Wednesday, October 31, 2007

Why You Should Not Retire....

October 31, 2007
Ex-Chief of S.E.C. Says Pension Funds in Danger

As New York State comptroller, his father “saved the retirements” of countless workers, Arthur Levitt Jr. said in a speech yesterday — but he added that now those pensions, along with those of millions of other Americans, are again at risk.

In remarks to pension officials from New York and several other states, Mr. Levitt, the longest-serving chairman of the Securities and Exchange Commission, said their world was fraught with problems, including conflicts of interest, opaque accounting and a tendency among elected officials to promise valuable benefits, then fail to set aside enough money to pay for them.

“As the baby boomers begin to retire, we cannot tolerate a shaky pension system,” said Mr. Levitt, who stepped down from the S.E.C. in 2001 and is now a senior adviser to the Carlyle Group, a large private equities firm.

The Carlyle Group is one of the investment firms to be questioned by investigators in an inquiry into the New York State pension fund. Mr. Levitt alluded to that inquiry, which has focused on whether associates of New York State’s most recent former comptroller, Alan G. Hevesi, improperly benefited from his sole direction of the $156 billion fund, the nation’s second largest.

But Mr. Levitt said New York’s pension woes were just the latest in a series of scandals at public funds all over the country, including those in the cities of Chicago, San Diego and Philadelphia and the states of Illinois, Ohio and California.

Mr. Levitt was speaking at an annual conference for public pension trustees sponsored by the Pacific Corporate Group, an investment management company that specializes in private equities.

He said he was speaking in the dual capacity of a private equities executive and the son of Arthur Levitt Sr., who was widely admired for refusing to use the New York State pension fund to bail out New York City during its fiscal crisis in the 1970s. Today, “too many fund trustees as well as elected officials” are “unable to carry this load,” he said.

Mr. Levitt said much of the trouble was rooted in pension accounting rules that “fail to reflect accurately” the cost of the benefits that public workers have earned or the value of the assets set aside to pay those benefits.

“We can’t begin to improve the fiscal standing of public pension funds until we can accurately assess their financial health,” he said.

He blamed a rule-making framework that allows softer accounting standards for governments than for corporations, and called for the repeal of the Tower Amendment, a 30-year-old law that limits the S.E.C.’s authority to police governmental accounting. The current S.E.C. chairman, Christopher Cox, has also expressed doubts about the Tower Amendment’s continuing usefulness but has not called outright for its repeal.

Mr. Levitt also called on Congress to create an independent financing source for the body that writes the accounting rules for governments — something Congress has already established for the corporate accounting rule-makers.

Currently, the Governmental Accounting Standards Board must finance its operations by soliciting contributions from the same bodies of government that adopt its rules.

Mr. Levitt also questioned the way the governmental accounting rule-makers are chosen, saying he thought the trustees of the board should be named by the S.E.C. Currently, various constituency groups recommend trustees.

Even if the pension accounting rules are beefed up, he said, it would make little difference unless the oversight boards of the funds were also improved. Currently, less than half of all public pension funds are thought to have formal education requirements for their trustees.

Current practices also allow pension officials to give priority to political concerns, he said, like calling for the divestment of pension money from “rogue states” like Sudan and Iran. He expressed great concern over the practice of some pension officials of soliciting campaign contributions from Wall Street firms.

“We have created a situation where workers’ retirement savings are being used for private gain,” he said.

While at the S.E.C., Mr. Levitt said he had directed staff members to investigate these practices, after which they drafted a rule barring money managers from working for public pension funds if the money managers had recently made political contributions to any fund officials.

But the rule, conceived of in 1999, when the S.E.C. was fighting uphill to curb conflicts of interest in the auditing profession, never made it past the drafting stage. Eight years later, Mr. Levitt said he thought the problems were worse than ever.

Questions from the audience suggested that at least some trustees at the conference disagreed with Mr. Levitt’s contention that pension trustees had no business identifying rogue states and trying to steer money away from them. One asked whether he also wanted them to back off from efforts to improve corporate governance. He said he did not.

Joseph Haslit, who represents New York City’s comptroller, William C. Thompson Jr., on the boards of four of the city’s big pension funds, said he thought nearly everybody in the room agreed with Mr. Levitt on the need to crack down on unethical behavior. But he said he doubted they agreed with his contention that pension boards needed to be beefed up.

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These Idiots Will Be The Death of The USA...

October 31, 2007
Letting the Cat Out of the Bag
Attacking Iran for Israel?


Secretary of State Condoleeza Rice is at her mushroom-cloud hyperbolic best, and this time Iran is the target. Her claim last week that "the policies of Iran constitute perhaps the single greatest challenge to American security interests in the Middle East and around the world" is simply too much of a stretch.

To gauge someone's reliability, one depends largely on prior experience. Sadly, Rice's credibility suffers in comparison with Mohammed ElBaradei, head of the International Atomic Energy Agency (IAEA). Basing his judgment on the findings of IAEA inspectors in Iran, ElBaradei reports that there is no evidence of an active nuclear weapons program there.

If this sounds familiar it is, in fact, déjà vu. ElBaradei said the same thing about Iraq before it was attacked. But three days before the invasion, American nuclear expert Dick Cheney told NBC's Tim Russert, "I think Mr. ElBaradei is, frankly, wrong."

Here we go again. As in the case of Iraq, US intelligence has been assiduously looking for evidence of a nuclear weapons program in Iran; but, alas, in vain. Burned by the bogus "proof" adduced for Iraq-the uranium from Africa, the aluminum tubes-the administration has shied away from fabricating nuclear-related "evidence." Are Bush and Cheney again relying on the Rumsfeld dictum, that "the absence of evidence is not evidence of absence?" There is a simpler answer.

Cat Out of the Bag

The Israeli ambassador to the US, Sallai Meridor, let the cat out of the bag while speaking at the American Jewish Committee luncheon on Oct. 22. In remarks paralleling those of Rice, Meridor said Iran is the chief threat to Israel. Heavy on the chutzpah, he then served gratuitous notice on Washington that countering Iran's nuclear ambitions will take a "united United States in this matter," lest the Iranians conclude, "come January '09, they have it their own way."

Meridor stressed that "very little time" remained to keep Iran from obtaining nuclear weapons. How so? Even were there to be a nuclear program hidden from the IAEA, no serious observer expects Iran to obtain a nuclear weapon much sooner than five years from now.

Truth be told, every other year since 1995 US intelligence has been predicting that Iran could have a nuclear weapon in about five years. It has become downright embarrassing-like a broken record, punctuated only by so-called "neo-conservatives" like James Woolsey, who in August publicly warned that the U.S. may have no choice but to bomb Iran in order to halt Tehran's nuclear weapons program.

Woolsey, self-described "anchor of the Presbyterian wing of the Jewish Institute for National Security Affairs," put it this way: "I'm afraid that within, well, at worst, a few months; at best, a few years; they [the Iranians] could have the bomb."

The day before Ambassador Meridor's unintentionally revealing remark, Vice President Dick Cheney reiterated, "We will not allow Iran to have a nuclear weapon." That remark followed closely on President George W. Bush's apocalyptic warning of World War III, should Tehran acquire the knowledge to produce a nuclear weapon.

The Israelis appear convinced they have extracted a promise from Bush and Cheney that they will help Israel nip Iran's nuclear program in the bud before they leave office. That is why the Israeli ambassador says there is "very little time"-less than 15 months.

Never mind that there is no evidence that the Iranian nuclear program is any more weapons-related than the one Cheney and Donald Rumsfeld persuaded President Gerald Ford to approve in 1976. Westinghouse and General Electric successfully lobbied for approval to sell the Shah for $6.4 billion the kind of nuclear facilities that Iran is now building, but the deal fell through when the Shah was ousted in 1979.

With 200-300 nuclear weapons in its arsenal, the Israelis enjoy a nuclear monopoly in the Middle East. They mean to keep that monopoly and Israel's current leaders are pressing for the US to obliterate Iran's fledgling nuclear program.

Anyone aware of Iran's ability to retaliate realizes this would bring disaster to the whole region and beyond. But this has not stopped Cheney and Bush in the past. And the real rationale is reminiscent of the one revealed by Philip Zelikow, confidant of Condoleezza Rice, former member of the President's Foreign Intelligence Advisory Board, and later executive director of the 9/11 Commission. On Oct. 10 2002, Zelikow said this to a crowd at the University of Virginia:

"Why would Iraq attack America or use nuclear weapons against us? I'll tell you what I think the real threat is-it's the threat to Israel. And this is the threat that dare not speak its name...the American government doesn't want to lean too hard on it rhetorically, because it is not a popular sell."


The political offensive against Iran coalesced as George W. Bush began his second term, with Cheney out in front pressing for an attack on its nuclear-related facilities. During a Jan. 20, 2005 interview with MSNBC, just hours before Bush's second inauguration, Cheney put Iran "right at the top of the list of trouble spots," and noted that negotiations and UN sanctions might fail to stop Iran's nuclear program. Cheney then added, with remarkable nonchalance:

"Given the fact that Iran has a stated policy that their objective is the destruction of Israel, the Israelis might decide to act first, and let the rest of the world worry about cleaning up the diplomatic mess afterwards."

Does this not sound like the so-called "Cheney plan" being widely discussed in the media today? An Israeli attack; Iranian retaliation; the United States springing to the defense of its "ally" Israel?

A big fan of preemption, the vice president was the first U.S. official to speak approvingly of Israel's air attack on Iraq's reactor at Osirak in 1981. He included that endorsement in his important speech of Aug. 26, 2002, in which he set the terms of reference for the subsequent campaign to persuade Congress to approve war with Iraq.

