Featured StoryMore experts are saying what most Americans have suspected for years - the real inflation rate is much higher than the government is willing to admit.
Officially, the U.S. Bureau of Labor Statistics (BLS) says the inflation rate, or Consumer Price Index (CPI), for 2011 was 3%.
But a report issued last week by the non-profit group American Institute for Economic Research (AIER) says the U.S. inflation rate for 2011 is far higher - 8%.
AIER used criteria based only on common daily expenditures to more accurately reflect how inflation affects consumers. Their index excluded less-frequently purchased items, like automobiles.
Economic consultant John Williams, an outspoken critic of the government's economic statistics, contends things are even worse.
Using the government's old methodology from 1980 - before politicians started to monkey with the formula - he calculates the real inflation rate is north of 10%.
That's more than triple the government's figure.
Among the few in government who see this as a problem is Republican presidential candidate Rep. Ron Paul, R-TX.
"You know this argument that the prices are going up about 2%, nobody believes it," Paul bluntly told U.S. Federal Reserve Chairman Ben Bernanke during a hearing last week. "People on fixed incomes - they're really hurting, the middle class is really hurting because their inflation rate is very much higher than the government tries to tell them and that's why they lose trust in government."
Changes to the Real Inflation RateOver the years, the government has made a series of adjustments to how it calculates the CPI, ostensibly to make it more accurate.
However, critics like Williams say the inflation rate formula has been changed to serve political ends.
occupy wall street
What the World Will Look Like if Occupy Wall Street Wins
There are many reasons why the Occupy Wall Street movement could fail - a lack of cohesion, too many directions, no leadership, not enough money, and no representation, to name a few.
But what if it "succeeds?"
What would our investing landscape look like and what would we do about it?
I think that's an interesting question, especially since Occupy Wall Street has gained some traction, even taking on a global appeal. And more importantly, there are two other reasons the movement could succeed:
- First, our political system is broken and has deteriorated into little more than a fancy debating society.
- And second, the world's central bankers remain out of control; their bailouts are saving the irresponsible at the expense of the hardworking. Our regulators and Wall Street remain locked in an unholy alliance that has done very little to fix the underlying problems that have resulted from decades of bad fiscal policies, unsound monetary practices, and dysfunctional leadership.
A lot of people thought they would go away, too. But Tom Hayden and his collection of Students for a Democratic Society didn't. Nor did Abbie Hoffman, Bobby Seale, and others. Their passion and that of thousands who joined in eventually succeeded in changing the course of social consciousness.
OWS could too.
By shunning the hierarchy that is organized politics and corporate America, there is the sort of strength necessary to address the growing disparity and the vanishing opportunities that are the new economic reality for millions of Americans.
I, for one, am hopeful that OWS will find the leadership needed to clearly delineate its goals and mandate change on the strength of the raw unvarnished potential that is now driving it.
I am also hopeful that OWS will succeed in raising the social consciousness to the point that living within our means becomes both an economic and political reality.
But that's just me. You may have entirely different feelings. That we might not agree is irrelevant.
Since OWS began, I've been watching carefully and doing a lot of deep thinking about what things might look like if OWS "wins" - however you define the term.
So here's a look at some of the potential changes that could take place if the movement succeeds:
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Poll Misses Point: Washington and Wall Street Partners in Blame for Bad U.S. Economy
"Who do you blame more for the bad U.S. economy, Washington or Wall Street?" asked a recent USA Today/Gallup poll.
In fact, it's the sordid relationship between the U.S. government and the big financial institutions that plunged the U.S. economy into turmoil in 2008 and has hampered its recovery ever since.
"They are brothers-in-arms against the greater good of the American public. They are conspirators," said Money Morning Capital Waves Strategist Shah Gilani. "Who is to blame, is it Wall Street for giving money to Washington to clear a path for their schemes, or is it Washington pandering to Wall Street for money to wage their campaign battles to put themselves in place to repay their paymasters?"
In the USA Today/Gallup poll, 64% of Americans blamed the federal government more for the bad U.S. economy, with just 30% pointing a finger at big financial institutions.
But the poll also indicated that the American public is extremely unhappy with both groups, with 78% saying that Wall Street bears a great deal or fair amount of the blame for the bad U.S. economy; 87% say that of Washington.
"You see the frustration that there's some serious things wrong with capitalism in America, but you also see the conundrum - how do we change it?" Terry Madonna, a political analyst and polling expert at Franklin and Marshall College told USA Today.
Close to half of Americans - 44% - also see the system as unfair to them, with some groups, such as people without a college degree (49%), feeling more mistreated than others.
Gilani couldn't agree more.
"Calling the "system' unfair is like calling the Grand Canyon a ditch," he said. "It's massively, incomprehensively unfair. It's unfair first and foremost on the macro level. The system favors the few at the expense of the masses. If there is class warfare stress in this country, it's because the nexus of Wall Street Washington manufactured it."
That Washington's efforts to fix the bad U.S. economy - very loose monetary policy on the part of the U.S. Federal Reserve and billions in stimulus spending from U.S. President Barack Obama and the U.S. Congress - have changed little is no doubt part of the reason why people remain disgruntled with government.
"The Fed is part of the problem, not part of the solution," Gilani said. "They did what they had to do to save us from going over the financial chasm, but they also helped us get there."
How to Fix ItGilani had several suggestions on what should be done to make the system more fair as well as to prevent another financial crisis like we had in 2008:
- Break up all the "too- big-to-fail" banks.
- Regulate derivatives and determine what limitations need to be put on their use, by who, and when.
'Occupy Wall Street' Protests Wear On for 10th Day
For more than a week now hundreds of citizens have "occupied" Wall Street in an effort to protest the financial system and the coddling of big banks.
Protestors have been present at Zuccotti Park near Wall Street since Sept. 17. The goal is to "flood into lower Manhattan, set up beds, kitchens, peaceful barricades and occupy Wall Street for a few months," according to "Occupy Wall Street," the group behind the show of civil disobedience.
The Wall Street protests started out quietly enough, but gained national media attention when allegations of police brutality surfaced. Several videos on the group's Web site show police officers using pepper spray on passive activists.
In many ways, the protests seem long overdue. Since the economy collapsed in 2008, thousands of protesters have descended on Washington at various times to protest government spending and bailouts. However, the financial firms behind the collapse of the global economy have managed to evade accountability with savvy PR and extensive lobbying efforts.
The Dodd-Frank Financial Reform and Consumer Protection Act did little to rein in large U.S. banks, and many of the largest corporations in America continue to dodge taxes through creative accounting.
Just last month, Rolling Stone reported on malfeasance and corruption at the Securities and Exchange Commission (SEC).
The SEC allegedly destroyed the files of some 18,000 investigations, thus whitewashing the records of countless financial firms and Wall Street players - some of whom played a key role in the financial collapse of 2008.
Protestors in New York carried signs bearing slogans such as: "End Corporate Personhood," and "How Do We End the Deficit? End the War, Tax the Rich."
Many of the protesters are young, not surprisingly. Youth unemployment stands at 18% -- double the national rate. Furthermore, it's the younger generations of America that will suffer the most from cuts to federal spending. Social Security, Medicare and other benefits have all been jeopardized by previous generations, who overspent on tax cuts, entitlements, and wars.
"There's a major divide between the rich and the poor in this country," protestor Alexander Holmes, 26, told the New York Times, summing up his frustration. "One in 10 people are unemployed and my vote is nullified by corporate lobbyists."
News and Related Story Links:
- Money Morning:
The Insidious Truth About Federal Reserve Policy
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