U.S. Hurtles Toward System Failure
By: Jim Willie CB
By: Dr. Jeffrey Lewis
Soros Effect: The Market’s Clear Rejection of Authority
By: Dr. Jeffrey Lewis
By: Dr. Jeffrey Lewis
Market Commentary From Monty Guild
Introducing the Guild Basic Needs IndexTM
Guild Investment Management has long believed that the existing indices used to measure cost of living changes in the United States are inadequate and misleading.
For instance, the widely quoted inflation index — the Consumer Price Index (CPI) — is currently based on data collected from spending surveys given by the U.S. Bureau of Labor Statistics from approximately 14,000 urban families. In addition to basic needs, the CPI includes other expenditures, such as insurance and taxes. However, it also includes discretionary spending items such as personal care services and entertainment purchases such as the latest flat screen televisions and consumer electronics.
Another point about the CPI is that the Bureau of Labor Statistics periodically alters its content, making adjustments to the weighting of the components, and smoothing seasonal patterns. Such tinkering with data, as we have mentioned over the years, usually results in an understatement of the inflation rate and creates an unreliable, misleading cost of living index.
We believe a simpler index is necessary for tracking the price changes of basic needs. No such index exists. So, we are creating one: the Guild Basic Needs IndexTM. It will not reflect spending patterns of one segment of the population. Rather, it will measure the changing prices of essential living expenditures.
Design of the Guild Basic Needs IndexTM
The Guild Basic Needs IndexTM concentrates on four categories of primary and essential living needs. Each category is assigned a specific percentage of the overall index:
1. Food 30%
2. Clothing 10%
3. Shelter 30%
4. Energy 30%
Food, clothing, and shelter are self-explanatory and energy is needed for basic heating, electricity, cooking, and transportation.
The categories and their values within the Guild Basic Needs IndexTMare fixed. There is no seasonal adjusting, smoothing, or replacing of components. Due to the established and essential nature of the four Guild Basic Needs IndexTM categories, they are consistent and not subject to passing fancy.
Life is Getting More Expensive, According to The Guild Basic Needs IndexTM
We compared the CPI data to the Guild Basic Needs IndexTM beginning at the start of this millennium. For the period from January 1, 2000 to April 30, 2011, the U.S. Consumer Price Index is up about 35 percent (2.7 percent per year). Meanwhile, our index shows a rise of about 113 percent (6.9 percent per year) over the same 11 years and four months.
Looking at just the five year period ending April 30, 2011, while the U.S. economy has struggled to grow, the price of basic needs have continued to climb higher. During this time, the cost of shelter has declined — yet the cost of living according to the Guild Basic Needs IndexTM still increased over 28 percent. The CPI over the same time period is up less than 12%. As the prices of the items in the Guild Basic Needs IndexTM change, spending patterns will also have to change—and perhaps someday the CPI data will reflect it.
Summary
The comparisons above illustrate dramatically why we believe the current government-provided inflation data does a poor job of reflecting real cost of living changes.
We will utilize the Guild Basic Needs IndexTM in future newsletters. Sadly, one of the realities the index will document is the declining standard of living in the U.S. as economic growth and wages struggle to keep pace with the rising costs of subsistence living. The Guild Basic Needs IndexTM is uniquely designed to track the changes in price ofbasic necessities that people must be able to afford; it is not meant to represent spending patterns.
Our future letters will provide updates on the Guild Basic Needs IndexTM and how the cost of living in the U.S. responds to global change.
www.GuildInvestment.com
Guild Investment Management has long believed that the existing indices used to measure cost of living changes in the United States are inadequate and misleading.
For instance, the widely quoted inflation index — the Consumer Price Index (CPI) — is currently based on data collected from spending surveys given by the U.S. Bureau of Labor Statistics from approximately 14,000 urban families. In addition to basic needs, the CPI includes other expenditures, such as insurance and taxes. However, it also includes discretionary spending items such as personal care services and entertainment purchases such as the latest flat screen televisions and consumer electronics.
Another point about the CPI is that the Bureau of Labor Statistics periodically alters its content, making adjustments to the weighting of the components, and smoothing seasonal patterns. Such tinkering with data, as we have mentioned over the years, usually results in an understatement of the inflation rate and creates an unreliable, misleading cost of living index.
We believe a simpler index is necessary for tracking the price changes of basic needs. No such index exists. So, we are creating one: the Guild Basic Needs IndexTM. It will not reflect spending patterns of one segment of the population. Rather, it will measure the changing prices of essential living expenditures.
Design of the Guild Basic Needs IndexTM
The Guild Basic Needs IndexTM concentrates on four categories of primary and essential living needs. Each category is assigned a specific percentage of the overall index:
1. Food 30%
2. Clothing 10%
3. Shelter 30%
4. Energy 30%
Food, clothing, and shelter are self-explanatory and energy is needed for basic heating, electricity, cooking, and transportation.
The categories and their values within the Guild Basic Needs IndexTMare fixed. There is no seasonal adjusting, smoothing, or replacing of components. Due to the established and essential nature of the four Guild Basic Needs IndexTM categories, they are consistent and not subject to passing fancy.
Life is Getting More Expensive, According to The Guild Basic Needs IndexTM
We compared the CPI data to the Guild Basic Needs IndexTM beginning at the start of this millennium. For the period from January 1, 2000 to April 30, 2011, the U.S. Consumer Price Index is up about 35 percent (2.7 percent per year). Meanwhile, our index shows a rise of about 113 percent (6.9 percent per year) over the same 11 years and four months.
