While housing falls, other prices rise — why?
|July 29, 2008||Posted by Jeffery J. Smith under Progress Report, The Progress Report|
While housing falls, other prices rise — why?
Inflation, worse than admitted, not fixable by conventional means
To show that economy is still on the track laid out by the recurring 18-year land price cycle, we trim, blend, append several 2008 articles of Julys last two weeks. The economy still has not hit bottom; it must get worse yet before it gets better. The working-class have been beset by layoffs and hair-trigger tempers at home. Now middle-class people can not retire from work nor sleep at night. Requests for therapists increased 15% to 20% in the past three months, primarily driven by concerns about the financial situation. (USA Today, July 23)
Billionaire magazine publisher Steve Forbes blames a weak dollar for 80% of gasoline price increases, which not only makes life tough on commuters and others dependent on driving but may also drive some auto companies and airlines out of business. (MoneyNews, July 16)
Consumer prices in June surged 1.1 %, their biggest upward jump in 17 years. That fits roughly into the 18-year land price cycle which foretold the present unpleasantries. As of June, consumer prices have risen officially 4.9% in the past year, the highest 12-month inflation rate since 1991.
Sales of previously owned homes fell 2.6% from May to June. That was 15.5% below the level for 2007 June. The homes now on the market total an 11-month supply, nearly double the norm, which will keep pressure on prices. The median price for June declined 6.1% from a year ago to $215,100.
Last month’s slump in the Dow-Jones Industrial Average was the biggest June slide since the early depression year of 1930. From a 2000 peak of 11,700, the Dow has dropped 500-700 points. Allowing for official inflation, the decline was near 25%. When Washington understates inflation by one percent, then gross domestic product has been overstated by that same amount. If you calculate CPI as the government would have calculated it in 1980, it would be nearly 12% today. (Kevin Phillips, Huffington Post, July 17)
One big source of the excess cash powering the present price inflation are the official bailouts of banks and brokers whom officials describe as too big to let fail. What about the less well off who lack the political clout to be allowed to escape market discipline? Theyre being foreclosed on their homes.
Another source of unnecessary new notes is deficit spending. The federal government spends too much on the extravagant welfare of insiders. For instance, the GAO reports that over half of the spare parts currently on order for the Air Force — some $235 million worth — are already marked for disposal; our government is buying hundreds of millions of dollars worth of military hardware just to throw it away!
Government spending, in the words of the US Constitution, should promote the general welfare. Instead of lavish funds on the military and bail out the rich, government should always be sharing out societys surplus. Then, if there were to be any fallout from big investors going bankrupt, innocent bystanders would not suffer.
Our social surplus is the socially generated values of sites, resources, EM spectrum, and the rest of nature. By collecting the values of land and the rest, that makes locations et al unattractive to speculators; they would no longer have any reason to bid up their price. Uninflated natural assets are likely to prevent any bubble and subsequent bursting.
If we used surplus public revenue to fund a dividend to the citizenry, everybody would be cushioned; thered be no excuse to enrich contractors or bail out banks. Thered be no excuse to deficit spend. Without new money issued more than new goods and services produced, thered be no inflation.
To paraphrase an old politico, people get the economy they deserve. Eventho the little people outnumber the big ones, they still vote just the way the big ones prefer — against their own self-interests — then feel so anxious they make an appointment with a shrink.
Most critics absolve voters and blame corporations and markets. Such pundits urge government to intervene on behalf of the masses and urge people to change their ways and become more community spirited. They miss fundamental reform: quit corporate welfare, quit taxing earnings, recover all rents, and disburse them in ways to benefit everyone.
Jeffery J. Smith runs the Forum on Geonomics.
The Panic of 1907
Leaders Need to Show Fiscal Restraint
Wasting Billions on Military Spending
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