Cheney has done little to disguise his attraction to Israel's penchant to preempt. Ten years after the attack on Osirak, then-Defense Secretary Cheney reportedly gave Israeli Maj. Gen. David Ivri, commander of the Israeli Air Force, a satellite photo of the Iraqi nuclear reactor destroyed by U.S.-built Israeli aircraft. On the photo Cheney penned, "Thanks for the outstanding job on the Iraqi nuclear program in 1981."

Nothing is known of Ivri's response, but it is a safe bet it was along the lines of "we could not have done it without your country's help." Indeed, although the U.S. officially condemned the attack (the Reagan administration was supporting Saddam Hussein's Iraq at the time), intelligence and operational support that the Pentagon shared with the Israelis made a major contribution to the success of the Israeli raid. With Vice President Cheney now calling the shots, similar support is a virtual certainty in the event of an Israeli attack on Iran.

It is no secret that former Israeli prime minister Ariel Sharon was already pressing in 2003 for an early preemptive strike, insisting that Iran was likely to obtain a nuclear weapon much earlier than the time forecast by U.S. intelligence. Sharon even brought his own military adviser to brief Bush with aerial photos of Iranian nuclear-related installations.

More troubling still, in the fall of 2004 Gen. Brent Scowcroft, who served as national security adviser to President George H.W. Bush and as Chair of the younger Bush's Foreign Intelligence Advisory Board, made some startling comments to the Financial Times.

A master of discretion with the media, Scowcroft nonetheless saw fit to make public his conclusion that Sharon had Bush "mesmerized;" that he had our president "wrapped around his little finger." Needless to say, Scowcroft was immediately ousted from the advisory board and is now persona non grata at the White House in which he worked for so many years.

An Unstable Infatuation

George W. Bush first met Sharon in 1998, when the Texas governor was taken on a tour of the Middle East by Matthew Brooks, then executive director of the Republican Jewish Coalition. Sharon was foreign minister at the time and took Bush on a helicopter tour of the Israeli occupied territories. An Aug. 3, 2006 McClatchy wire story by Ron Hutcheson quotes Matthew Brooks:

"If there's a starting point for George W. Bush's attachment to Israel, it's the day in late 1998, when he stood on a hilltop where Jesus delivered the Sermon on the Mount, and, with eyes brimming with tears, read aloud from his favorite hymn, 'Amazing Grace.' He was very emotional. It was a tear-filled experience. He brought Israel back home with him in his heart. I think he came away profoundly moved."

Bush made gratuitous but revealing reference to that trip at the first meeting of his National Security Council on Jan. 30, 2001. After announcing he would abandon the decades-long role of "honest broker" between Israelis and Palestinians and would tilt pronouncedly toward Israel, Bush said he had decided to take Sharon "at face value" and unleash him.

At that point the president brought up his trip to Israel with the Republican Jewish Coalition and the flight over Palestinian camps, but there was no sense of concern for the lot of the Palestinians. In Ron Suskind's Price of Loyalty, then-Treasury Secretary Paul O'Neill, who took part at the NSC meeting, quotes Bush: "Looked real bad down there," the president said with a frown. He then said it was time to end America's efforts in the region: "I don't see much we can do over there at this point."

O'Neill reported that Colin Powell, the newly minted but nominal secretary of state, was taken completely by surprise at this nonchalant jettisoning of more nuanced and balanced longstanding policy. Powell demurred, warning that this would unleash Sharon and "the consequences could be dire, especially for the Palestinians." According to O'Neill, Bush just shrugged, saying, "Sometimes a show of strength by one side can really clarify things." O'Neill says that Powell seemed "startled."

It is a safe bet that the vice president was in no way startled.

What Now?

The only thing that seems to be standing in the way of a preemptive attack on Iran's nuclear facilities is unusual-but-sensible foot-dragging by the U.S. military. It seems likely that the senior military leadership has told the president and Cheney: This time let us brief you on what to expect on Day 2, on Week 4, on Month 6-and on the many serious things Iran can do to Israel, and to us in Iraq and elsewhere.

CENTCOM commander Admiral William Fallon is reliably reported to have said, "We are not going to do Iran on my watch." And in an online Q-and-A on Sept. 27, award-winning Washington Post reporter Dana Priest spoke of a possible "revolt" if pilots were ordered to fly missions against Iran. She added:

"This is a little bit of hyperbole, but not much. Just look at what Gen. Casey, the Army chief, has said...that the tempo of operations in Iraq would make it very hard for the military to respond to a major crisis elsewhere. Besides, it's not the 'war' or 'bombing' part that's difficult; it's the morning after and all the days after that. Haven't we learned that (again) from Iraq?"

How about Congress? Could it act as a brake on Bush and Cheney? Forget it. If the American Israel Public Affairs Committee (AIPAC) with its overflowing coffers supports an attack on Iran, so will most of our spineless lawmakers. Already, AIPAC has succeeded in preventing legislation that would have required the president to obtain advance authorization for an attack on Iran.

And for every Admiral Fallon, there is someone like the inimitable retired Air Force Lt. Gen. Thomas McInerney, a close associate of James Woolsey, "cakewalk" Ken Adelman and other "neo-cons." The air campaign "will be easy," says McInerney, a FOX pundit who was a rabid advocate of shock and awe over Iraq. "Ahmadinejad has nothing in Iran that we can't penetrate," he adds, and several hundred aircraft, including stealth bombers, will be enough to do the trick:

"Forty-eight hours duration, hitting 2,500 aim points to take out their nuclear facilities, their air defense facilities, their air force, their navy, their Shahab-3 retaliatory missiles, and finally their command and control. And then let the Iranian people take their country back."

And the likely White House rationale for war? Since, particularly with the fiasco of Iraq as backdrop, it will be a hard sell to promote the idea of an imminent threat from a nuclear-armed Iran, the White House PR machine has already begun focusing on other "evidence"- amorphous so far-indicating that Iran is supporting those who are "killing our troops in Iraq."

The scary thing is that Cheney is more likely to use the McInerneys and Woolseys than the Fallons and Caseys in showing the president how "easily" it can all be done-Cakewalk II.


It is not as though our country has lacked statesmen wise enough to warn us against foreign entanglements and about those who have difficulty distinguishing between the strategic interests of the United States and those of other countries:

"A passionate attachment of one nation for another produces a variety of evils. Sympathy for the favorite nation facilitates the illusion of an imaginary common interest in cases where no real common interest exists, infuses into one the enmities of the other, and betrays the former into participation in the quarrels and wars of the latter without adequate inducement or justification."
(George Washington, Farewell Address, 1796)

Ray McGovern was a CIA analyst from 1963 to 1990 and Robert Gates' branch chief in the early 1970s. McGovern now serves on the Steering Group of Veteran Intelligence Professionals for Sanity (VIPS). He is a contributor to Imperial Crusades, edited by Alexander Cockburn and Jeffrey St. Clair. He can be reached at:

A shorter version of this article appeared first on

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What Remains in New Orleans...and why we should all care....

October 31, 2007
The Screams of the Besieged
New Orleans' Broken Criminal Justice System


"We are faced with the daily reality of an imminent collapse of our criminal justice institutions."

New Orleans Police Chief Warren Riley

Some say crime causes a city to be under siege; others say crime is the symptom of a city under siege. Either way, New Orleans is in serious trouble. Our criminal justice system is in unprecedented crisis.

Thursday there were four murders in 24 hours in New Orleans. Over the weekend three more people died from gunshots. So far this year, 170 people have been murdered in New Orleans--a rate seven times the national average.

The District Attorney of New Orleans just resigned at the insistence of the Mayor, the Attorney General and several legislators. His office owes a group of discharged employees a federal civil rights judgment of over $3 million--and neither the City nor State was willing to pay unless he resigned. There is high turnover in the office and thousands of people arrested have been released because the office could not timely decide whether to charge them with crimes or not. His resignation will not make New Orleans any safer.

Katrina severely damaged an already dysfunctional criminal justice in New Orleans. In fact, what has occurred and is happening now in New Orleans is really neither "justice" nor a "system

Before Katrina, New Orleans averaged 1000 violent crimes each quarter. In the second quarter of 2007, New Orleans reported over 1300 violent crimes--despite the fact that not many more than half the people of New Orleans are back.

Black on black crime continues to dominate. Of the 161 homicide victims in 2006, 131 were black men, along with most of the suspects. Many victims and the suspects were teenagers. About two-thirds of the deaths of 2006 have gone unsolved.

Police work out of trailers, including the brass. During the summer, officers filled out paperwork in their cars because there was no working air conditioning in their temporary trailer offices. Not until spring 2007 was there a working crime lab.

New Orleans has a post-Katrina police force over 80% as large as before the storm--nearly half are new officers. At the end of 2006, seven police officers were indicted on murder charges--and then hailed as "heroes" by many fellow officers as they reported to court. The police force is supplemented by hundreds of National Guard members patrolling the city in camouflaged humvees, and, on special occasions, members of the state police as well.

The public defender system is starting to improve but remains unable to represent all those facing charges. Recently, Orleans Criminal Court Judge Arthur Hunter mailed over 450 letters to attorneys in New Orleans ordering them to report to his courtroom to start defending poor defendants. Most declined.

