Ironic

[altivo]

So while Congress are making idiots and fools of themselves squabbling and refusing to make a deal over the debt ceiling, the economic analysts have come to the conclusion that I reached quite some time ago. There is no recovery after all. We remain on the brink of a serious recession, and economic growth has, if anything, just barely kept pace with population growth in the last 12 months (this amounts to no growth at all.)

Any number of experts, both conservative and progressive, in the financial industry and academia, have been announcing today that this is NOT the time to make big cuts in federal spending, at the risk of triggering another economic slide. While the deficit needs to be addressed, it cannot be done all at once, and must be approached in a long term plan.

I have said this again and again since at least 2008. Of course, why should anyone listen to me? I'm no one. I was predicting the collapse of the housing bubble more than a year before it started to become obvious too. Oh well.

Get ready for more inflation, and less income folks. This is exactly what happened in the Great Depression too. When Roosevelt gave in to the conservatives and agreed to cut federal spending, the economy collapsed for a second time.

So I did my part today. I ordered two plushies. ;p Well, it's not much, but I don't have much either.

Comments

[moonhare]

So I did my part today. I ordered two plushies.

A selfless patriot!

[altivo]

Well, it wasn't unbridled Jingoism at least. Big Zoo is having a sale and free shipping on the small 12" Cuddlekins, so I got an okapi and a snowshoe hare. ;D (Sale ends today I think.)

[avon_deer]

While the deficit needs to be addressed,

Dare I suggest a cut in military spending? Or is that verboten? ;)

[altivo]

Certainly not verboten and I agree it would be more than appropriate. Military spending is one of the GOP sacred cows, of course. They'd rather kill social programs and increase the military budget.

In fact, when Republicans control both Congress and the Executive, as they did under Reagan and both Bush presidencies, military spending always increases significantly. The Bush deficit consisted largely of military expenditures and tax cutting. Clinton left office with an almost balanced budget.

Of course, the GOP is blind to its own spending and blames the entire federal budget on the Democrats. That has been their policy for my entire lifetime. In fact, they love to refer to "tax and spend Democrats" which at least seems rational to me. The GOP ought to be called "spend more than you tax Republicans" because that's just what they have done since at least 1980.

[davv]

I think the well-known term is "borrow and spend" :)

[altivo]

I prefer to get right to the point and use the terms "ideologues and idiots."

[lhexa]

It all sounds correct except for the bit about higher inflation. Interest rates have been stupidly low throughout the recession, and that doesn't look likely to change. I recall a chart from economics class meant to display that even healthy economies had to balance two evils, unemployment and inflation, and it's clear which of these two evils we've chosen.

On the plus side, developing countries never got the word that Keynesian economics was unfashionable, and their recoveries have been stronger than those in Europe and the U.S. Ten percent annual growth in India and China is pretty impressive. Considering the huge wealth disparity between first- and third-world nations is largely responsible for the shitty conditions of the latter, I'm glad to see this gap narrowing.

[altivo]

Actually the "experts" are predicting a sudden increase in interest rates if there's an actual default, or even just if the US credit rating drops from AAA to AA.

Doesn't make sense to me. If the government's ability to borrow goes away, then that reduces the competition for others who are competing for what's available.

Anyway, inflation is real and it is heating up. Just because Washington doctors the indexes to hide or reduce the reports doesn't mean it isn't happening. Food prices are up as much as 20% from this time a year ago. Health care is up even more. The value of the dollar against other currencies is declining, which always indicates an inflationary trend. They "weight" the index to hide these things, changing the weights whenever they want to make things look better. Fuel up? Lower the importance of fuel. Food up? Lower the importance of food. Real estate down? Great, increase the weight of real estate.

Unfortunately, most of us buy food daily or weekly, but only buy houses or cars very occasionally. The price of a new sofa or carpet matters a lot less to me than the price of milk, flour, and eggs. I also think they miss a new trick that is spreading in the food market: shrink the package rather than raise the price. Coffee beans that were $6 per pound two years ago now come in a 12 or 14 ounce bag for $9. All sorts of things have shrunken from pound packaging to 14 ounces in the past two years. Ice cream has dropped from 64 ounce containers to 54, then 48, and now 36 ounces for the same price. Sugar used to come in 5 pound packages but now comes in 4 pounds. I'm sure flour will do the same any time now. The prices have not dropped accordingly. That's inflation.

