So what is the true rate of inflation?

There is no one true rate of inflation, since to estimate inflation, one has to compare apples and oranges, and there is no one valid way of doing this.

But if inflation is substantially less than ten percent a year, we are consuming substantially more goods this year than last year.  Do you think we are consuming substantially more goods this year than last year?

But whatever the true rate of inflation might be, it is increasing.  It is not increasing fast as I expected, not increasing very fast at all.  It is increasing at about two percent a year, so if this year inflation was not ten percent, but eight percent, next year it will be ten percent a year, and the year after that, twelve percent a year.  The rate at which prices increase, is itself increasing.

This does not sound all that terrifying, but recall that hyperinflation begins as the collapse of a paper bubble.  Everyone wakes up one morning realizing that inflation is a lot higher than they thought and will only get worse, so they all try to unload their paper at the same time for tangibles:  Land in productive use, gold, ammo, guns, non perishable food items, alcohol,  and suchlike, also overseas non tangible assets, paper assets regulated by solvent governments.

Only to discover that they cannot all unload their paper money at the same time.

If the rate of inflation is high and increasing, sooner or later, it suddenly starts to increase a lot faster.  Suppose inflation this year was seven percent, then next year it will nine percent, which is not imminent doom.  If people are not panicking today, they are unlikely to panic tomorrow. The end is not nigh.  But the end, nonetheless, is in sight.

I don’t quite know what you’d call these rituals, but the term “private health-care system” doesn’t seem the most obvious fit. Indeed, as in so many other areas of American life — the Fannie-Freddied mortgage market, the six-figure college education — the main purpose of these dysfunctional labyrinths ever more disconnected from any genuinely free market seems to be to discredit the very concept of a “private” system and thus soften up the electorate for statist fixes.

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In free, functioning societies, it ought to be easy to buy a bottle of pills. The fact that it isn’t is one reason why America has a real bad headache.

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if you price your time, even if you price it at kind of minimum wage, the amount of time it takes, this is my problem, that everywhere you look now, you’re seeing a remorseless transfer of time, and time is money, of time and money from the productive class to the kind of bureaucratic sclerosis class.

In a previous post of mine, I observe that the US health care system is socialism without a central plan, and capitalism without markets or prices. Obama is not socializing it. He is making it more socialist than it was.

This is not riot control, it is a manufactured photo opportunity

Manufacturing the appearance of significance

Observe the hand motion.  He is tossing a smoke grenade just in front, not at the protestors.  If you are wondering how heavily outnumbered protestors accomplished their goal  of occupying the city hall, despite announcing it at least a day in advance, the above photo explains the inexplicable.

And here are the protestors are in occupation, burning the vandalized and stolen city hall flag.  Although the photo does not show it, police are watching a short distance away.

Another photo opportunity while police watch

There were amply sufficient police watching to have seriously cramped their style, and yet, they did not.  First the photo opportunity, then the police intervene.  When the police finally intervene, the protestors yield without any resistance or fuss, revealing police complicity in this photo opp.

This post placed in the economics category, as well as the politics, being an example of your tax dollars at work, the government funding agitation for more government funding.

From 2009 May to 2011 November total business sales in dollars rose twenty six percent, ten percent a year, which to me, though not to Bernanke, looks like good reason to scream panic and hit the brakes, to raise real interest rates to at least normal levels, and arguably higher.

The reason Bernanke is not panicking is that from 2008 July to 2009 May, total sales fell by the same amount, so, Bernanke presumably figures, we are just getting back to normal, and indeed still have not gotten to back to anything like the old normal, because these are inflated dollars.  Continue at this rate for a a year and a bit, then we will be back to the old normal, in terms of real value of goods sold,

So he proposes to continue at this rate for another year and a bit, to early 2014.

Which makes perfect sense if you think the US economy is still as capable of producing wealth as ever it was.

I don’t think we can get back to the old normal without fundamental political change, and by fundamental change, I don’t mean any of the current crowd of Obama look alikes that the Republican party is offering.

In a year and a bit, early 2014, it will become apparent whether I was right or Bernanke was right.

“The low level of inflation is a validation,” Bernanke said. “There are some who were very concerned that our balance-sheet policies and the like would lead to high inflation. There’s certainly no sign of that yet.”