Jail is not the answer to our crime problems because Louisiana already leads all 50 states in the percentage of our people in jail, and New Orleans leads Louisiana. A report on those in the New Orleans jail show that the majority are awaiting trial and many of those in jail could easily be released. A third are in on bonds of $5000 or less--the only reason they remain in jail is because of their poverty. Over half are only facing minor charges and nearly three-quarters have no other outstanding warrants for their arrest.

Addressing crime takes a functioning criminal justice system--and New Orleans is working on that by increasing communication between the various agencies and enacting some new programs. But, like the resignation of the District Attorney, this is not likely to dramatically reduce crime.

Three recent reports help show the way for New Orleans to improve the criminal system. They stress earlier and better communication between the police and prosecutors; a wider range of pre-trial release options; and greater use of alternatives to prison.

The August 2007 report of the Urban Institute, "Washed Away? Justice in New Orleans," documents past and present challenges for criminal justice. Available online at:

The VERA Institute of Justice report, "Proposals for New Orleans' Criminal Justice System: Best Practices to Advance Public Safety and Justice" gives four concrete ways that the system can be improved in the short run. Their report is available at:

The community-based Safe Streets Strong Communities organization has put out several recommendations about how New Orleans can fight crime without criminalizing or alienating the people in the neighborhoods. See:

But even if all these changes are started, most leaders acknowledge what Criminal Judge Calvin Johnson, who has presided in criminal court for nearly 20 years, says over and over "We cannot arrest our way out of this problem."

Crime is not an isolated action. It is impossible to fix the crime problem if the rest of the institutions that people rely on remain deeply broken.

The head of the local FBI suggested to the Christian Science Monitor that criminals in New Orleans "are products of an educational system that didn't educate, a state judicial system that failed to mete out consequences for criminal activity, and an economic landscape devoid of meaningful jobs."

Katrina and its aftermath place enormous daily stresses on all people, particularly those already disadvantaged by race, gender and class systems. Treatment facilities report much more substance abuse, suicide and domestic violence. Yet, the mental and physical health systems are only a shell of what they were before the storm. Affordable housing is scarce and families are separated. Public education is not working for the poorest children. There is only so much the criminal justice system can do.

The number of doctors and social workers and nurses who treat mental health is down dramatically. Beds are down nearly 80%. Hospitals turn troubled people away every day. Doctors report people who cannot be turned away are chemically restrained on gurneys in the hall or kept in dimmed emergency waiting rooms until they can be released. The system is backed up around the state.

Even regular medical treatment is a challenge for uninsured and insured both as many hospitals remain closed. Drug and substance abuse treatment are scarce.

The extreme lack of affordable rental housing means many older family members have not returned to New Orleans. Many teenagers have returned on their own--living alone or with other relatives and friends.

Public education for those not in charter schools continues to be quite an uphill battle for the children--often in highly policed public schools that illustrate the school to prison pipeline.

Before Katrina, New Orleans had the highest per capita murder rate in the nation a couple of times. The police arrested few people for violent crimes and prosecutors and judges and juries convicted less. Police, prosecutors and public defenders were overworked and underpaid--often losing their most experienced people to the suburbs and other cities where the work was calmer and the pay better.

After Katrina it is all worse. There is much more stress on the streets. There is much less counseling and treatment available. There are fewer extended families to provide a supportive environment. The police are less experienced. The police do not communicate well with the prosecutors, who do not work well with the victims and witnesses, while the judges feud with the public defenders, and on and on.

After Katrina, there is even less of a system and certainly less justice for everyone--the public, victims, the accused, law enforcement and people working in the institutions. Only when the criminal justice system is supported by a good public education available to all children, sufficient affordable housing for families, accessible healthcare (especially mental healthcare), and jobs that pay living wages, can the community expect the crime rate to go down.

The District Attorney has resigned. But New Orleans and the Gulf Coast remain in serious trouble on all fronts. Our criminal justice system is but one illustration of our institutions melting down. For us, crime is not the cause of our community being under siege; crime is the scream of our community under siege.

Bill Quigley is a human rights lawyer and law professor at Loyola University New Orleans. You can reach him at

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Joe Conason
Rudy’s Glass House
by Joe Conason

Published: October 30, 2007

Tags: Opinion, Politics, Rudolph Giuliani
This article was published in the November 5, 2007, edition of The New York Observer.

Hai Knafo
Rudy Giuliani.
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In Rudolph Giuliani’s narrative of his own life, as confided to rapt Republican voters along the presidential primary trail, he has been fighting the lonely twilight struggle against “Islamic terrorism,” as he insists on calling it, since sometime in the 1970’s. Like President Bush, Mr. Giuliani is vain enough to compare himself with Winston Churchill. Both the former mayor and his supporters often suggest that his understanding of the terror threat is visceral and almost mystical. Only he, among all the candidates of both parties, truly grasps the issue and possesses the fortitude to confront the threat.

As part of the same spiel touting his 30 years of experience battling terrorism, Mr. Giuliani often attacks the Clinton administration for failing to comprehend the nature of the problem following the first major attack on New York, which occurred shortly after he became mayor.

“Islamic terrorists killed Americans. Slaughtered Americans. Bombed the World Trade Center. Bombed it,” he said in a typical speech last summer. “You know what the reaction of the Clinton administration at the time was? It was a crime. It was another group of murders. … Well, it wasn’t just another group of murders.”

While that description of President Clinton’s response to the February 1993 bombing is hardly fair or accurate, the tone of curt disdain serves a specific partisan purpose, by warning that a Clinton restoration in the White House will endanger America. His unrelenting attacks are aimed at portraying Hillary Clinton, the Democratic front-runner, as too weak to serve as commander in chief. But his biting words also invite closer scrutiny of Mr. Giuliani’s claims about himself.

Unfortunately very few mainstream media outlets will take up that invitation. Although cable channels and newspapers devote endless amounts of space and time to consider the authenticity of Mrs. Clinton’s laughter, they seem unable to cover an extraordinary scoop that raises questions about Mr. Giuliani’s authenticity.

Published in the Oct. 23 issue of The Village Voice—the New York alternative weekly that has excelled in covering the former mayor for many years—that scoop revealed the contents of his private testimony before the 9/11 Commission. The previously sealed memoranda summarizing Mr. Giuliani’s testimony, obtained by reporter Wayne Barrett, show profound contradictions between his stump speech and what he admitted to the commission behind closed doors.

For reasons that remain unclear, the minutes of his private testimony, marked “commission sensitive/unclassified,” were nevertheless to be locked away until the convenient date of December 2008. According to Mr. Barrett, nobody associated with the 9/11 Commission could explain how or why that decision had been made.

The Voice article discloses the embarrassing contents of a 15-page “memorandum for the record,” prepared by a commission attorney on April 20, 2004, which quotes Mr. Giuliani explaining that he knew little about Osama bin Laden’s organization until “after 9/11,” when “we brought in people to brief us on al Qaeda.” He recalled no such briefing earlier, which was “a mistake,” he acknowledged, since “if experts share a lot of info,” that would mean a “better chance of someone making heads and tails … [of the] situation.”

When a commissioner inquired about his knowledge of al Qaeda threats during the three years preceding 9/11, Mr. Giuliani replied, “At the time, I wasn’t told it was al Qaeda, but now that I look back at it, I think it was al Qaeda.” He noted that soon after the 9/11 attacks he had brought in Yossef Bodansky, author of the prophetic 2001 book Bin Laden: The Man Who Declared War on America, to brief him and his staff. (In his own book, Leadership, he discloses that he read Bodansky’s book at the urging of his wife, and covered the text in “highlighter and notes.” No wonder he regards himself as an expert.)

Asked how he might apply the city’s crime-fighting strategies to the “war on terror,” Mr. Giuliani said, “Bernie knows more than I,” a reference to former Police Commissioner Bernard Kerik, the extremely dubious character whom he almost succeeded in installing as secretary of Homeland Security. All in all, America’s Mayor appears clueless and uninformed in his private remarks, even though the commissioners, by their own admission later, went easy on him.

None of that will surprise anyone who has read Grand Illusion: The Untold Story of Rudy Giuliani and 9/11, the 2006 book by Mr. Barrett and Dan Collins that delves into many of the errors and falsehoods behind the Republican front-runner’s facade. More puzzling—but alas not so surprising—is the reluctance of the mainstream media to follow up on Mr. Barrett’s story, to demand the release of Mr. Giuliani’s private testimony and to determine how and why those documents were to be locked up for the duration of the presidential campaign.

When Mr. Giuliani observes that national security will be the chief concern of many voters this year and next, he is correct. That is why he deserves the scrutiny he has escaped so far.

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value flys away

- a dollar in 1950 will buy only 12 cents worth of goods today, 88% less than before -

Inflation in my adult years increased average prices 1,000% or more -
example 1: a postage stamp in the 1950s cost 3 cents; today's cost is 41 cents - 1,266% inflation;
example 2: a gallon of 90 Octane full-service gasoline cost 18 cents before; today it is $3.05 for self-service - 1,870 % inflation;
example 3: a house in 1959 cost $14,100; today's median price is $213,000 - 1,400% inflation;
example 4: a dental crown used to cost $40; today it's $1,100 - 2,750% inflation;
example 5: an ice cream cone in 1950 cost 5 cents; today its $2.50 - 4,900% inflation;
example 6: monthly government Medicare insurance premiums paid by seniors was $5.30 in 1970; its now $93.50 - 1,664% inflation; (and up 70% past 5 years)
example: several generations ago a person worked 1.4 months per year to pay for government; he now works 5 months.
And in the past, one wage-earner families lived well and built savings with minimal debt, many paying off their home and college-educating children without loans. How about today?

