Food Stamp Nation

Details

Published on Friday, 28 September 2012 12:18

Written by Bill Bonner, Founder and President, Agora Inc.

Hits: 995

Whoa... a lot to talk about. Like, the end of the world as we know it.

Let's begin with comedy. We'll come back to tragedy later.

On Wednesday, Argentine president Cristina Fernandez de Kirchner was speaking at our alma mater, Georgetown University. She was asked about the funny numbers Argentina uses to report the rate of inflation there.

Her bureaucrats put the CPI at less than 10%. Independent analysts and housewives know it is a lie. Prices are rising at about 25% per year.

At a press conference, Fernandez de Kirchner defended herself artfully: "Really, do you think consumer prices are only going up at a 2% rate in the U.S.?"

Bingo. They all lie.

Two percent is what the Bureau of Labor Statistics says. But the quants are massaging the numbers so hard they're breaking their backs.

The real rate is probably closer to 5%. Maybe 10%. Who knows?

Made-up Numbers

You might say it depends on how you mis-measure it. And it is in the interest of the government to put it on the low side. That way, you don't have to adjust your inflation-adjusted bonds quite as much. Or your Social Security payments.

Which just goes to show how fishy the entire system is. Fernandez de Kirchner is right. All the numbers are made up. So you may as well make them up to suit you. Lower the inflation reading, and you make the rest of your statistics look better too. Like your GDP growth. And productivity. And stock market returns.

If we tell you that a stock rose from $10 to $100 over a 10-year period, you will think the stock has been a great success. But if inflation has been 10% per year over the same time, the success looks a lot more impressive.

Every investor has an idea of how much he has made. And none know for sure. Because, if you calculated inflation the way they did in 1980 (the system has been modified twice since), you'd have an inflation rate today of about 9%. And if that is true, the stock market gains from 1980-2012 practically disappear.

Naturally, the authorities don't want word to get out that their economic management has been a total failure. So they massage the numbers... with a steamroller.

The Ponzi State

Trouble is, people are catching on. And this is where the tragedy begins. The welfare state -- the world we have known all our lives -- is, fundamentally, a Ponzi scheme.

The average voter hoped to get more out of the system than he paid in. That's the unwritten "social contract." The masses give their votes to the politicians who promise to give them more than they put in. And until now it worked. Bigger, richer generations -- and debt -- allowed the politicians to pay off.

But now, the next generation is smaller... and poorer. They don't understand what is going on. They don't know which politicians are to blame. But when they get hot about something, they cause trouble.

In Greece, they're battling police in the streets. The New York Times:

The proposed cuts in Greece have ignited new anger, with many talking openly of increased impoverishment as the nation grapples with a third round of austerity measures in three years. The protests in Athens were peaceful in the morning, as civil servants, teachers, medical personnel, bank employees and lawyers made their way to the city center. A police spokeswoman put the turnout at 35,000-40,000 people -- modest by Greek standards.

But violence broke out shortly after 1 p.m., as a group of protesters wearing black masks hurled gasoline bombs at police officers on Vasilissis Sofias, a wide avenue abutting Parliament, sending bursts of flame and black smoke into the air. Firebombs were also thrown at the Finance Ministry and into the lush National Gardens next to Parliament.

Officers wielding batons responded with bursts of tear gas, scattering demonstrators and tourists as police helicopters circled overhead and flares exploded. Many cursed the police with cries of "traitors" and "Merkel's pigs" -- a reference to Chancellor Angela Merkel of Germany, the country widely blamed for insisting on strong austerity measures in exchange for aid.

Just a problem in Greece?

Nope, it's all over Europe. The New York Times continues...

On Tuesday, in Spain, tens of thousands of demonstrators besieged Parliament to protest austerity measures planned by Mr. Rajoy. Last week, more than half a million people marched in cities across Portugal to protest an increase in social security contributions, and 1 million marched in Barcelona, calling for Catalan independence.

Not Just a Problem for Other People

Well, it's a problem for other people. At least Americans don't have any reason to take to the streets.

Or do they? From Investor's Business Daily:

In another sign that the economic recovery under President Obama is not producing gains for average Americans, median household incomes fell 1.1% in August to $50,678, according to a report released Tuesday by Sentier Research.

Since the economic recovery started in June 2009, household incomes are down 5.7%, the Sentier data show, and they are down more than 8% since Obama took office.

"Even though we are technically in an economic recovery, real median annual household income is having a difficult time maintaining its present level, much less recovering," said Sentier co-founder and former Census Bureau official Gordon Green.

Earlier this month, the Census Bureau released its annual report, showing that the number of people in poverty was nearly 3 million higher in 2011 than in 2009, an increase of 6%.

That report also found that average incomes for middle- and lower-income households fell in 2011 after adjusting for inflation. They rose only for the wealthiest 20% of households.

Other bad signs: The number of people on food stamps is up more than 220,000 in the first half of this year and up almost 12 million -- or 34% -- from June 2009 to June 2012.

The number of people in the labor force has fallen more than half a million in the past two months, with the participation rate down to 63.5%, a rate not seen in the past 30 years, according to the Bureau of Labor Statistics.

Almost 83,000 signed up for federal disability benefits in September, and more than 736,000 have joined in the first nine months of this year, according to the Social Security Administration. That's a higher enrollment rate than the first nine months of the Obama presidency.

And much of the disappointment falls on the people who are most apt to cause trouble: young people. This from Bloomberg:

The number of 26-year-olds living with parents has jumped almost 46% since 2007, according to Census Bureau data compiled by the University of Minnesota Population Center. Last year, the number of 18- to 30-year-olds living with their parents grew to 20.7 million, a 3.9% gain from 2010.

The figures underscore the difficulty that millions of young people have had in finding jobs and starting careers in the U.S. following the longest recession since the Great Depression. About a quarter of American adults between the ages of 18 and 30 now live with parents, while intergenerational households have reached the highest level in more than 50 years.

The number of unemployed Americans has surged 60%, to about 12.5 million, from 7.82 million in the first quarter of 2008, according to data compiled by Bloomberg. The nation's jobless rate, which peaked at 10% in October 2009, was 8.1% in August, compared with 5.1% in March 2008.

Editor's Note: Invest alongside America's wealthiest 1%. For years, the America's wealthiest 1% has been quietly investing in "forbidden assets"... assets unavailable to most people. Now, thanks to a controversial new "Shadow Fund"... you can tap these five taboo opportunities for a real shot at millionaire status... Follow this link for all the details.