary, I got back in my car. Just as I was about to start the engine, Tommy Thompson walks out the door. Holding an Iced Latte in one hand the other pressing his motorola razr to his ear.

(Probably the only real perk of living in Iowa is the quadrennial visits from politicians.)

I jump back out of my car walk toward Tommy with my hand outstretched and say, “Tommy Thompson, how are you doing?”. He looks up at me, still talking on his phone tells the party on the other end to hold on a second, frees up his right hand and engages mine in a strong, prolonged handshake.

We had a very brief conversation what went something like this:

Me: “Tommy, It’s Nice to meet you. It’s great to see you here in Davenport.”

Tommy: “Nice, to meet you too. What’s your name?”

Me: “I’m Matthew Smith”

Tommy: repeating it back, “Matthew Smith”

Me:”You know, You’re one of the few Republicans that makes any sense. I voted for Bush before, but I’ve been really disappointed over the last couple of years.” (For the record, I voted for Bush in 2000. I think only ignorant or oblivious people voted for him in 2004. Unfortunately, the majority of voters are ignorant and/or oblivious.)

Tommy: “Me Too. What do you do, Matthew?”

Me: “I own an Internet Marketing Company.”

Tommy: “Really?…Do you have a card with you?”

Me: patting down my short pockets, “No, I don’t. I just woke up, took a shower and came to get some coffee. That’s the nice thing about an internet business… I can go to work whenever I want, where I want.”

Tommy: Looking toward his escort, “Can you get him a card?”

Me: Shaking Tommy’s hand again. “Thanks, I just thought I should say hello. I really appreciate you being here.”

Tommy: “Thank you, and thanks for coming up and talking to me”

That was pretty much it. It was clear he was busy. I didn’t want to disturb him any more than I already had. His aide handed me a business card and said, if I’d like to help out send him an email.

Looking back I wish I would have asked a couple of questions and expressed my opinion on the direction of the country. But, it was all spur of the moment and I’ll just accept as what it was.

If you’ve ever read the book “Blink”, you know that people create near instant impressions of others. Even though I had only 30 seconds of his time, I was left with a very favorable impression of him.

Tommy2008.com

UCLA Student tazered repeatedly

Here’s a disturbing video of some L.A. cops abusing their power and repeatedly tazeing a student. It’s clear in the video, that it isn’t about trying to get the student to comply. It’s about power. The cops want this student to totally and unconditionally submit to them. It’s not about taking him into custody or removing him from the scene. They could accomplish this by picking him up and carrying him out (as they eventually did).

IMPORTANT BACKGROUND ON THIS SITUATION:

Before you jump to conclusions and think “oh well, what’s NOT shown in the video?   This guy must have done something wrong to deserve this treatment from the police”.   Here’s how the associated press described the incident:

Tabatabainejad, 23, was shocked Tuesday night after arguing with a campus police officer who was conducting a routine check of student IDs at the University of California, Los Angeles, Powell Library computer lab.

Campus police say he refused to show his student ID and refused to leave the building when asked.

So, when you’re unwilling to “show your papers”, this is the outcome?

There’s only one thing worse than the blatent abuse of power by these police and that is the belief by many that this student “got what he deserved” because he didn’t submit. Those who say he deserved it are the type of mindless docile sheep controlling authorities love.

Pathetic.

Think people, think! This could just as easily be you, or your brother or mother!

The Real Enron: United States Government

Another scary article was published today discussing gross (and if it were anyone but the Federal Government, the criminal) negligence. This article, published by the USA Today reveals that the real U.S. deficit FAR exceeds the “official” numbers released by the Government.

Which is worse the “cooking the books” by the Federal Government or that of Enron?

Who’s misrepresentation of financial health will have a bigger impact… Kenneth Lay’s or our Elected Official’s?

Everyone (the press especially) cheers the demise of rich executives who skirt the law and mislead the public and yet where’s the outrage here when we’re talking about the continued fiscal health of every man, woman and child in America now and for generations to come….

Thanks USA Today for your reporting on this issue. If only the American people would begin to give a shit…

What’s the real federal deficit?

The federal government keeps two sets of books.

The set the government promotes to the public has a healthier bottom line: a $318 billion deficit in 2005.

The set the government doesn’t talk about is the audited financial statement produced by the government’s accountants following standard accounting rules. It reports a more ominous financial picture: a $760 billion deficit for 2005. If Social Security and Medicare were included — as the board that sets accounting rules is considering — the federal deficit would have been $3.5 trillion.

Congress has written its own accounting rules — which would be illegal for a corporation to use because they ignore important costs such as the growing expense of retirement benefits for civil servants and military personnel.