Few citizens know that a few years ago government changed how they measure and report inflation, as if that would stop it - - but families know better when they pay their bills for food, medical costs, energy, property taxes, insurance and try to buy a house.

Is inflation a threat to society? Consider this famous quote:
"There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." Lord John Maynard Keynes (1883-1946), renowned British economist.

Inflation is the loss of a constant purchasing value of the dollar,
caused by an increase out of 'thin air' of the supply of money and debt creation by the financial system

10 graphic pictures help tell the story
(a picture is worth a thousand words)

This Inflation Report is a chapter of the Grandfather Economic Report series, showing serious economic and education trends facing today's families and youth, compared to prior generations.

Quick Links to sections this report
CPI Since 1800, Value of Dollar since 1950, For the Grandchildren, Annual CPI, Revising CPI, What is the CPI?, Foreign Comparison, Money Supply, Student Loan Debt, House Inflation, Mortgage Interest Rates, Commodity Index, Bottom-line


1. For 150 years America experienced relatively stable consumer prices, but in the last 50+ years prices have soared. Today's inflation is highest in 15 years. What happened?
2. Why do we pass on to young families and youth a currency which has lost 88% of its purchasing value?
3. Should we not provide annual rates of inflation of less than 1% as was achieved in the past, when family incomes consistently zoomed upward with one wage-earner per family - - and more mothers had a real choice to stay home and raise the kids?
4. Should we accept statements that inflation is "under control" when nothing basic has changed to restrain the banking system from creating money and debt out of thin air, meaning the dollar's internal value may drop another 58% before our infants are out of college - and decrease by another 88% before they reach retirement age?
5. Why do we have a government mandating inflation protection via cost of living adjustments for the incomes and medical insurance of government employees (federal & state/local) - - while many, many families pay extra taxes to provide that protection for others with no such guaranteed protection for themselves?
6. Should we be proud today's families pay a higher share of their incomes on all taxes than before - another form of inflation?
7. Should we be proud that inflation in housing prices has caused the highest percentage debt load on families in history?
8. Should families be proud to take the 'buying power hit' caused by the fact today each working person must now support 3 times more state & local government employees than before, in addition to supporting more seniors per capita?
9. Should we feel good about future prospects when the nations money supply has been driven up at rates 2-3 times faster than economic growth and much faster than that of our major trading partners, meaning more and more debt creation and more trade deficits are needed to support a dollar of growth?
10. Should we 'feel safe' accepting official cost of living index reports when we know measurement criteria were dramatically revised during the 1990s to minimize same, plus recognizing that the CPI does not include cost impacts of government and taxes - - the largest spending component in the entire economy - - and does not reflect manipulated asset bubbles in stocks and real estate, or home prices?
11. U.S. oil production peaked in 1970 and world production is expected to peak in the next 5-15 years. We now import over 60% our needs. Energy inflation appears as a 'ticking time-bomb.'
12. U.S. inflation rates are higher than competitor nations, as U.S. trade deficits soared to new records each year indicating declining international competitiveness, causing us to become the world's greatest debtor.

cpi-1800.gif (5608 bytes)INFLATION HISTORY >

Stable consumer prices for 125 years.
And then, prices soar up, up and away.

This chart shows the Consumer Price Index (CPI-U) from 1800 to today, a period of more than 200 years.

For the first two-thirds of this chart the consumer price index oscillated at or below the 50 point price index mark, indicating relatively stable consumer prices for nearly a century and a half.

Thus, 150 years of near nil inflation.

But in the past 50 years, especially after 1971, the consumer price index in this chart took off - -
- - inflating prices more than 1,000 times higher.

Note: prior to 1913, a period of relatively stable prices, there was no Federal Reserve Bank. This chart calls into question the stated purpose of creating a Federal Reserve in 1913 to assure price stability, when thereafter prices soared instead of becoming more stable. This chart appears to shout that > > the Federal Reserve was created for the purpose of generating inflation.

The data source for this chart is from the Minneapolis Federal Reserve Bank, incl. data from the U.S. Bureau of Labor Statistics (link #12). (The chart denotes U.S. citizens for the first time ever were disallowed in 1933 (FDR) from exchanging dollars for gold; in 1971 (Nixon) foreigners were likewise disallowed and the dollar ceased being backed by any gold standard.)

With those soaring prices, let us now look at what happened to the purchasing power of a single dollar - - from 1950 to today > >

decline of purchasing power of a dollar88% Decline of a Dollar's Purchasing Value since 1950

This chart shows an 88% reduction in the value of a dollar (its internal purchasing power) since 1950, where a dollar of 1950 is worth but 11.9 cents today - based on the consumer price index. Restated, an average cpi item costing $10 in 1950 costs $88 today.

Note in the chart: The accelerated fall of the domestic purchasing power of the dollar from 1965 to 1980 was due to higher annual inflation rates, which was a period when government social spending ratios were rising much faster than general economic growth.

As the chart shows, starting about 1981 and The Reagan Era, the decline of the purchasing power of a dollar started slowing dramatically - a significant rate of change in inflation compared to the prior several decades.

Now look to the right side of the chart, which shows an apparent slow-down in recent years. Actually this curve should point down faster after 1995, since in 1981 and 1995 the federal government changed the way their people measure the cost of living index by a cumulative 4.8% - - which otherwise would have placed the today's value of a 1950 dollar at 9 cents using the old criteria, not the 11.9 cents shown via the new criteria. (this is discussed further down this page).

For this chart, the average annual inflation rate since 1950 was about 4%. To some people 4% doesn't sound like a big number. However, compound 4% over 50+ years and the 1950 dollar is worth but 11.9 cents today - - as seen in the chart.

(Compound it out another 50 years into the future to 2056, when today's 15-year old will retire, and the value of today's dollar will be worth just 12 - - another 88% plunge - - bringing it to a value of just 1.5 cents when compared to the 1950 dollar.)

It takes $10,000 cash today to purchase that which $1,190 would purchase in 1950. And with higher combined federal & state/local tax rates today compared to then, it takes even more. Typical example: you need 39 cents as of 2006 to purchase the same stamp that cost just 3 cents in 1950 - - a 1,300% price increase - - and nobody dare claim any quality improvement for that increase.

Had annual rates not exceeded the approx. 1% average inflation rate of 1950-65 (see chart below) for the entire period shown it would take just $2,200 today (not $10,000) to be equivalent to the $1,190 of 1950 - meaning 78% fewer dollars to have the same buying power. No wonder many mothers were forced into the work-place to help make ends meet, as shown in the Family Income Report. If most of the men and women are today in the work-force to make ends meet, who else can a family send into the work-force during the next decades? Their children? And/or, just open up the southern borders even wider?

Who benefits from this performance? Answer: the financial sector and governments at all levels (and proponents of big government over families), as revenue streams are accelerated by both tax bracket creep, extending the caps for social security taxes, property taxes, and sales taxes. Inflation camouflaged government growth, as it expanded to consume and control a larger share of the economy.

And, government spending is mostly consumptive spending that adds inflation via increased demand of its employees and transfer recipients, without compensating productivity. Few deny that government is significantly less efficient and productive than the private sector. As it expanded its relative size, and as credit/debt soared, such contributed to more national inefficiency and therefore to a reduction in the purchasing value of a dollar.

Big Question: What is the reason for this horrendous erosion of the purchasing power of a dollar?
Answer: The chart at the top of this page argues that the cause is due to the creation of the Federal Reserve (in 1913), followed by the absence of a gold standard (since 1933) to restrain this Federal Reserve, allowing the Federal Reserve's banking system to create piles of new dollars and debt out of thin air. For proof of this answer, see the following statements of Federal Reserve chairman Alan Greenspan >

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. The abandonment of the gold standard made it possible for welfare statists to use the banking system as a means to an unlimited expansion of credit (debt creation)" - Alan Greenspan (#8), 1966

"It was the case that the price level in 1929 was not much different, on net, from what it had been in 1800. But, in the two decades following the abandonment of the gold standard in 1933, the consumer price index in the United States nearly doubled. And, in the four decades after that, prices quintupled. Monetary policy, unleashed from the constraint of domestic gold convertibility, has allowed a persistent over issuance of money. As recently as a decade ago, central bankers, having witnessed more than a half-century of chronic inflation, appeared to confirm that a fiat currency was inherently subject to excess." -
Chairman Alan Greenspan Before the Economic Club of New York, December 19, 2002 "Issues for Monetary Policy" (

Read that last quote again. It states there was zero inflation for 129 years from 1800 to 1929. But, once the gold standard was abandoned there was no restraint on the creation of money and debt out of thin air by the banking system - - and inflation soared, as shown by the charts above. Additionally, as the first chart shows, there was next to zero inflation for 113 years from 1800 to 1913 before the Federal Reserve was created. It appears government and the financial sector wanted inflation to replace stable prices (zero inflation), and the Federal Reserve was created and soon after the gold standard was eliminated to accomplish same.

"The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. Both are the refuge of political and economic opportunists." - Ernest Hemingway

m3-vs-cpi.gif (6548 bytes)A warning - MONEY SUPPLY explosion
creating loss of purchasing power of each dollar, plus exploding debt

"Inflation is always and everywhere a monetary phenomenon. To control inflation, you need to control the money supply." Milton Friedman, Nobel Laureate in Economics.

As money supply exploded 3,000% - -

The dollar's purchasing power collapsed 85%,

- - as proven by this chart.

The left chart compares growth of the broad money supply M3 (red curve) with the the shrinking value of a dollar as determined by the cost of living index (cpi-all items) - blue curve.

