Money Matters Update September 3, 2013 READ!

Inflation eventually adds to your currency!

Zeros that is!

Marc's Notes:

I knew that the government sponsored Bureau of Labor Statistics (BLS) skewed their inflation data to reflect much lower inflation than the reality you and I see around us but it dawned on me while on vacation last week there is another inflationary machination that’s taking place everywhere around us yet the average Joe Schmoe fails to connect the dots to that and the ever increasing inflation in our economy.

The BLS s uses a variety of what they call “adjustments” to more accurately reflect price movements but their adjustments tend to reflect what the government wants us to believe rather then what you and I actually see on the street and in the supermarkets.

A host of methodologies (which would make your hair curl if you knew them all) paint a picture of benign inflation and we even hear occasional claims of just the opposite; deflation or falling prices.

Everyone knows few prices are really falling. What most of us do see is persistent inflation eating away at our pocket books at an alarming rate.

It’s the reason many people can’t make ends meet and why it’s getting harder each and each day to pay our bills.

My most recent epiphany came during my vacation last week where a litany of surcharges and taxes increased what I thought was pretty reasonable priced vacation into quite an expensive one. A virtual mountain of fees and surcharges were on almost every bill I paid, whether it was for lodging, entertainment or basic necessities.

Fuel surcharges appeared on my transportation bills and the same appeared on a snorkeling trip for the boat. 4 different taxes appeared on my rental car bill and I paid even more money to have my luggage on my plane. Hotel taxes were ludicrous and those resort fees were everywhere. Taxes on meals to phone calls further eroded my wallets contents and by the time I was thru, the vacation ran me a heck of a lot more money then the Expedia summary totaled up months ago when I booked everything.

The avalanche of taxes, fees, surcharges and what have you “add-ons” added more than 20 % to everything I bought yet the Bureau of Labor statistics counts none of these additional charges as inflationary.

They’re add-ons, not real price increases they tell us, but they take my money just the same way as an inflationary price increase would.

I look around at my everyday bills and see the same types of charges and taxes almost everywhere. If I ship something by truck, a fuel surcharge appears along with transportation taxes. My cell phone bill is riddled with fees as is almost every other utility bill I pay. I now pay a fire protection tax of over $100.00 every year which is outside of my normal property bill and anytime I want to build something I pay the city more fees which add to the cost of skyrocketing materials and a subsequently higher sales tax charge. Gas is over 4 bucks a gallon again and a buck or more of that is just another tax.

The fact is the world’s corporations and governments have found a way around the BLS inflation figures.

They now just add a fee, tax or surcharge and conveniently most of those charges don’t fit into a BLS column anywhere when it comes to its inflation calculator.

And that’s why there is no inflation the way they figure it in Washington.

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What helped rescue the American auto manufacturer after the 2008/09 economic crisis?

Well, mostly you, the American taxpayer.

Thru decades of bad management, little foresight into what car buyers wanted and over zealous unions pushing for more and more worker concessions, it only took the push of an economic crisis to expose which car companies were swimming naked when the economic tides went out.

General Motors was certainly the sicker of the 3, with Chrysler right behind them, both would probable have folded up their tents had not the US government spent your money to rescue the behemoths.

Fearing GM and Chrysler would go under, and a valid concern it was, the US government took to assuming every one of their car warranties so these companies could continue to sell their cars.

Fear of a bankruptcy and therefore no warranty to back their cars, consumers would have stop buying cars from both of these companies. The government program for backing warranties was complicated but in one sentence you get the picture;

“The U.S. Treasury will work with the auto companies to back-stop your GM and Chrysler warrantees, and will commit to honoring that warrantee in the event that the manufacturer cannot”.

That’s a taxpayer back stop no matter how you look at it. Government backstopping didn’t stop there however. About 24 billion dollars in taxpayer funds went to these private for profit companies in the months to follow:

  • $17.4 billion for General Motors and Chrysler.
  • $6 billion for GMAC.
  • $1.5 billion for Chrysler Financial.

The auto companies did however get to keep all their profits throughout the years but apparently didn’t save much. Even more in bond support and outright dirt cheap loans further padded the coffers of the American auto companies all because these companies were not strong enough to weather a hiccup in their revenue streams because of bad management over many, many years.

Once car sales plummeted by about a third during the real estate bust, GM and Chrysler started to gasp and eagerly gulped down your tax money to keep their bloated carcasses alive. The government made them promise to streamline their products and strive for more fuel efficient cars, something these companies should have been doing anyway, but that sounded good so that’s what was spoon-fed to the public as some bullcrap condition.

Now that these companies are alive and kicking, the Feds continue to help them limp along with ultra low interest rates to fuel car loans and the banking sector is now packaging up auto loans into bundles much like they did with real estate loans a few years back. 

In conclusion, many Americans support the government bailouts of the auto companies but truthfully folks, that’s not what America is supposed to be about. It’s a free country, and that means if you make mistakes, you are free to go broke as well.

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Money Matters airs this Thursday at noon, Pacific Standard Time, and available worldwide on the Web at KVMR.ORG.

All for now,

Marc

 

PS: Come see me at the Celtic! Buy some raffle tickets and say hello!

Email me for ticket infomation!