Even the Rich Are Getting Hit

Betting On the Deficit

When fiscal and financial madness is about to come to its inevitable end, the key indicator is debt.  This is true for individuals, businesses, local and national governments.  At the national level the annual deficit is spiraling out of control and those in government in charge of the budget are more clueless than the average first grader.

Normally, the colossal errors made each year by Congressional Budget Office (CBO) forecasting future revenues and outlays does not matter much.  It matters a great deal now.  Below is a chart of the CBO forecast made nearly two years ago:

Please notice the sharp contraction to below $1 trillion for this fiscal year’s (2011) deficit.  This week the CBO has issued a new forecast with its usual big oops!

Instead of plunging below $1 trillion, this fiscal year’s deficit will hit $1.5 trillion.  This is before adding in hundreds of billions of dollars airbrushed away by what would be called accounting fraud if it were done by you and me.

Again, please notice the projections for sub $trillion deficits beginning a couple of years from now and how they stabilize at that lower level.  Anyone want to bet the CBO estimates will prove wildly optimistic?  In this context, Obama’s so-called discretionary spending freeze is worse than a tasteless joke.

We are in the early stages of a seismic shift in our economy and our culture.  Debt is the key indicator to follow for this long term perspective because the way we have been doing business must change at every level or debt will continue ratcheting sharply higher –even as the stock market rises and the government reports the GDP is rising.  As long as the mainstream Keynesian economists are in control, the very policies they prescribe will serve only to make our economy sicker and stifle real growth as opposed to the spending and cyber cash creation induced, speed laced cocaine highs we have experienced in recent decades.  So far there is no evidence of any legislation or executive action that will have any meaningful impact of our trajectory into the abyss.

Even the Rich Are Getting Hit

I grew up in Kings Point, New York which was the super rich tip of the “golden ghetto” of the Great Neck peninsula, which is on the north shore of Long Island just east of the NYC line.  I can therefore tell you from personal knowledge that Nassau County is really dripping in dough.  I do not need official data that it is among the 15 wealthiest counties of the 3100+ counties in the US to know just how reekingly rich this place is.

Nevertheless, Nassau County is in dire straits.  It cannot seem to balance its budget despite having the second highest property taxes of any county in the US.  The folks that live in my old home get skinned for $27,000.  So unbalanced is the budget that New York State took over the county’s finances this week.  This is really scary stuff.  I never would figure Nassau County for a bust.  Now, I have chosen another rich place to hide out, but this latest news truly shakes me up.  If Nassau County can go into the crapper in this economy today, is there anywhere for me (or you) to go when things really get bad in a few years?  Please let me know if you have any suggestions!!!

Punch Line in the Battle Against Inflation

After dropping out of a 24/7 type A workaholic lifestyle 11 years ago I created a new lifestyle that I call “genteel poverty.”  One key development is that I now keep close track of where the money goes, even for food.  I can therefore report that the sale price of butter is up 44% over the last year.  The sale price of eggs has nearly doubled over the last few years.  Yes, these examples are anecdotal and not statistically valid, but I find when these types of observations mount they can be more informative than the nonsense CPI releases each month.

You can look for higher prices across the board soon.  As the cyber cash created by the fed finds its way around the globe, price pressures mount.  For example, China has increased its minimum wage at least twice in the last year.  This, among other cost increases will result in higher prices charged at your local Wal-Mart.  I know because I shop there – a lot.

Speaking of Wal-Mart, I noticed they too participate in a big way in the attempted sleight of hand price increases sweeping the retail industry.  Their Great Value brand of coffee used to come in a 39 ounce container.  That was reduced to 34 ounces and in my recent visit to the store I noticed the size was again reduced, this time to 28 ounces.   On top of that the printing on the can proclaimed “New And Improved.”  The only difference I could detect is that new and improved meant that the contents no longer consisted of 100% Arabica beans as in the past.  I bet this is barely reflected in the CPI guesstimates issued each month.

Now, I really do not want to appear to be picking on Wal-Mart.  I like the place, though I doubt Sam would approve of this tactic.  When the world’s largest retailer joins most everyone else in this practice, you know things are pervasively bad.  Check for yourself and you will find this method of stealth price increase is the rule rather than the exception.

On the subject of inflation, I can’t help but snicker every time I hear Bazooka Ben B. explain how a key function of the Fed is to fight inflation.  Well then, Ben, you can start the fight against inflation by punching yourself in the nose.

Church Takes a Walk

One of the most disturbing things I must endure is some moralist exhorting the suckers to keep paying on their mortgages despite being way upside down because it would be immoral to default.  Now we have the Family Christian Center of Orangeville, California effectively strategically defaulting on a $4.2 million mortgage for its 1000 person sanctuary – just like the big boys do it at the Morgans et. al.  Of course this doesn’t make the headlines it deserves.  When this sort of thing finally does hit the front pages of the lame stream press it will no longer be important news.

This is the first of what I hope will be a long running weekly post (Saturday or Sunday) on anything of interest related to money and, economics.  Topics soon to be tackled will be a review of the findings of the commission investigating the causes of the financial meltdown, crucial demographic developments and whether we are following the Japanese experience.  With any slowdown in breaking news you can expect more general topics like the ethics and morality of a truly free market, fair trade is not free and free trade is (like golf) not fair, book reviews and more.  Your suggestions for topics will also be appreciated.

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