The rising red curve shows growth of the money supply since 1959, the value of which is shown on the left axis in billions of dollars - from $302 billion in 1959 to $11.5 trillion in 2006. ( M3 data:

(the 'broad' money supply is defined by economists as the 'M3' of money, being the sum of all cash, checking and savings accounts, small and large time deposits and money market funds).

The declining blue curve (taken from the chart at the top of this page) represents the falling buying value of a 1950 dollar, per the right axis shrinking from a value of 83 cents in 1959 to 11.8 cents in 2006 - representing 88% loss in purchasing power since 1959. (based on cpi data: table B-60, 2004 President's Economic Report).

This chart certainly appears to validate Dr. Friedman's above statement > "Inflation is always and everywhere a monetary phenomenon. To control inflation, you need to control the money supply."

Where has this taken us?
What are we leaving our children and grandchildren?

How about soaring debt ratios in all sectors, including the household sector, to new records each year (as proven by America Total Debt Report), to exploding federal debt (as proven by the Federal Govt. Debt Report), to soaring record trade deficits with surging asset transfers to foreign entities because America borrows to consume more than it produces (as proven by the International Trade Report), to plunging savings rates to historic lows (as proven by the savings chart), to long term stagnant inflation-adjusted median family incomes including declining real incomes of single household workers (as proven by the Family Income Report), to a 60% drop in the U.S. manufacturing base and its high salaries and benefits (as proven by the Manufacturing Report) causing more dependence on foreign entities, to a 74% loss in the foreign exchange value of the dollar (as proven by the Exchange Rate Report), to a loss of energy independence (as proven by the Energy Report), to the ticking time bomb for senior citizens regarding pensions and medical care (as proven by the Social Security Report), and, again, to an 88% loss of the internal purchasing power of the dollar due to generated inflation (as proven by the chart above). We can add to this ominous list the sagging quality of our education system and its lagging performance relative to foreign students and to our own past, including its own price inflation (as proven by the Education Report), our lagging life expectancy and health system quality at higher cost relative to other nations (as proven by the Health Care Report), and each year each worker must support more state & local government employees than ever before (as proven by the State & Local Government Spending Report), and finally - - the larger share of the economy consumed by government spending and the diminished share left to the private sector compared to the past (as proven by the Government Growth Report), including its impact on national security.

Everyone is invited to study the above and make their own list of impacts and consequences.

OTHER RELATED ISSUES - - Annual CPI, Revising CPI, What is the CPI?, Foreign Comparison, Money Supply, House Inflation, Mortgage Interest Rates, Commodity Index, Bottom-line > >

Taxes: we know in 2000 the federal government raked in more tax revenue (as a share of the economy) in peace-time history. Additionally, the Social Security Report shows today's working people are paying five (5) times higher social security & Medicare tax rates than did most of today's retired people during their working days. Some don't think higher taxes are a form of inflation, but this author does.

How many private sector families were guaranteed automatic cost of living adjustments by law during this period? However, government employees and others receiving incomes from government receive COLAs, including seniors.

Who lost? Answer: those who were saving and those who were working without guaranteed inflation protection for their earnings and for their increased tax rates to federal, state & local governments. Children also lost, as 2 ½ decades of inflation-adjusted family income stagnation forced more mothers to the work-force and away from full-time up-bringing of their children which further increased government revenue. And, household debt exploded and savings plunged.

International: Inflation performance since 1970 has caused declines of up to 70% in our foreign purchasing power, and America became the largest debtor on earth with ballooning negative trade balances.

Another item: as inflation camouflaged government growth, the issuance of regulations exploded to consume 15% of the economy, productivity declined if measured by meaningful methods, and more non-teaching employees and social mandates were added to schools resulting in a 71% decline in the education quality/price index, further driving inflation. We have heard about 'grade inflation' in public schools, yet U.S. high school seniors come in last of all nations on The International Math and Science Tests. And, in addition to supporting more retired seniors per working person, each working individual also must support 3 times more state & local government employees than before. And total government spending has grown faster than the economy for a long time. All this drives inflation.

To make it more difficult for us to understand inflation, major changes in measurement criteria have been made - to make us 'feel' better. This decline follows the same trend as the decline in the share of our economy represented by the private sector, which was caused by the fact that combined federal and state & local government spending increased faster than the economy, and therefore made a greater and greater portion of the economic pie dependent upon and controlled by government.


Today it is reported that inflation is "under control" if annual inflation rates are less than 4%. Why do we accept such a lowering of standards from the 1% or lower ratio achieved in the past?

Or - - how about a ZERO INFLATION GOAL as per the first chart in this chapter.

inf_rate.gif (5515 bytes)The chart's black plot line shows the inflation rate each year since 1952, as measured by the Consumer Price Index. (using the same measurement method employed prior to 1995. The red curve represents govt.'s revised method, discussed below.)

The first thing to note in this chart is that today's inflation rate is the highest in 15 years - and well above the 1952-1967 period. Why did media and government officials imply inflation is 'dead', and say its the 'lowest in our life time'? Many citizens were misled by such erroneous statements and their investments suffered.

Look to the left end of the chart. For the period 1952-1965 the inflation rate averaged about 1% or less per year (the dashed red line). This low-inflation period produced strong inflation-adjusted family income growth. Therefore, we set the 1% level as our target - - noted by the dashed-red line on the chart. In the mid-1960's inflation rates began a dramatic rise, for the next 2 decades. Once inflation rates exceeded about 3% inflation-adjusted family incomes and savings rates ceased to grow, as seen in the Family Income Report - - just as today's incomes are not growing while family savings plummet. The Reagan Era of the early 1980's started excessive rates downward toward the 2% level. Since then, inflation rates were much higher than the 1% rate average 1950 to 1964.

Computer price impact: Another item to keep in mind is the impact on the total CPI of rapidly declining computer prices. From 1987 to 1993 computer prices tracked the CPI, but then computer prices dropped much faster than did the over-all CPI. If you look at the CPI, excluding the computer component of the CPI, the non-computer CPI in 1997 was higher than in 1993 - 40% higher. To provide some numbers: in 1997 the CPI excluding computers was about 3.8%, or 1.5% above the total CPI for that year. So, huge declines in prices for computers, imported oil and other metals in the those 4 years effectively camouflaged the true underlying rate of inflation. But, these price declines cannot forever mask true inflation.

Additional concern regarding late 1990s data: It's a fact government changed how it measures inflation to make recent rates appear less threatening, and thereafter invented the song that 'inflation is dead' and claimed that this, together with productivity, improved U.S. competitiveness. That is a myth, since the trade deficit exploded and private sector debt exploded to new records in the last 7 years, indicating we have become increasingly less competitive, and we owe more and more to foreigners and other creditors?

May 2002 > the Wall Street Journal stated that Pat Jackman, an economist at the Bureau of Labor Statistics, admits that the CPI Index may understate actual year-over-year price increases.

Additionally > The so-called slowing of inflation rates measured by traditional methods were not just due to changing how they measure the cost of living index in recent years. The unprecedented explosion of new debt creation, brought on by manipulated interest rates to historic lows, helped fuel something outside the cost of living index - - exploding asset bubbles in stocks and real estate. Of course these bubbles will not be sustained, just as the real estate bubble is rapidly deflating. Therefore, in recent years explosive debt creation has not all gone into prices of goods and services which are captured by the CPI, but much went into creating asset bubbles that cannot be sustained and are not so captured. As economist Steven Roach said Sept. 2002, "The transition from tight to easy money unleashed a massive asset bubble and concomitant excesses in the real economy - - that must be purged."

When someone says inflation is dead, ask them "compared to what?"
- because they are changing how they measure -

The STATISTICAL REVISIONISM AND WIZARDRY Report documents numerous changes in measurement criteria during the mid-1990s. When some say today's inflation is low, you have to ask 'compared to what' - since they now measure CPI in 'oranges' and then compare to 'apples' in the past. Changes are always in one direction - - which is to pump-up the data to make citizens 'feel better.'

Watch it - CPI measuring criteria has changed: The short red line at the right of the chart since 1995 reflects a new government measurement method now in process, which lowered the historical method up to 3/4%. For 1995 3.1% inflation was effectively reduced to 2.8% by the new method, for 1996 from 3.4% to 3%, for 1997 from 2.8% to 2.3% for 1998 from 2.2% to 1.6%, for 1999 from 3% to 2.2%, and for 2003 from 3.1% to 2.3%. (the new changes are per Business Week, 10/4/97, pg. 30: 'Since the start of 1995, Labor Dept. statisticians have 'quietly' modified their treatment of rents, hospital prices, drugs, and altered other sampling methods. This has lowered the published rate of consumer inflation by 0.2 to 0.5 of a percentage point - and, a change of 0.63 points will be applied in 1998 and 0.75 in 1999 and forward. But, the govt. is not going back to fix historic data in the same way (so reviewing today's quoted inflation rates vs. the past must be with care to develop historic comparisons). Therefore, part of the apparent lower inflation rate numbers reported today compared to the past are from changing the yardstick of measurement.' That's like moving in the baseball field fence and then declaring > from now on our home-run performance will be better.

"Looking at it from the government point of view, there’s a strong political motivation to understate the CPI. By understating, it keeps COLA adjustments down on entitlements, which are at this point the largest part of the government’s budget. And by understating CPI, the government can minimize the inflationary impact on things such as rents, which are indexed to CPI, or wages, pensions and a whole list of ancillary costs to artificially keep inflation rates down. Bottom-line: The published CPI understates the real inflation rate." Dec 2005 - Barry Bannister, respected commodity analyst.

