Were President Obama to provide an honest assessment of the current economic crisis he might advise that our national financial losses are nearly equal to the Gross Domestic Product (GDP) of the entire world.
Given that: with real unemployment at 15% and growing, last years actual inflation at 10% and currently perhaps 6% above the reported -0.5%, a bankrupt banking system except for fictional accounting, more than 3 million house foreclosure filings last year with at least that many projected for this year, more than 1 million personal bankruptcies filed last year and even more projected for this year, retail stores failing, malls closing, trillions of new money pumped into Wall Street, trillions of dollars in deficit spending, doubling of the national debt, and credit card delinquency rate up by 32% for last years fourth quarter; well as Professor Howard Hill might say, "we got some serious trouble right here in River City."-
1. Government understates unemployment.
Since Reagan, to reduce unemployment, military service personnel are counted as if they were part of the civilian work force. Since Clinton, part-time employees that wanted full time employment were counted as if they had full time employment. Those that wanted to work part-time and worked more than 21 hours a week at less than poverty level wages were counted as if they had full time employment. Without these changes, the current 8.6% unemployment would be right at 15%. From 1928 through 1933, the worst of the depression, unemployment averaged 15.2%. There are now, and still growing, a large number of U.S. citizens that know this a depression, not a recession.
2. Government understates inflation.
The Consumer Price Index (CPI) for 2008 was 3.85%. Were the CPI calculated as it was during the 1970's before working and middle class real income declined, Shadow Statistics calculates the CPI for 2008 would be 10%. Inflation (now deflation) is currently running in the neighborhood of minus 0.5%. Aren't you glad to learn that this week's or month's paycheck for your wages or salary will buy more than it did last year. Are we really as stupid as the federal government believes us to be?
3. Government lies by the sin of omission.
Treasury Secretary Geithner refuses to allow the Federal Deposit Insurance Commission (FDIC) to enforce the Prompt Corrective Action Law or discuss alternative methods to its Public-Private Investment Program to resolve the "toxic assets"- problem of the banks. Treasury now calls these assets "legacy assets" in the apparent belief the stench will be less apparent to the public with the name change. The NEW YORK TIMES reports, "the government is failing to use powers it already has to restructure insolvent commercial banks. Instead, Mr. Geithner continues to suggest a variety of other actions that seem unlikely to solve the banks' central problem--a lack of equity capital." Outside of government there is a growing consensus calling for nationalization.
Congress, colluding with Treasury, the FDIC, and Wall Street lobbyists, pressured the Federal Accounting Standards Board (FASB) to not require banks to use "mark to market" asset valuation resulting in fictional valuations to avoid the losses and balance sheets write downs that would result in an insolvent condition for many of the troubled banks.
4. Private but pseudo-government agencies fail to honor integrity.
Some wags now refer to the FASB as the Fictional Accounting Standards Board.
The Federal Reserve Systems (the FED) Chairman Bernanke refuses to disclose to whom it has pumped trillions of new loan dollars for the purpose of maintaining bank liquidity and/or solvency.
The FED no longer reports (but probably calculates) M3, the total of U.S. dollars in circulation; obviously it has and is pumping too much into circulation. Last reported in 2006 when it was running at twice the rate of M1 and M2, it does not seem probable that the vast increase in loans to Wall Street, auto industry bailouts and TARP financing, coupled with deficit spending and deficit trade balances, can long remain hidden. The risk is increasing that our economy will be adversely effected by significant inflation and dollar devaluation in the not too distant future.
THE WORLD NEWS DAILY suggests that we, "Keep in mind, the United States defaulted on its debt in 1933 when Roosevelt took office and pulled the country off the gold standard, thus, shrugging off the claims of foreign investors who were assured the US would honor its obligations in gold. The dollar plummeted. Bernanke's muddled strategy has the nation walking down that same path once again."
BLOOMBERG NEWS reports "the Fed has already lent or committed $12.8 trillion trying to stabilize the financial system after the bursting of Wall Street's speculative mega-bubble. Now Bernanke wants to dig an even bigger hole, by creating programs that will provide up to $2 trillion of credit to financial institutions that purchase toxic assets from banks or securities backed by consumer loans. The Fed's generous terms are expected to generate a flurry of speculation which will help strengthen the banking system while leaving the taxpayer to bear the losses. It is impossible to know what the long-term effects of Bernanke's excessive spending will be, but his plan has the potential to trigger hyperinflation or spark a run on the dollar."