"May You Live in Interesting Times"
Kevin DeMeritt
President, Lear Financial
You've undoubtedly heard the "Chinese" saying, "May you live in interesting times." You may have even been told it a time or two. Well, in the unlikely event you don't already know, it was never intended as a well-meaning wish.
It was always intended as a curse.
Actually, if you try tracing the phrase back to its Chinese roots, you'll probably end up scratching your head. Researcher Steve DeLong says it can't be done. The closest he can come to it is the authentic Chinese proverb, "It is better to be a dog in a peaceful time than be a man in a chaotic period."
Hmmm. Not quite the same impact. The truth is, DeLong thinks an American science fiction writer actually created the popular curse in one of his 1950 novels. That being the case, it does, at least, illustrate an important point:
We, Americans, sometimes tend to spin the truth.
But we don't spin it a fraction as much as our government or media. These institutions spin truth like one of those old fashioned tops many of us had as kids.
So what is the truth?
The truth, generally speaking, is that we are living in interesting times.
Way too interesting, in fact. So let's take a step back here and look at some of these times of ours in as spin-free a way as we can.
"Interesting" Event#1/ Raging Inflation, Understated CPI
Talk about spinning statistics, Washington is notorious for pegging inflation at a fraction of its actual rate.
Take, for instance, the alarming fact that gas has risen over 50 percent in the last twelve months, rivaling only that incredibly inflationary year of 1980. Yet the core CPI for September is recorded at a mere .01 percent rise. Disconnect going on somewhere? You betcha.
The core CPI? Yeah, that's Washington's index of inflation excluding food and energy. And all things considered, it's a reasonable statistic. After all, we exclude food and energy from our household budgets, don't we?
The core CPI is like saying, "I'm a model citizen. If you ignore my conviction for bank robbery. And my prison sentence for murder."
Says analyst John Mauldin about this pie-in-the-sky statistic: "Consumers confront food and energy prices nearly every day of the week. When consumers worry about inflation, food and energy are likely to be at the top of their list, matched perhaps only by the monthly mortgage payments or rent to the landlord."
The CPI Emperor Has No Clothes
No self-respecting economists-at least if they buy their own gas and shop for their own food-could say, for example, that we had zero inflation last May (as the CPI dutifully reported).
So what's the real story here? How could the CPI be that far off?
From Washington's standpoint, there are any number of inviting reasons for a rock bottom, if not totally inaccurate, Consumer Price Index. And one of the biggest has to do with the government's inflation-based entitlement programs.
Consider the fact that Social Security, Medicare and government pensions are all indexed to inflation. A consistently rising inflation, therefore, means higher government entitlement costs. Which means higher government deficits, a lower dollar, and shrinking global prestige.
Something had to be done. If not about inflation, than at least about the indicator of inflation. According to financial writer, Jim Puplava; "The solution was to change the way inflation is measured. Media reports began to surface on how CPI was overstated. The real inflation rate was actually much lower according to government and Federal Reserve officials. The Senate Finance Committee appointed the Boskin Commission to study the problem and find a solution."
That 1996 commission did just that, making the American people swallow the outlandish premise that inflation was simply getting measured wrong. To fix the problem, they concocted a Byzantine formula for getting it measured right. The result is "the mish mash we have today, which bears no resemblance to reality," Puplava concludes.
CPI or Core CPI-Whichever Sounds Better
In his excellent article, The Core Rate, Puplava also talks about Washington's sleight of hand in quoting either the core CPI rate or just the CPI itself. When inflation is high, the core rate is trotted out, since it excludes food and energy.
When inflation is on the low side, expect to hear about the more traditional, yet still hopelessly flawed, CPI.
So what is today's real inflation? Certainly higher than is being reported. Some analysts fall on the side of editor Joel Skousen, who wrote, "…the real rate of price inflation at the retail level is around 10%. The more accurate Producer's Price Index (PPI) is now approaching a whopping 24% rate per annum…"
If you take the blinders off, you'll have no trouble seeing our out-of-control inflation.
"Interesting" Event#2/ Iran's Petroeuro Oil Bourse and Nuclear Threat
What is an oil bourse? It's like a stock exchange for oil. There are two major ones in the world already: London's International Petroleum Exchange (IPE) and the New York Mercantile Exchange (NYMEX).
Along with Iranian plans to start a third oil bourse in early 2006, what may be most disturbing to the petrodollar establishment is the likely intention of Iran to also, according to William Clark, "usher in a fourth crude oil marker - denominated in the euro currency. From a purely economic and monetary perspective, a petroeuro system is a logical development given that the European Union imports more oil from OPEC producers than does the U.S."
Clark, who has an upcoming book on the subject, Petrodollar Warfare, went on to say…
"One of the Federal Reserves' nightmares may begin to unfold in 2005 or 2006, when it appears international buyers will have a choice of buying a barrel of oil for $50 dollars on the NYMEX and IPR…or purchase a barrel of oil for E37 - E40 (37 to 40 euros) via the Iranian Bourse.
"A successful Iranian Bourse would solidify the petroeuro as an alternative oil-transaction currency, and thereby end the petrodollar's status as the monopoly currency."
Does that mean Iran will be made an example, too? Financial writer Joshua Frank had this to say: "Last week in London, US Ambassador John Bolton expressed his disappointment with the UN Security Council for their "failure" in dealing with Iran's alleged nuclear threat. Bolton all but threatened military action, deliberately implying that the US government would take matters into their own hands if the UN wouldn't."
Nuclear or currency threat, serous problems with Iran seem more in our future than in our past.
"Interesting" Event#3/ Real Estate Already on the Downside?
In a recent edition of the mainstream financial magazine, "Money," there appeared a clear sign of the top-heavy real estate market. "Tom Barrack, arguably the world's greatest real estate investor," the article said, "is methodically selling off his U.S. real estate holdings as prices drive the market to nosebleed levels."
Barrack describes one of the telltale signs of the end of this bull market (or any bull market, for that matter) when he says that "amateurs" are blanketing the real estate investment field, making it harder to find real deals. "The amateurs are going to get trampled, he explains, taking seasoned [pros], who should get off the turf, down with them."
According to Gary North, "Barrack sees signs of the tech bubble mentality in the U.S. real estate market. Too much capital is chasing real estate, he complains, with hedge funds, private-equity groups, and rich investors all bidding up the same properties."
Sure, it may come down to rising interest rates. But Barrack also sees another pin pricking the real estate balloon-higher building product prices. "Construction costs have spiked 20 percent in the past nine months," he said, obviously paying no attention whatsoever to the politically correct CPI.
And when the balloon bursts?
"The result will be a crack, then a crash. Bonds sold with an assumed government guarantee will go bad, at which point there's no bottom," warns business journalist, Dana Blankenhorn.
"The stock market crash did little lasting damage to the U.S. economy because the real estate boom was waiting to replace it," he continued. "…once the (real estate) bubble bursts, all the other debts and deficits plaguing the U.S.-imports and government borrowing and all the rest-all those problems will hit at once. It's going to be the Perfect Economic Storm."
No spin there.
Yes, we do live in interesting times. No matter who invented the phrase. As for me, I'd prefer making it far less interesting-as less interesting as possible, in fact-with some timely gold ownership.
Kevin DeMeritt
www.goldcentral.com
October 31, 2005 |