Last year, the audited statement produced by the accountants said the government ran a deficit equal to $6,700 for every American household. The number given to the public put the deficit at $2,800 per household.

A growing number of Congress members and accounting experts say it’s time for Congress to start using the audited financial statement when it makes budget decisions. They say accurate accounting would force Congress to show more restraint before approving popular measures to boost spending or cut taxes.

“We’re a bottom-line culture, and we’ve been hiding the bottom line from the American people,” says Rep. Jim Cooper, D-Tenn., a former investment banker. “It’s not fair to them, and it’s delusional on our part.”

The House of Representatives supported Cooper’s proposal this year to ask the president to include the audited numbers in his budgets, but the Senate did not consider the measure.

Good accounting is crucial at a time when the government faces long-term challenges in paying benefits to tens of millions of Americans for Medicare, Social Security and government pensions, say advocates of stricter accounting rules in federal budgeting.

“Accounting matters,” says Harvard University law professor Howell Jackson, who specializes in business law. “The deficit number affects how politicians act. We need a good number so politicians can have a target worth looking at.”

The audited financial statement — prepared by the Treasury Department — reveals a federal government in far worse financial shape than official budget reports indicate, a USA TODAY analysis found. The government has run a deficit of $2.9 trillion since 1997, according to the audited number. The official deficit since then is just $729 billion. The difference is equal to an entire year’s worth of federal spending.

READ the rest of this important article here: USAToday.com

US ‘could be going bankrupt’

I came across this great article on the future of the US economy. Oddly enough, I didn’t find it in the US press, but the UK press. It’s quite enlightening and more than a little scary. The irresponsible “who cares about tomorrow” decisions of our government are compounding and will eventually reach a tipping point….

By Edmund Conway, Economics Editor

(Filed: 14/07/2006)

The United States is heading for bankruptcy, according to an extraordinary paper published by one of the key members of the country’s central bank.

A ballooning budget deficit and a pensions and welfare timebomb could send the economic superpower into insolvency, according to research by Professor Laurence Kotlikoff for the Federal Reserve Bank of St Louis, a leading constituent of the US Federal Reserve.

Prof Kotlikoff said that, by some measures, the US is already bankrupt. “To paraphrase the Oxford English Dictionary, is the United States at the end of its resources, exhausted, stripped bare, destitute, bereft, wanting in property, or wrecked in consequence of failure to pay its creditors,” he asked.

According to his central analysis, “the US government is, indeed, bankrupt, insofar as it will be unable to pay its creditors, who, in this context, are current and future generations to whom it has explicitly or implicitly promised future net payments of various kinds”.

The budget deficit in the US is not massive. The Bush administration this week cut its forecasts for the fiscal shortfall this year by almost a third, saying it will come in at 2.3pc of gross domestic product. This is smaller than most European countries – including the UK – which have deficits north of 3pc of GDP.

READ the full article here

Proof: Driving with cell phone as bad as driving drunk, possibly even worse…

I hate drivers talking on cell phones. Usually, when I see someone do something stupid on the road I say to myself, “if you’d get off the f’n phone maybe you’d be able to merge without cutting people off, see the red light soon enough to stop, see the green light soon enough to go, drive in only one lane etc. etc.”

About 10% of the time, I’m wrong… the driver wasn’t on a phone afterall. The vast majority of the time, however, the bad, half dead to the world drivers are so caught up in a phone call of such importance that it couldn’t possibly wait and clearly must fully occupy the driver’s mind because their driving is stupid, unpredictable and dangerous.

Now there’s research that shows that driving with a cell phone is at least as bad as driving drunk and in many cases (like as the cause for accidents) even worse than driving drunk…

Driving with cell phone as bad as driving drunk, study says

By Tom Avril

The Philadelphia Inquirer

(MCT)

PHILADELPHIA – Drivers who talk on cell phones may be just as dangerous as those who drink.

That’s the sobering conclusion of a study published Thursday by University of Utah researchers who monitored 40 men and women on a driving simulator.

And drivers using hands-free phones were no better than those with the hand held variety, confirming previous studies.

The findings, published in the journal Human Factors, represent a direct blow at a popular pastime that is taken for granted by millions of multitasking drivers.

At any given moment during the day, 10 percent of drivers on U.S. roads are gabbing away on their wireless devices, according to a 2005 estimate by the National Highway Traffic Safety Administration.

Bad idea, said psychologist Frank A. Drews, one of the Utah study’s authors.

“It’s kind of almost unpredictable how they are driving,” Drews said.

When using cell phones, drivers had slower reaction times and more accidents, and they drove inconsistently, sometimes approaching other cars then falling back, he said.

READ THE FULL ARTICLE HERE