Inflation biggest threat to U.S. economy in 2010
12/29/2009
http://sdgln.com/news/2009/12/29/inflation-biggest-threat-us-economy-2010
In 2009, the monetary inflation created by the Federal Reserve's zero percent interest rates drove up the prices of U.S. stocks, without dramatically increasing the prices of U.S. consumer goods. The NIA considers 2009 to have been a brief period of euphoria, before a rapid increase in the prices of food, energy, clothes and other necessities Americans need to live and survive.
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However, on December 22, the U.S. Bureau of Economic Analysis revised third quarter GDP growth down to 2.24%. After this latest revision, 'Cash for Clunkers' now accounts for the overwhelming majority of the reported GDP growth in the third quarter. Adjusted for real inflation, the U.S. GDP is actually contracting today.
The current rate of U.S. inflation based on the U.S. government's reported Consumer Product Index (CPI) on a year-over-year basis is 1.84%. However, NIA believes that the U.S. government's CPI index is understating inflation and real price inflation in the U.S. is already well above 5%.
The CPI index is no longer calculated based on Americans maintaining the same standard of living but is instead calculated based on an expected continual decline in the standard of living in America.
Decades ago, the CPI index tracked the price of a fixed basket of goods. Today, the U.S. Bureau of Labor Statistics (BLS) uses geometric weighting to decrease the weighting of goods that increase in price and increase the weighting of goods that decrease in price. The BLS also uses hedonic adjustments so that if a household appliance increases in price, they can justify it to being more energy efficient and say the price didn't rise, because you are enjoying increased pleasure from it.
With millions of baby boomers getting ready to retire, they all need to realize that although their social security payments may increase based on growth in the CPI index, it will not keep pace with real inflation. Retirees living on fixed incomes should calculate if they will be able to survive with less than half of the income they are expecting to receive. If they calculate that they will be unable to do so, they should seek at least some kind of part time work immediately, so that they can accumulate physical gold and silver.