Really?  Sales have gone up ten percent in nominal value, which only makes sense if the real rate of inflation is seven to ten percent.  The US economy is on fire, and Bernanke pledges to continue throwing gasoline on the flames.

Why the madness? Well, reading human souls is a chancy business, but here is my reading:

For political reasons the left, aka the United States Government, aka the guys who cannot be fired or lose their jobs no matter how badly they screw up, has been hurling great gobs of money at political insiders, such as favored bankers and financiers, and also great gobs of money at favored voting blocks, in particular Mexicans.

Therefore, everyone has to believe that these policies are not a matter of throwing America over the cliff for short term political and financial gain, even though the US economy appears to be falling off a cliff, but rather are sound and principled actions dictated by sound economic reasoning, and the reasoning is, um, ah, err, uh – Oh yes. Vitally needed Keynesian stimulus!

And if Keynesian stimulus is vitally needed, then we must be suffering serious deflation.

So everyone who knows how to get ahead convinces himself that we are suffering serious deflation, or at least that inflation is a very minor problem. And of course these guys don’t do any shopping, and they don’t know anyone who does their own shopping, so there is no inconvenient risk of reality butting its head in where it is not wanted. The Bureau of labor statistics notes that computers are greatly improving in value, televisions are significantly improving in value, and blithely closes its eyes to the fact that everything you need to live is getting more expensive.

And now, something even chancier than reading human souls: Reading the future: I think we are nine to eighteen months from an “Oh $#!%” moment when everyone except the ruling elite recognizes that the US economy is in total meltdown, and about three years to five years or so for the ruling elite to catch on.

There is a lot of ruin in a nation, and I still predict ruin around 2020-2025 or so, but this disturbing statement by Bernanke, and everyone’s calm acceptance that it is perfectly reasonable, and that there is nothing even faintly suggestive of madness and evil about it, leads me to predict interesting times arriving sooner than that.

A lot of people think that the ruling elite is cynically aware of what it is doing, but seems to me that everyone knew of the mortgage meltdown in 2005 November, whereas Goldman and Sach did not start unloading their mortgage exposure onto their customers until 2007. In the mortgage crisis, the elite from Harvard were the last to know.  That is why they needed to be bailed out.

Similarly, when the Soviet Union was falling, after 1985 lots of people knew the fall was imminent, yet the left, aka the government, was still in denial well after it had fallen.

We are not ruled by an elite selected for intelligence, but rather for the ability to believe six impossible things before breakfast.

There is a lot of ruin in a nation.  I have been predicting that we will probably not see hyperinflationary collapse for several years.  I find this data surprising and confusing. Either we are booming, or we are inflating, and it does not feel like we are booming.

While Google is wonderfully politically correct, and would never dream of suggesting that black people are stupid, the scam service they are selling in Kenya is predicated on the assumption that black people are stupid.

Mocality is a Kenyan business whose main asset is a database of Kenyan businesses, and a web service for looking up those businesses.  It creates, for every Kenyan business it can find, a short web page, directly competing with Google advertising.  Kenyans look up Mocality when they want to find a business, rather than googling.

Google call centers would look up businesses listed by Mocality, cold call them, and try to telemarket them Googles hosting service.

Very few Kenyan businesses have the skills to create a web page, nor any compelling reason to acquire such skills when Mocality creates a web page free of charge for every Kenyan business, so they had no use for the hosting service that Google was selling.

So, part of the Google telemarketer script was that Mocality was supposedly going to charge businesses some extravagant fee for their listing, and that is why Kenyan businesses supposedly needed their own host and their own web page.

In the general election I’ll be pointing out that the president took the reins at General Motors and Chrysler – closed factories, closed dealerships laid off thousands and thousands of workers – he did it to try to save the business.

Now that is an unusual strategy for winning elections.

This shows us why a Republican Party socialist can never beat a Democratic Party socialist in an election. If you are going to oppose a Democratic Party socialist, have to oppose socialism.

This is politics 101. If you tell the voters that your opponent’s policies are so wonderful that you will be just the same, only better, they are not going to be impressed.

