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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: CalculatedRisk who wrote (35888)	8/25/2005 3:29:22 AM
From: Chispas	Read Replies (1) \| Respond to of 116555

Crudele - "It's time to cheat old people again" . This little scheme happens every year. The increase in payments that Social Security recipients will receive in January is based on the cumulative rise in consumer prices in July, August and September. And each year the government finagles the numbers so that the old folks get less of a raise than they should. I've written about this before. (And I'll continue to write about it until — at the very least — the AARP wakes up and does something about it.) Over the years, Washington has come up with some truly novel approaches to damping consumer inflation based on bona fide academic theories. By this I mean some learned professor — who probably never sets foot in an actual store — finds a way to downplay price increases to aid some political cause. The numbers also don't reflect the true price of tuition hikes, or medical costs. And the housing bubble you've heard so much about doesn't exist in the consumer inflation figures. But this year there's a new wrinkle: the gasoline price increases that we've all felt in real life don't seem to be making it into the calculation fast enough to affect Social Security payments. Not surprised? Well, neither am I. Here's why I think there's something hokey about gasoline prices. In its consumer price index calculations, the government said gasoline prices fell a seasonally adjusted 4.4 percent from April to May, declined 1.2 percent from May to June and were up a large 6.1 percent in the June to July period. The total increase over that three-month period was just 0.5 percent. Not bad! I almost want to go out and fill up my tank. But there is another series of government statistics (which, of course, isn't used in calculating Social Security increases) that don't jibe with the CPI tally. The U.S. Census Bureau says that sales at gasoline stations rose from $30.53 billion in April to almost $32 billion in July. That's a 4.5 percent increase. The number of gallons purchased doesn't change radically — especially after seasonal adjustments — so that extra revenue must be coming from price increases. So, one government number says prices rose by something like 4.5 percent while the other figure (which is part of the Social Security calculation) gained just 0.5 percent over the same period. What's up? It is possible that gasoline prices will be up big when the August and September CPI numbers eventually come out. And it is possible that people who receive Social Security payments — and anyone else who counts on cost-of-living adjustments — will come out whole. But don't bet on it. Last year's 2.7 percent hike in Social Security payments was the largest since 2000. It's too early to tell what this year's hike will be, but it's going to be higher than last year. The apparent discrepancy in the price increase for gasoline alone will probably trim 0.1 percent off the increase in SS payments. That's only about a buck out of a recipient's monthly check, but it does save the government $500 million a year. But once you include all the other odd ways consumer inflation is being calculated these days, that 0.1 percent fleecing grows significantly. It's time for honest accounting. * Crude oil inventories rose sharply last week but gasoline stockpiles fell. So, naturally, speculators who want to keep prices at unconscionable levels focused only on the gas decline. But speculators always have a backup plan to keep prices up just in case the first scare doesn't work. This is what I think the speculators should do: get themselves good legal representation, because if the economy collapses because of these games, the speculators will find themselves grilled before court and Congress. >>>>>>> Registration Required: nypost.com