[lhexa]

My comment did assume an averted debt crisis. I hope that doesn't turn out to be naive. :P

My expertise is limited, but the best source of information I can find is the Consumer Price Index Summary for last month. Inflation with food and energy was 3.6% over the last year, and 1.6% without -- and from what I understand, the latter measure is used because food and energy prices fluctuate a lot, not because it looks better. Anyway, my limited knowledge leaves me unable to argue in much detail.

But, there's something more problematic here. You're rejecting the only sources of objective information at hand, and rejecting them in a way that doesn't seem reasonable. If a climate change denier made the argument, "You can't trust what the experts say because they all have an agenda, and besides, I've got some anecdotes and experiences that go against what they say," I would be rightly suspicious, but that's the form of the argument you just made. Now, you may well be right about inflation, but it's not worthwhile to be right on the basis of flawed reasoning.

[altivo]

My reasoning is not purely subjective. I'm basing it on our own household accounts, which happen to be unusually detailed and go back almost a decade. I can tell you that we are buying less meat than ever before, and what we do buy is not of the same quality, for instance. We have shifted from purchasing most food items at the most convenient location to spreading those purchases over five different stores in order to get the lowest prices where possible. Our actual eating habits have not changed, we go to restaurants rarely when compared to most Americans, and even so, the cost increase since 2007 comes out to 15 or 20% each year. Restaurant food has risen more steeply than that.

Energy costs are rising at an alarming rate, even though we have fuel-efficient vehicles and limit our driving. We do not use LP fuel to heat with in winter, but instead have a geothermal system and a woodstove.

Health insurance cost (counting only the portion that I pay out of my own pocket) has increased by more than ten percent every year in the last five years. My pay has risen by less than 2% on the average for each of those years. In fact, the insurance costs and increases in various tax rates have caused my take-home pay to shrink in each of the last two years, even with the latest round of "emergency" tax cuts that were supposed to stimulate the economy. All those did was help feed the insurance industry, and move federal taxes to the state and local level.

The assessed valuation of our house and land (which is a very modest place in the end) has been reduced since the housing bubble burst, but our real estate taxes have increased significantly without respect to that. The number of mortgage defaults and distress sales in this area remains the same as it was three or four years ago, and that is abnormally high compared to what it was eight years ago. This is verified both by figures from the county clerk's office and by the simple expedient of counting the number of real estate foreclosure notices in the local newspapers.

I'm not making these things up. They are measured facts. The pundits in Washington and New York have been declaring that the recession is over and recovery underway for a year now, but as of Friday a lot of them reversed that decision and admitted that there really has been no recovery yet and the US economy is balanced on the edge of what could be a very steep precipice.

[lhexa]

Hmm, I'll assume you have come to an accurate assessment of your own expenses, but remember that one household's accounts do not provide strong evidence about inflation, no matter how well kept. To go on to some specific points: your rising food prices might be a local thing; yep, energy costs are going way up, although that reversed a bit the last two months, according to the previously-linked report; health insurance costs are notoriously fucked up in the US, but from the report it seems that health services, not insurance, are factored into inflation rate (and hopefully the growth in insurance costs will slow once all the health care bill kicks into effect); and dropping house prices are deflationary, not inflationary. I wouldn't argue that our economy is in recovery, just that inflation is not a problem, and in a discussion over that personal experience is unreliable, just like local weather is unreliable in a discussion about climate change.

Also adding to my will to be contentious is the fact that inflation, like Social Security troubles or the deficit, is something whose dangers DC pundits routinely exaggerate.

[altivo]

Inflation is always a serious problem if incomes are not rising. And they aren't.

The rate at which the Fed has been printing funny money is bound to be reflected as inflation, just give it some time.