Whatever it is that is most characteristic, distinctive, and controversial about your incumbent opponent, you have to say that that prominent and controversial characteristic stinks mightily. You have to say that your opponent is no damn good because his most prominent and distinctive controversial characteristic is no damn good, that Obama’s socialism is destroying this country. Instead, Governor Romneycare sounds like the conspicuously fake opposition that communist parties would sometimes run against themselves, which fake opponents would not only lose by 0.1% to 99.9% but would quite genuinely lose by almost as much.

Paraphrasing: Oh, no I am not a greedy selfish capitalist, I am almost as kindly and benevolent as the great Obamessiah himself.  I save jobs just like the benevolent Obamessiah does.

The right answer, of course, would have been that Bain Capital took care of the destruction side of capitalism’s creative destruction, that for well run firms like Apple to exist, badly run firms have to be shut down and their assets sold to the highest bidder – which story would sound a whole lot better coming from someone responsible for the creative side of capitalism’s creative destruction.

If a presidential candidate cannot say that Obama’s socialism is ruining lives and destroying jobs, that candidate is not going to win against Obama.

There really is no such thing as the real rate of inflation. To estimate inflation, you need to compare apples with oranges, which requires a judgment call. Increasingly, the BLS has been making judgment calls in the direction that will flatter its masters – which does not, however, prove those judgment calls are false.

The amount of computing power that an hour’s work will buy has gone up an astonishing amount, and continues to rise rapidly. Televisions are cheaper by this metric and considerably better. Unfortunately the amount of food, housing, healthcare, energy and education that an hour’s work will buy has fallen, and continues to fall.

It has been falling for a long time, at first slowly, and now, faster and faster.

Once again, I repeat, the last man left the moon in 1972, the tallest buildings in the US were completed in 1972, and the coolest cars built in 1972.

If you cannot afford to feed, house, and educate your children, if driving to work gets a bigger problem every day and you cannot casually go and see your relatives, the falling cost and improved quality of smartphones is small consolation.

If we go by Shadowstats value judgments, then we see that GDP has been falling, the US has been in economic decline ever since Bush the elder replaced Ronald Reagan.

Shadowstats figures, like the government’s figures, show a boom from 2001 to 2005 November, but everyone now knows this boom was fake. Manifestly, whether the Austrian theory of booms and busts is true in general, it has been true of recent events. People invested in housing, bankers supposedly created value through borrowing and lending, real estate agents supposedly created value by getting people in houses, and builders created value by building and improving houses, but obviously the builders were creating considerably less value than was believed, and the bankers and real estate agents were subtracting rather than creating value.

The boom was what the Austrian economic school calls malinvestment. People invest in the wrong things, so prices are wrong, so people do the wrong things, subtracting value, but getting paid as if they are creating value. Then, subsequently there is correction, which correction unavoidably makes people feel bad. Printing money to make people feel good just makes things worse.

People thought that housing would have more value than it did, because they thought that genetically low IQ Mexican immigrants were going to be magically affirmative actioned into successfully performing the middle class lifestyle, that in the near future they would have nice houses in suburbia, and in the near future they would be able to pay for nice houses in suburbia, so there would be the need for a lot more nice houses in suburbia, and a payment stream making those houses valuable.

This fantasy fell apart, though no one can speak about it, and mentioning it, even on supposedly right wing and libertarian blogs, is apt to result in being called a white nationalist, a hateful racist, and getting banned from that blog.

If we adjust for the fake boom and subsequent correction, we see not an abrupt decline starting in 2009, but rather a long arch, with growth slowing in the 1970s, the economy peaking soon after Reagan, and decline slowly and steadily accelerating since then.

So what is causing the decline?

If we look at the areas where we are declining, and where we are not, the answer is pretty obvious: Computers are pretty much unregulated. Every piece of software and hardware comes with a de riguer disclaimer that it is not promised to do anything useful, and may well do you great harm, and if so, not the manufacturers fault. Strangely, government, courts, and regulators have let them get away with it, probably because they are not quite sure what computers are or what they do.

Housing, health, energy, food, finance, and education, on the other hand, are massively regulated, and are largely managed by government or quasi government institutions.

Government is simply failing economically, and is taking with it major and vital parts of the economy.

The cure is going to be illegal health care, illegal finance, illegal food, and illegal housing, all of which is apt to create a demand for the illegal provision of defense and contract enforcement services, assuming we don’t get conquered by hostile outsiders in the process, or, like the Roman Republic, switch to military despotism, a despotism that might, with painful slowness, eventually become monarchy.