2007 report > In 1983 the Bureau of Labor Statistics changed how they measure the housing component of the CPI, such as to make inflation appear less than it is. They revised the housing component to equivalent rent, instead of house prices, which dropped the CPI dramatically. See 2007 report on this.


Bill Goss of PIMCO stated in October 2004, "The CPI as calculated is definitely a con job foisted on an unwitting public by government officials. The government says that if the quality of a product got better over the last 12 months that it didn’t really go up in price and in fact it may have actually gone down! In 1998 the methodology was adopted for computers – surely the biggest step backward in realistic inflation calculations. Since then, the BLS has expanded the concept to include audio equipment, video equipment, washers/dryers, DVDs, refrigerators, and of all things, college textbooks! (see poor quality textbooks). Today no less than 46% of the weight of the U.S. CPI comes from products subject to hedonic adjustments. PIMCO calculates that without them, and similarly disinflating substitution biases, Greenspan’s favorite inflation measure, the PCE, would be between 0.5% and 1.1% higher each year since 1987. If the CPI is so low and therefore real wages in the black, tell me why U.S. consumers are resorting to hundreds of billions in home equity takeouts to keep consumption above the line." (see America's Total Debt Report for trend data graphics on exploding household debt ratio). "If real GDP growth is so high, tell me why this economy hasn’t created any jobs over the past four years. High productivity? Nonsense, in part – statistical, hedonically created nonsense." (see Productivity Report)."My sense is that the CPI is really 1% higher than official figures and that real GDP is 1% less than stated." 'Con Job' at

(It should be pointed out that an over-stated CPI of 1% per year compounded for say 15 years produces a GDP that is 16% over-stated and Social Security monthly income 16% less to seniors than it should be. - calculation: M. Hodges)

Why did they do this? Answer: One could say if you don't like what you are paying then change the way you measure.

In this light, the Clinton administration and some congressional leaders decided to change how inflation is measured in order to reduce the annual cost-of-living adjustment pay-outs to recipients of social security and other programs, without saying that was their objective. Some might call this government fraud and theft in disguise.

This chart shows how much social security recipients would have lost in earnings if the CPI had been revised for 1984-1996, producing a gap of $100 per month by 1996. That was one of their motivations to make the change, and thereby also produce more surpluses in the trust funds to support more spending on non pension stuff.

Now, project those lines on the chart from 1996 forward into the future, and look how much future pensioners will be penalized via the change that was finally introduced in 1996.

If that 'savings' would be put into the trust fund to shore it up for future retirees then some might better justify the reason for changing inflation measurement criteria. But it was not saved for the future, it was siphoned-off and spent.

Additionally, when one hears on T-V about inflation rates one needs to understand that much of the touted by the fact criteria for measuring the CPI is being revised each year - - without historical perspective.

This does not take into account inflation in housing and stocks. Hopefully, the above charts and discussion provide some perspective.

For more on this 'changing the rules' in measuring inflation, the impact on social security recipients, and what makes up the CPI - see the Cost of Living Debate article from the Washington Post (


On this new, adjusted basis, our 1% target on the chart should be reduced to perhaps 0.5%. So, if one day you hear inflation rates are averaging below 0.5% annually without again manipulating how they measure, then you might say "OK, that's more like that experienced by my grandfather in the 1950s when only one wage-earner per family was required to rapidly expand living standards and savings, with minimal debt - - and when most mothers could stay at home to give full-time attention to their children and their schools."
Components of CPI IndexWHAT IS THE CPI (Cost of Living Index)? And - WHAT IS IT NOT?
Here's what IS included in the official CPI.

The left chart shows the components of the official consumer cost of living index, and the percentage each represents of the total CPI.

Note food and housing account for 58% of the total.

However, it must be pointed out that the housing component shown in this chart significantly understates housing, since this is based on rental price changes - - and does not account for the huge inflation in new and existing home prices, as discussed below.

And, we have all heard it reported we pay more in taxes than we do for food and housing - - yet taxes are NOT included in the official CPI. Why not, you should ask.

We know property taxes have not gone down, nor our sales taxes, nor federal taxes, nor social security payroll taxes, nor excise taxes, nor _ _ _ .
Have you ever heard of a tax going down, and staying down?

If they go up, which they do, or if they add more taxes at federal, state, or local government levels, which they do - - that is inflation that should be in the CPI, so individuals and families better understand total inflation - - not just a manipulated inflation index.

Yet - - taxes are not included in the CPI computation, yet the cost of government is the largest component (43%) of the economy. Question: Why Not? This Inflation Report WILL NOT IGNORE that biggie!!

Notice the large housing component of the CPI in this chart. As mentioned above, this component is understated and significantly distorts the CPI reported to the public. Right? Well, some years ago, the way the housing component is measured was changed. It no longer tracks the inflation in housing prices (note below charts showing huge increases in house price inflation). This component now only tracks what it calls the rental value of owner-occupied housing which moves much slower - - especially recently as record low interest rates manipulated by the Federal Reserve have driven more renters to become home owners which lowered rental prices due to lower rental demand as it also drove up house price inflation. This altered measure of housing has nothing to do with housing inflation, so the CPI housing component significantly understates true inflation. Why would government wish to understate the CPI? One reason is to fool workers and social security recipients into accepting lower cost of living adjustments. Another is to fool investors into thinking the economy is better than it is and to allow the government to pay lower interest rates on its mounting debt. Should such manipulation be allowed ??

CPI components with Government Taxes includedThe next chart adds what is NOT included in the official CPI. a missing element - government spending impacts shown by the red slice, and adjusts the ratio of each of the original components accordingly.

First, we notice from the chart that the red slice of the pie, 44% of the total pie, is represented by that required to support all federal, state, and local government spending.
Government is a real cost to each of us, just as food and housing are real costs to each of us. Many will say one needs food & housing more than government - - especially more than large government.
This 44% figure is from The Government Growth Report.

This 44% for government spending (% net national income), you will notice, is more than the sum of the food, housing and clothing components which total 36% - - just as we have heard before. (BTW - the housing component is based on rents, not housing prices as should be the case)

Since we know government's taxes and regulations impact inflation, just as any other item faced by individuals and families, many continue to ask why is this not included in the official CPI calculation - -

especially since we know government tax revenue at all levels has been increasing at a faster rate than both GDP and personal incomes. And, from where does that revenue originate?
Answer: It all comes from individuals and families, because they pay all costs of government, in one way or another, both direct and indirect. - - as reported in the Tax Report.

and, we know federal government spending has increased faster than general CPI inflation and even faster than growth of the entire economy. See the Federal Government Spending Report.

and, we know state and local government continues to increase their employee headcount faster than growth of the general population - - as shown in the State & Local Government Spending Report.

What percentage of households have experienced a reduction each year in their property taxes? Answer: that's not on anyone's radar screen. How many have seen their property taxes rise? Everyone! That's inflation, and must be included in the CPI. As reported in the Tax Report and according to, since 1995 property taxes nationwide have jumped 48%, that’s 30% higher than inflation.

And, we know government employees write more regulations each year, which increases compliance costs to consumers (although much is 'hidden'), as shown in the Regulation Compliance Cost Report.

This regulation cost component is not shown in the 44% red slice of the above pie chart, but if it were shown it would add as much as 14% to the above government slice of the pie (since all compliance costs are not shown in say food costs), bringing that red slice to as much as 58% of the total pie - - and thereby reduce the remaining component slices (approximately) accordingly - - meaning, housing would become as low as 19% of the total, food 8%, etc.

In any case, the impact of complying with increased government regulations does impact inflation to consumers in a way that is not easily measured - - in fact government does not even budget compliance cost impacts before approving regulations, as such are in effect un-funded mandates imposed on the private sector.

NOW YOU KNOW - - at least a bit better - - that in addition to the 1990s' revision of the criteria for measuring the official CPI inflation rate, such as to minimize same as discussed in above articles, the official CPI does not even include the impact of government - - the largest cost item in the economy.

GUESS WHAT? - the above chart indicates that a way to reduce TOTAL inflation is to reduce the share of the economy controlled by government at all levels


INTERNATIONAL NOTE: U.S. future international competitiveness and living standards depend not just on our internal inflation rate, but how it compares to our major international competitors.

inflation rates: USA vs othersThe Exchange Report shows the long-term negative trends of the U.S. dollar compared to the currency of other nations, and the Trade Report shows soaring negative trends in balance of trade and current accounts. Parts of these negative trends are caused by higher relative inflation rates in the U.S. vs. other nations.

The left chart is according to data from the international Organization for Economic Cooperation & Development (OECD). The red line represents consumer price inflation in the USA - compared to several other nations. The USA continues to experience inflation rates higher than others, despite the U.S. revising its measuring method in 1995 to report 'lower' numbers. In June 2007 compared to a year before the U.S. inflation rate was 4.3% by its 'new' method shown in this chart. In this chart the other nations continue with their old, historic measurement method - such as the latest data point of 0.1% (Japan), 2% (Germany), and 1.6% (Swiss) - per The Economist 7/21/2007, pg. 93.

These nations had consistently lower inflation rates than the U.S. during the past 2 decades, and continue to do so. U.S. costs continuely increase much faster than these tough competitors.

In the 12 months to May 2007 Japan and Germany produced strong positive trade surpluses (combined of +$326 billion) whereas the US recorded a historic high negative trade deficit of $827 billion (Trade Report) - - that's a whopping relative $1.2 trillion U.S. negative trade difference.
inflation-foreign-5.gif (5952 bytes)While its interesting to hear some 'brag' about today's lower inflation rates and making statements that 'inflation is dead', one must always respond with the question: "Compared to What?"

