1.3% Growth (Minus Cost Increases)

February 20, 2008 at 12:53 am (Inflation)

I’ve wanted to start this blog for several months now, and I feel a bit guilty for not starting sooner.  I debated creating my own template, getting another URL, and hosting it myself — all which led to ultimate procrastination.

I shouldn’t feel guilty, however, because now I don’t need to spend so much time defending my position that the economy in this country is going to Hell in a handbasket overnight despite the government’s upbeat talking points.  That’s because the government has stopped disagreeing with naysayers like myself.  Now it’s down to the nuances of the English language.

 Today, the Federal Reserve said projected growth for 2008 was somewhere between 1.3 and 2%.  Hey, that’s cool — it’s still growth right?  Well, no.  Especially considering our population (and therefore cost burden) will likely increase more than 1.3 or 2% this year, due to birth rate and immigration.  And the costs for food, gas, energy, and healthcare are likely to increase much more than 2% due to inflation.  That’s what Bush means when he says with a smile, “We will have growth.”  He neglects to say, “We also will have more expenses.”  Well, anyone who uses GDP as the indicator of an economy’s health is a little silly anyway.  That’s like focusing on your 2% raise and ignoring the 15% cost of living increase.

Of course, the other significant number Bernanke mentions is the unemployment rate of 5%.  Well, 5% isn’t much, right?  If you assume the unemployment rate roughly corresponds to the number of working-aged people who are unemployed, you’d be wrong.  The “unemployment rate” includes only people who are taking unemployment insurance.  And that insurance doesn’t last forever, whether or not the person finds a job.  You usually get 6 months, sometimes longer, and then you’re not part of the official unemployment rate anymore.  Neither are those who are unemployed because they are in prison, are disabled, retired, or don’t bother to demonstrate an eagerness to work (required for unemployment benefits).  And of course, students aren’t counted.

A more relevent question to me would be “What percentage of American households do not contain an adult with a paying job?”  15%?  20%?  One can only guess.

Today’s article of doom: mother of all meltdowns.

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