In its death throes, government is taking over and destroying every part of the economy, and will probably reach computing soon enough. I have often mentioned Sarbannes Oxley as the height of far left madness, for it makes the foundation of the modern corporation, accounting, pretty much illegal, leaving investors in the dark. Sarbanes-Oxley accounts don’t mean much.

Lately the government has been directly intervening into the management of companies, with cataclysmic results.

All these interventions have the effect that investment, instead of being directed at making money, is instead directed to political goals – spent on the underclass, and on professional left wing activists.

Sarbanes–Oxley theoretically dictated how accounting should be done, so that people could not cook their books. But no one knows how to comply with Sarbanes–Oxley, or what compliance with Sarbanes–Oxley would constitute, so they just hire someone sufficiently influential that whatever he does is likely to be deemed compliance with Sarbanes–Oxley.

Which means that no one knows what, if anything, the accounts mean. Observe that in the recent financial failures, everyone was working in the dark. The accounts failed to provide any sign that the money was running out until the checks started bouncing and people discovered that everything was gone.

Now on top of Sarbanes–Oxley, we have the Dodd–Frank Wall Street Reform and Consumer Protection Act, which turns all major financial institutions into quasi government enterprises, like Fannie and Freddy.

Such enterprises have no incentive to perform, and are above the law, making it likely they will act criminally.

This is already happening: A major part of Dodd–Frank was regulating derivatives. The big derivatives that scare people are bets on credit events, where a financier promises to pay if someone does not pay his debts. So if you lend to Greece, and are worried that Greece will not pay its debts, you buy a bet from a bank that Greece will pay its debts. If Greece stiffs you, the bank will pay you.

Before Dodd-Frank, when such bets were unregulated, those who lost the bet always paid up, or themselves went broke. Recent Greece failed to make payments on its government debt, and lo and behold, those who were stiffed by Greece, were stiffed a second time by Goldman Sachs which had made big bets that Greece would pay its debts, but now that finance is regulated by the wise and the benevolent, they wisely and benevolently deemed that the bet would not be paid.

Thus the practical effect of Sarbanes–Oxley is cargo cult accounting, and to criminalize real accounting, and the way the wind is blowing, the practical effect of Dodd–Frank will be cargo cult finance, and to criminalize real finance. The true nature of Sarbanes–Oxley is shown by MF Global, and the true nature of Dodd–Frank is shown by derivatives of Greek debt.

Anyone who offers investments through United States brokers has to comply with Sarbanes–Oxley, which means that US citizens are forbidden world wide to invest in anything with real accounting. You can bypass this, but it is not trivial.  If you go with the flow, you wind up investing on the basis of Sarbanes–Oxley numbers.

Supposedly Sarbanes–Oxley has produced “better earnings quality” – but one would not expect Sarbanes–Oxley to produce better earnings, that not being the purpose of Sarbanes–Oxley. It is more likely that Sarbanes–Oxley has produced reported better earnings. The purpose of Sarbanes–Oxley was to produce truth, and it has not produced truth. On the contrary, whereas Enron’s accounts, read carefully, revealed that Enron had been losing money for some time, and was broke, nothing in MF Global’s accounts revealed that.

Enron went under because people stopped selling it stuff on credit, and stopped paying for stuff in advance. People were depositing money and gold in MF Global right up the last minute.

Enron went under because the truth in its accounts meant it could no longer suck in other people’s money. MF Global went under because it was losing more money than it could suck in. Accounting did not fail for Enron. It failed for MF Global. Enron failed because people got wind it was in trouble. No one got wind that MF Global was in trouble.

Rick Santorum’s nephew tells us:

When Republicans were spending so much money under President Bush, my uncle was right there along with them

Rick Santorum’s claim to fiscal conservatism is that he supported Clinton on welfare reform. Unfortunately he also supported Bush on pissing away mortgage money on deadbeat borrowers. Paul is the only one in the race who opposed the financial crisis before it happened.

Paul is the only Not Romney that survived under fire. We shall see how Rick Santorum does when he comes under fire. He is already being monstered as Bush the third. If Rick Santorum goes down under fire, then Ron Paul will be the only Not Romney remaining.