Meet the New Boss, Same as the Old Boss III - Hedonic Fraud
"To emit an unfunded paper as the sign of value ought not to continue a formal part of the Constitution, nor even hereafter to be employed; being, in its nature, pregnant with abuses, and liable to be made the engine of imposition and fraud; holding out temptations equally pernicious to the integrity of government and to the morals of the people." - ALEXANDER HAMILTON 1755 – 1804 - 1st Secretary of the Treasury and founder of the First U.S. National Bank.
Global Market Distortion
In Uncle Al’s Conundrum Part VI and Hedge Funds & Foreign Central Banks we touched upon the “collateral damage” that foreign interests can inflict by Forex Arbitrage.
The CPI as a measure was intended to convey the presence or lack of price stability in domestic price levels. It was developed in the context of stable exchange rates and at a time when global trade flow scales were a fraction of today’s.
Due to the nature of the relationship amongst the players of the game, the dollar, euro, yen and RMB cannot detach from the institutional inertia and resulting orbit they hold in common. Are all inseparable, doomed to taking turns propping each other up to facilitate the carry bond trade for the central banks.
Do you think that the dollar trade’s at 8.3 RMB or 106 yen or 1.30 Euro due to the intrinsic value of the currencies involved? Wake up and smell the coffee, not Mrs. Olsen.
By pegging and manipulating currencies through Forex Arbitrage and interest rates through central bank control, the prices that the CPI attempts to measure are themselves contrived.
Hedonic Distortion
Hedonic adjustment is made under the assumption that normal price measurement fails to capture qualitative improvements in a product or service.
For example, a computer with twice the processor speed as last year’s, which is priced the same this year, is counted as having a 50% price reduction, even though you paid the same price as last year.
Hedonics is used to measure 46% of the components in the CPI. The BLS is considering using hedonics to measure healthcare costs which increased 141% over 1990 to 2003.
God help us, a new laser which reduces the amount of surgery time, would cause a $200,000 surgery to by priced at $75,000. And then the BLS would claim that insurance costs went down. Yeah right.
Hedonic adjustments are akin to pro forma earnings in their subjectivity. They are the trickle down economic voodoo of the CPI. Corporate cooking of the books isn't bad enough, the government also has to have their works of fiction for public consumption.
Since 1990, total CPI inflation was 2.7% per year, yet hedonically adjusted durable goods increased by only 0.1%. Over the past 12 months the BLS reports that non-durable were up 4.61% while the hedonically adjusted durable goods were down by 1.25%. Alrighty then.
By manipulating the CPI numbers to seem like inflation is benign, the players benefit by paying less on: pensions, social security, Treasury Inflation Protected Securities (TIPS) and all Treasury obligations.
Remember notes and bonds, issued in “good faith” and which and have no tangible backing whatsoever? Securities issued to pay for the government’s debt and back the IOU’s they print up called a dollar. This is another method by which the players of the game rob the public blind.
In conclusion, the valuation of the dollar as supported by the CPI is a result of institutional influence and intellectual delusion, and is supported by corporate controlled media misdirection and public gullibility.
In, Fools the Public, it is pointed out that greed, public apathy and denial are major reasons why “The Game” is condoned. One should note the disdain The Rothchilds have for the public in the following quote, and it applies to the gullibility of the public, in spades.
"Those few who can understand the system (check book money and credit) will either be so interested in its profits, or so dependent on its favors, that there will be little opposition from that class, while on the other hand, the great body of people mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests." - THE ROTHSCHILD BROTHERS OF LONDON communiqué to associates in New York, June 25, 1863
More to come in Part IV.
Global Market Distortion
In Uncle Al’s Conundrum Part VI and Hedge Funds & Foreign Central Banks we touched upon the “collateral damage” that foreign interests can inflict by Forex Arbitrage.
The CPI as a measure was intended to convey the presence or lack of price stability in domestic price levels. It was developed in the context of stable exchange rates and at a time when global trade flow scales were a fraction of today’s.
Due to the nature of the relationship amongst the players of the game, the dollar, euro, yen and RMB cannot detach from the institutional inertia and resulting orbit they hold in common. Are all inseparable, doomed to taking turns propping each other up to facilitate the carry bond trade for the central banks.
Do you think that the dollar trade’s at 8.3 RMB or 106 yen or 1.30 Euro due to the intrinsic value of the currencies involved? Wake up and smell the coffee, not Mrs. Olsen.
By pegging and manipulating currencies through Forex Arbitrage and interest rates through central bank control, the prices that the CPI attempts to measure are themselves contrived.
Hedonic Distortion
Hedonic adjustment is made under the assumption that normal price measurement fails to capture qualitative improvements in a product or service.
For example, a computer with twice the processor speed as last year’s, which is priced the same this year, is counted as having a 50% price reduction, even though you paid the same price as last year.
Hedonics is used to measure 46% of the components in the CPI. The BLS is considering using hedonics to measure healthcare costs which increased 141% over 1990 to 2003.
God help us, a new laser which reduces the amount of surgery time, would cause a $200,000 surgery to by priced at $75,000. And then the BLS would claim that insurance costs went down. Yeah right.
Hedonic adjustments are akin to pro forma earnings in their subjectivity. They are the trickle down economic voodoo of the CPI. Corporate cooking of the books isn't bad enough, the government also has to have their works of fiction for public consumption.
Since 1990, total CPI inflation was 2.7% per year, yet hedonically adjusted durable goods increased by only 0.1%. Over the past 12 months the BLS reports that non-durable were up 4.61% while the hedonically adjusted durable goods were down by 1.25%. Alrighty then.
By manipulating the CPI numbers to seem like inflation is benign, the players benefit by paying less on: pensions, social security, Treasury Inflation Protected Securities (TIPS) and all Treasury obligations.
Remember notes and bonds, issued in “good faith” and which and have no tangible backing whatsoever? Securities issued to pay for the government’s debt and back the IOU’s they print up called a dollar. This is another method by which the players of the game rob the public blind.
In conclusion, the valuation of the dollar as supported by the CPI is a result of institutional influence and intellectual delusion, and is supported by corporate controlled media misdirection and public gullibility.
In, Fools the Public, it is pointed out that greed, public apathy and denial are major reasons why “The Game” is condoned. One should note the disdain The Rothchilds have for the public in the following quote, and it applies to the gullibility of the public, in spades.
"Those few who can understand the system (check book money and credit) will either be so interested in its profits, or so dependent on its favors, that there will be little opposition from that class, while on the other hand, the great body of people mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests." - THE ROTHSCHILD BROTHERS OF LONDON communiqué to associates in New York, June 25, 1863
More to come in Part IV.
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