CPI numbers are manipulated, real inflation was around 8% for the past couple of years when the growth in the money supply (M3) was 13-15% and GDP 4% now M3 isn't reported by your freinds at the government and GDP is +- 0% so real inflation is going to be upwards of 12% as suggested by the recent soaring commodity prices.
Just think of it this way 500k for a partner 10 years ago was a different league compared to the same amout now.
Got to thank Big Al and Helicopter Ben for letting inflation eat us alive.
I'd be sending out a sequence of these--->
right now if it weren't so tragic.
That being said, in all honesty, in order for the U.S. to become a producer again, a crappy dollar isn't so bad. Over the long haul, perhaps we'll see a true rebalancing of trade. Obviously, this will be painful.
Here's the real kicker. These chincy tax rebates won't do anything for the economy IMO. Nor will another 1% rate cut, which is being talked about (short term trades in the market? Sure, but long term?). So, at what point will the Fed HAVE to raise rates in order to shore up the dollar?? I think it's gonna come (out of NO other option) at a time when the economy can least afford it. In other words, the Fed is real close to shooting it's final wad...
If what the CEO of Freddie Mac says is true (that home prices have only depreciated 1/3 of what he anticipates), then things look really, really bad. What are all the people that have hung on thus far (the not-so-subprimers) going to do when rates creep up on them?? Another round of defaults?
Then there's the question of whether foreign banks will keep purchasing US securities. What if they go to Euro denominated debt? What happens if they do this at a time when the dollar is already getting bashed from our own monetary policy? Then what will the dollar look like.
The reason this could turn into a huge global issue is because if US "consumers" (pitiful that we're refered to as "consumers" more than CITIZENS) cool off (which is happening already), then China is in deep doo-doo themselves. We're a lot more important to them than they are to us (given the trade imbalance). So, maybe there will be some cooperation to keep things from getting TOO bad. The PROBLEM with this is that it implies that US "consumers" continue their/our spending (and borrowing) spree. This is what's unsustainable, given our social obligations that David Walker has been highlighting.
It's a big f..ing mess right now. And, I think that it's finally being called in on us. I think we're heading into our little reckoning day(s). Many might say it's been long overdue.