Looking at just the five year period ending April 30, 2011, while the U.S. economy has struggled to grow, the price of basic needs have continued to climb higher. During this time, the cost of shelter has declined — yet the cost of living according to the Guild Basic Needs IndexTM still increased over 28 percent. The CPI over the same time period is up less than 12%. As the prices of the items in the Guild Basic Needs IndexTM change, spending patterns will also have to change—and perhaps someday the CPI data will reflect it.
Summary
The comparisons above illustrate dramatically why we believe the current government-provided inflation data does a poor job of reflecting real cost of living changes.
We will utilize the Guild Basic Needs IndexTM in future newsletters. Sadly, one of the realities the index will document is the declining standard of living in the U.S. as economic growth and wages struggle to keep pace with the rising costs of subsistence living. The Guild Basic Needs IndexTM is uniquely designed to track the changes in price ofbasic necessities that people must be able to afford; it is not meant to represent spending patterns.
Our future letters will provide updates on the Guild Basic Needs IndexTM and how the cost of living in the U.S. responds to global change.
www.GuildInvestment.com
Jim,
Tonight I watched our local news reporting on the new wireless menu tablets restaurants are introducing. The newscaster stated servers would still be required (it wasn’t mentioned there would no longer be a need for waitresses or waiters though). I believe it was only 2 or 3 weeks ago I noticed the announcement that McDonalds in Europe was introducing the tablet for ordering your Happy Meal. We were at least seeing a rise in employment for seasonal (including restaurant) help until now. It would appear we have come to the beginning of the Jetsons age. I don’t mean just the technology part but the part where the Jetson Law requires a guy to sit at the computer and is required to punch a button for the heck of it so he has a job.
I think it is time the Jetson Law be implemented. The banks who created the current financial crisis by milking their customers beyond what they were able to manage would be a good place to start, with 1 employee required to be maintained for every $100,000 of profit (customer service would be nice).
How else will we keep going? Serious brainstorming is required!
Best wishes,
CIGA Fred W
What are the chances the U.S. economy could eventually trigger violence in our country? Posted: 05:00 PM ET
June 8, 2011
FROM CNN’s Jack Cafferty:
For the first time maybe since the Vietnam War or certainly since the civil rights movement, there are some darkening storm clouds on the civility horizon. A growing number of voices are continuing to suggest that if this economy doesn’t turn around, and people can’t start feeling optimistic about their futures again, we could be headed for some ugly scenarios. A new CNN poll says 48 percent of Americans think the country is headed for another Great Depression in the next twelve months. That is a stunning number.
James Carville, who in 1992 told Bill Clinton, "It’s the economy stupid," says the current economy is so bad, there is a heightened risk of civil unrest. And unless things start changing for the better, it’s a distinct possibility.
Our country is bankrupt and our government refuses to do anything about it. Unemployment is stuck above 9 percent. Millions of Americans are out of work, some for a number of years now. The value of peoples’ homes is sinking below the break-even line. In the most recent jobs report, more than half of the private sector jobs that were added were at McDonald’s.
More…
Tonight I watched our local news reporting on the new wireless menu tablets restaurants are introducing. The newscaster stated servers would still be required (it wasn’t mentioned there would no longer be a need for waitresses or waiters though). I believe it was only 2 or 3 weeks ago I noticed the announcement that McDonalds in Europe was introducing the tablet for ordering your Happy Meal. We were at least seeing a rise in employment for seasonal (including restaurant) help until now. It would appear we have come to the beginning of the Jetsons age. I don’t mean just the technology part but the part where the Jetson Law requires a guy to sit at the computer and is required to punch a button for the heck of it so he has a job.
I think it is time the Jetson Law be implemented. The banks who created the current financial crisis by milking their customers beyond what they were able to manage would be a good place to start, with 1 employee required to be maintained for every $100,000 of profit (customer service would be nice).
How else will we keep going? Serious brainstorming is required!
Best wishes,
CIGA Fred W
What are the chances the U.S. economy could eventually trigger violence in our country? Posted: 05:00 PM ET
June 8, 2011
FROM CNN’s Jack Cafferty:
For the first time maybe since the Vietnam War or certainly since the civil rights movement, there are some darkening storm clouds on the civility horizon. A growing number of voices are continuing to suggest that if this economy doesn’t turn around, and people can’t start feeling optimistic about their futures again, we could be headed for some ugly scenarios. A new CNN poll says 48 percent of Americans think the country is headed for another Great Depression in the next twelve months. That is a stunning number.
James Carville, who in 1992 told Bill Clinton, "It’s the economy stupid," says the current economy is so bad, there is a heightened risk of civil unrest. And unless things start changing for the better, it’s a distinct possibility.
Our country is bankrupt and our government refuses to do anything about it. Unemployment is stuck above 9 percent. Millions of Americans are out of work, some for a number of years now. The value of peoples’ homes is sinking below the break-even line. In the most recent jobs report, more than half of the private sector jobs that were added were at McDonald’s.
More…
China's SAFE Warns Excessive Dollar Holdings Risky, Promptly Retracts Statement
Submitted by Tyler Durden on 06/08/2011 23:36 -0400For the nth time, China let loose that "excessive" holdings of US dollars are risky because "Washington could pursue a policy to weaken the dollar, a senior currency regulator said in comments published on a website that briefly pushed the dollar lower." Oddly this time, the statement which came from Guan Tao of China's State Administration of Foreign Exchange (SAFE) which is the entity responsible for managing the country's $3+ trillion in USD FX holdings, was promptly retracted, following an announcement by Tao to Reuters "that the comments had been made in private academic discussions and represented his personal view only." In other words this is an identical episode to the one when the BOC's Mark Carney told "a private circle" that the US is going to hell in a handbasket. While the announcement briefly pushed the dollar lower, is the take home message that everyone is secretly hating America, while in public keeping a rosy appearance? The answer, of course, is a resounding yes.
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