The left chart looks at longer term trends comparing cost of living index of 5 nations.

Note the USA line is red, pointing upward faster relatiave to the others.

To this observer it appears clear from these graphics that the USA needs much firmer action regarding inflation, as we need to be in the 0.5% rate range (incl. new housing prices) and with a slower cost of living index (less inflation) than international competitors -

- instead of changing measurement criteria or leaving out of the measurement key components like food and energy - - which camouflages reality.

data source: You may find basis and data for this CPI chart: (from german wikipedia, keyword "inflation" ) and


As recently as 1950 the U.S. was producing half the world's oil. Forty-eight years later, we don't produce half our own oil. Domestic production peaked in 1970, 30 years ago, and today we produce just 40% of the crude we consume. It is reported that within the next 5-15 years world oil production will peak, then decline. Perhaps international producers will prefer to maintain higher and higher prices to protect their diminishing supplies or limit they type of customer to whom they will sell based on geo-political agendas. (what are the energy implications for inflation, real family living standards, and national security looking forward, compared to past generations?). Energy-dependence - The Energy Report graphically shows declining oil production and reserves, and rapidly rising consumption of both oil and gas, as the U.S. has become more dependent on foreign oil and gas than ever before - - which has both economic, inflation, and national security implications.
m3-vs-cpi.gif (6548 bytes)MONEY SUPPLY (incl. repeating the above chart)

A warning - MONEY SUPPLY explosion
creating loss of purchasing power of each dollar, plus exploding debt

"Inflation is always and everywhere a monetary phenomenon. To control inflation, you need to control the money supply." Milton Friedman, Nobel Laureate in Economics.

The dollar's purchasing power collapsed 85%, as the money supply exploded 3,000%

- - as proven by this chart.

The left chart compares growth of the broad money supply M3 (red curve) with the the shrinking value of a a 1950 dollar as determined by the cost of living index (cpi-all items) - blue curve.

The rising red curve shows growth of the money supply since 1959, the value of which is shown on the left axis in billions of dollars - from $302 billion in 1959 to $11.5 trillion in 2006. ( M3 data: and

(the 'broad' money supply is defined by economists as the 'M3' of money, being the sum of all cash, checking and savings accounts, small and large time deposits and money market funds).

The declining blue curve (taken from the chart at the top of this page) represents the falling buying value of a 1950 dollar, per the right axis shrinking from a value of 83 cents in 1959 to 11.8 cents in 2006 - representing 88% loss in purchasing power since 1959. (based on cpi data: table B-60, 2004 President's Economic Report).

This chart certainly appears to validate Dr. Friedman's above statement > "Inflation is always and everywhere a monetary phenomenon. To control inflation, you need to control the money supply."

11 year trend broad money supplyThis chart records 22 years of the growth rate in the broad measure of U.S. money supply creation. Note the recent accelerating upward trend.

Although some claim the M3 money supply growth rate measure has less meaning in the late 1990s and 2000s since money is now also 'created' by non-bank entities, such as the GSEs (Fannie Mae and Freddie Mac), it is included here for interested visitors.

Note its fall from 1986 to 1992, which reduced previously very high inflation rates.

But, money supply exploded in the 1990s - as if 'powers-to-be' decided the best way to increase economic growth (at least for the short term) was to surge money (debt) creation, instead of real investment in infrastructure and manufacturing - - indicating trouble down stream. It is interesting that during this period of high money supply growth the definition of inflation's cost of living index (CPI) was changed to downplay inflation reporting (see below).

However, as mentioned above, non-bank entities such as the GSEs started creating money which may not slow up here. As a note, its interesting that the public does not understand the reason the Federal Reserve stopped publishing this M3 data in early 2006. Some believe the reason was because increases in this money supply foretell accelerating inflation and the Federal Reserve did not want to 'advertise' what is coming on that front. In any case, data after that date has been compiled by and is plotted here starting in 2006, showing a disturbing increase to 13.5% annual rate - pointing to accelerating future inflation. "Composition of the U.S. Money Suppy" in July 2007 reported that since money suppply growth causes inflation and that current trends in money supply are such as to suggest real inflation, that experienced by real people, is 7-14% - - certainly no where near the bogus 2% reported by the government.

It is this author's view that total debt is the item to watch, not M3 money supply alone. That is the reason such an extensive chapter was created, called America's Total Debt Report (sum of private sector and government debt) - - which shows that each dollar increase in total debt (now near $50 trillion) is producing a diminishing change in national income - - and the debt of households exploded to the highest ratios in history.

This appears to mean that in order to sustain national income growth (for the time being) more and more new debt (money supply) must be created than ever before - - faster and faster. Sooner or later the 'chickens must come home to roost' regarding huge debt levels in all sectors of the economy.

The reader needs to understand that increases in the money supply are largely brought about by either printing more dollar bills, or by increases in more debt money injected into the economy, or a combination of both. Both eventually result in a combination of more imbalances in the economy, leading to inflation and/or economic contraction as well as devaluation of the U.S. dollar's international value.

* What Does This Indicate? Clearly the steady reduction in money supply up to 1992 had a significant impact of dramatic reductions in inflation rates shown in first chart top of page.
* BUT, what happened after 1992 as money supply rates surged up? Such occurred at a time personal rates of savings plummeted to historic lows (see Savings Trend Chart) - meaning the above money supply growth certainly was not caused by savings, but instead was caused by the Federal Reserve pumping money (debt) into the economy as seen by unprecedented private sector debt growing faster than the economy to historic high ratios. Since prior to 1992 inflation rates had been decreased so rapidly the BIG QUESTION is why was this course reversed so dramatically to the upside of exploding money creation after 1992? Some might sense political motives to drive economic good times by expanding the money supply and debt creation in the private sector. However,
* 'In 1998 the broad measure of money again dramatically increased above the prior year. So far this excess liquidity has mainly fueled the surge in share prices; unchecked will eventually leak into consumer spending and prices." The Economist 2/98, updated 1/23/99. Perhaps 'fear' of the Asian crisis led to further pumping up the money supply in 1997-8, and then there was the excuse in late 1999 to surge more money supply to 'ward off the expected computer glitch of January 2000 (which never occurred)? Clearly this surge in money supply cannot continue forever to camouflage underlying imbalances which will impact the future, as more credit (meaning debt) is injected into the economy making it more and more debt-dependent.
* The above was a clear warning as witnessed by the financial markets in 2000-01, especially since just a slight slow-down in the rate of money creation in 1999 & 2000 (yet still way above prior years) dramatically impacted financial markets, which proves these markets are more influenced by money (debt) creation than by underlying fundamentals. In the year to June 2001 the U.S. again surging money supply, and creating debt (money supply growth) at a rate of 100-200% faster than our major trading partners. As a result, the chart just above this one shows the U.S. in experiencing higher inflation rates than these trading partners.. This signals a stronger warning regarding the U.S. dollar (see Foreign Exchange Report) considering exploding trade deficits (see graphics in Trade Report).
* And, the savings chart shows Americans have not saved so little since the depression of the 1930s - a spending binge well beyond growth of their incomes - - as savings plummeted since 1992 to levels.
* We have been told that in the late 1990s productivity surged which made us more competitive. The question is, that if productivity did surge, then why was it necessary to explode money (debt) creation in the economy AND why did the nations trade balances explode to negative records? See the productivity report.
* NOTE: To this observer a key point is not what is our level of inflation (especially with all the recent changes in how it is measured), but our private and government debt ratio trends, our trade balance trends, and how U.S. inflation compares to our strong international competitors. One has to wonder how much of the economic 'growth' of the US economy since 1992 has been purely driven by inflating money supplies and debt creation compared to real production, as seen in above chart. Certainly, any economy can appear to boom when you 'throw money at it' - - at least for awhile. But, what happens when that is reversed - - together with a cessation in the drop of commodity prices? Free lunches do not last forever - - at least so far they haven't. Its the long-term that matters to our young generation.

'Boom bust cycles and their causes' - Explaining the Fed and money supply for those interested in more depth > "The major catalyst that sets in motion a boom-bust economic cycle is the monetary pumping and artificial lowering of interest rates by a central bank. A loose monetary stance by the central bank enables the diversion of resources away from wealth generating activities towards wealth consumption, thereby causing a depletion of the pool of funding." 'Monetary Policy', by Dr. Frank Shostak, PhD (email > FShostak@MANFINANCIAL.COM.AU).

More on the CPI and Cost of Living
Measurement Games

(although the following is now past history - it's repeated for reader info)

In the mid-1990s consideration was given to revising the cost of living index (CPI), such as the Boskin Commission Report of December 1996, which stated inflation rates might have been over-stated by 1.1%. Great care should have been exercised before jumping to revise any historic measurement criteria since that distorts comparison with the past, but especially since politicians were under the gun to revise economic imbalances by perhaps saying they never existed.

Example: the deficit might be eliminated at the expense of pensioners just by changing the CPI methods, since they were counting social security surpluses as if they belonged to the general government, which would take the 'heat' off politicians to make the hard general government spending reduction choices. Another example: politicians were unhappy facing continued long-term stagnation of inflation-adjusted family incomes, and if they could revise the way inflation was measured this might cause a miracle and make it appear family income pressure is less.

The exercise appeared aimed to revise CPI (which cuts COLAs) by a politically-accepted method produced by a commission established for this purpose, with the sole objective of increasing net revenues for spending on other programs - by a 'hidden' method which is effectively a Tax Increase.

Even the 'justifications' for CPI changes of the 'enhanced quality' or shopping approach arguments are very weak - there have always been so-called quality improvements and changes in shopping methods since the beginning of time.

Further, there should be clear legislation that all 'savings' resulting from CPI revisions must not be converted to other spending, but must be applied direct to principal payments on federal debt AND to tax cuts.

Such number-changing approaches, as the Boskin CPI study, offer political 'game-making' potential for politicians to further disguise spending and the deficit, as well as making the economy appear better than it actually is.

Further, even if one applies the Boskin 1.1% change to measuring family incomes (see Family Income Report), still the period prior to 1970 saw median family incomes grow a huge three times faster than after 1970. So, such CPI adjustments will not explain-away this major shift in family financial conditions. So, why play numbers games?

"We should be nervous about dealing with what are essentially political choices by fobbing them off on a technical revision," said Paul Krugman, an economist at the Massachusetts Institute of Technology - to the Washington Post.

[for June 1997 report (Labor Dept.: CPI Modestly Overstates Inflation) that disputes use of the Boskin commission report, and states at most the overstatement is 0.4%, and if medical costs are properly considered said overstatement may disappear - - see: . Also, see the Full Report on the CPI ]

Many economists and the Federal Reserve Board Chairman agree the new measurement criteria understates inflation.

Student loan debt: among the two-thirds of college students with loans, the average debt has jumped from $9,250 in 1993 to $19,200, a 58% increase after adjustment for inflation. Jan. 2007 at


The consumer cost of living index (CPI) does not include inflating housing prices.

housing prices - 1959 vs todayThe left chart compares the median price of a single family home today vs. 1959.

In 1959 my house cost $14,100 (see below*)
In 2007 the median price of an existing house was $213,800 (data: US Dept.Housing, HUD ).

This increase reflects 1,400% house inflation over that time period.

In the past 5 years house prices increased 35% (driven by extremely low mortgage rates). A market correction is in process.

If home prices were included in the cost of living index, which is not the case, its easy to understand how this index significantly understates inflation.

Coupling inflated home prices with mortgage rates well above 1959 rates, it's easy to 'feel' the pinch on young families today, and easier to understand why past generations could get by with one wage-earner per family while building home equity and savings, with but small debt. To realize a home most of today's families require both husband and wife in the workforce, leaving young children without a full-time mother - - and today's average household has the lowest rate of savings and the highest debt ratio in history.

This is a good example of what inflation does. One thing that has become much more dangerous for many, many families - - taking out home equity loans and thereby consuming their equity - - whereas in past generations many homeowners eventually became free and clear - - they saved their equity buildup to help provide a living cushion in later years.

*Comment: The author's first new home for his family in 1959, the top model ($14,100) of a neat, new subdivision of professional residents, was financed for 30 years at fixed annual 5 ¼% interest rate. Monthly payments including tax and insurance were $94/month, which consumed approximately 17% of take home pay from my first job as a young engineer. My wife was able to choose to stay out of the workforce, and be home with our small children. This new concrete block home had 3 bedrooms, 2 baths, family room, living room, dining area, utility room, and screened porch - - totaling about 2,100 sq. ft. under roof. Floors were finished terrazzo (a type of tile) - - today considered a high-price luxury, compared to today's unfinished floors for standard houses. Heating was central gas, the roof was barrow tile. Also included was a tile-roofed 2-car carport with cement drive and outside gas lamps; the lot size was about 100 X 150 sq. ft; (this was not a GI loan, which then required a smaller 4 ½% interest rate).

2004 Housing Inflation - only 15% of Households can Afford

April 8, 2004. SAN DIEGO – The percentage of San Diego households that could afford a median-priced home was 15 percent, down from 22 percent a year earlier, according to a real estate industry report released Thursday. The February housing affordability index compared with 16 percent in January, according to the California Association of Realtors. The median home price in San Diego in February was $479,540, said Mark Giberson of the CAR. Households would need to make $111,510 annually to be able to afford a median-priced home in San Diego in February, Giberson said. The sheer increase in home prices means that the minimum qualifying income for a loan to buy a home is going up faster than most household incomes," said Robert Kleinhenz, the association's deputy chief economist. "It's a tough situation for residents of San Diego County." Twenty-four percent of households statewide were able to purchase a median- priced home in February, down 6 percent from the same period a year ago, according to the report. The minimum household income needed to purchase a median-priced home at $394,300 in California in February was $91,690, according to the association. Signonsandiego News Services, 4/4/04

And, that is nothing !! In 2005 and 2006 housing prices further accelerated which dramatically further decreased affordability.

NOTE - - it was noted above that the cost of living inflation index (CPI) understates inflation because its housing component does not take into account house price inflation but instead uses rental value, which significantly understates inflation.

DESPITE SO CALLED HISTORICALLY LOW MORTGAGE INTEREST RATES, TODAY'S RATES ARE WELL ABOVE THOSE OF 1960 - - and bankers cut rates on mortgages significantly less than they cut rates on family savings - - a double squeeze.

The next chart shows the 30-year fixed (no points) home mortgage interest rate in June 2006 of 6.86% vs. 5.25% in 1960.

This means many young families were paying 28% more interest each and every month compared to families in 1960 on the same level mortgage. Several years ago mortgage rates were over 8%, meaning they were 57% higher than 1960. That's a huge impact - - especially when applied against the tremendous inflation in housing prices (see above).

mortg-rate.gif (4009 bytes)Recognizing stagnant inflation-adjusted incomes for the past 2 ½ decades, higher mortgage rates coupled with inflated prices certainly negatively impact families - - leading to nil savings, soaring debt and more mothers in the workforce than ever before.

With the slow-down of the economy in recent years, and the tremendous pile-up of private sector debt to all-time records, the Federal Reserve slashed its federal funds interest rate to near record lows of but 1%, a total decrease of about 5.5 points.

Although that decrease depressed interest earned on family savings by at least that same 5.5 points, mortgage rates came down only about two points. And that so called mortgage 'low level' of 6.38% was still 22% above 1960 rates.

This is a good example of how 'powers-to-be' cut interest rates paid by banks to savers by 85% (from 6.5% to 1%), but only reduced mortgage rates by 25% (from 8% to 6%) in the face of roaring house price inflation resulting in huge mortgages- - all aimed to fuel income of the financial sector at the increasing expense of households. (Freddie Mac 30-year fixed rate mortgage)

For color graphics of comparative Tax Rates for Families, see Tax Report

For trends of family incomes, see Family Income Report

THE COMMODITY INDEX (crb) vs. COST OF LIVING INDEX (cpi) - - since 1950.

The rising red line is the inflation measure called the CPI, or cost of living index.

crb-cpi.gif (10487 bytes)The blue line is the commodity research bureau (CRB) price index for commodities.

Note the huge disconnect in the early 1970s, which is the same period when median family incomes (inflation-adjusted) ceased to grow strongly as they did in prior periods - -

- - followed by surging debt ratios.

BTW- CRB data Jan 2006 was 347 points - - left scale this chart, indicating commodity inflation has soared at double digit rates in the past year. (The CPI end 2005 was 197 - right scale of this chart)

Additionally, some will argue that such inflation precipitated the decline in the U.S. manufacturing base, leading to the trend of ever increasing trade deficits as shown in the International Trade Report chapter and to rapidly increasing private sector and government debt ratios shown in America's Total Debt Report chapter.

And the real beginning of the long-term decline of international buying power of the dollar vs. the other major industrial competitors, shown graphically in the International Dollar Exchange Rate Report.

And the significant challenge regarding energy, as shown in the Energy Report.

Such threatening the economic independence (as well as national security independence) of the USA relative to other foreign nations as we depend more on others for energy, commodities and financing debt.


* We should not accept higher than a 0.5% to 1% rate of inflation (via the prior measurement method AND with housing prices included in the index), and the U.S. rate should be below that of Japan and Germany.
* We should not provide cost of living protection to federal and state & local government employees, or welfare recipients and seniors if not equally provided to all families, as such is a negative to equality and a negative to citizen awareness of true facts regarding inflation. Elimination of mandated COLAs is recommended. Fairness and equity is required - - less many families are being abused just because they do not have union, AARP, political organization power, or work for the government.
* We should require strict regulatory cost accounting for all existing and future regulations, as un-funded regulations pass on a 'hidden' cost to the private sector which reduces productivity and increases inflation impacts on family income and spending power. (see the Grandfather Regulation Report)
* We must make sure government employees do not receive compensation packages above the private sector, and they must be adjusted downward considering government employees often have more protection from layoffs.
* We should reduce federal, state and local government spending ratios to economy size, with targets selected according to an approach similar to that contained in the Action Report. Since such has grown faster than the economy in the past, it's time to budget for government spending growth much slower than growth of the economy, aiming toward ratios experienced when our nation produced trade surpluses, low inflation and strong long-term increases in family incomes and savings with but one worker per family.
* Recognizing that much of our military spending is to protect our access to foreign oil supplies, the consumer price of energy in the U.S. perhaps should reflect this military spending. Is it feasible to determine this amount and then reduce general taxation by the same amount and make up with energy taxes - - so consumers have more incentive to conserve?
* Recognizing soaring ratios of debt debt creation to new record highs in all sectors, as graphically proven by the America's Total Debt Report, much driven by manipulated non-free-market interest rates, the Federal Reserve must be regulated in interest rates.
* AND, FINALLY - - the U.S. financial system must be restrained from creating money and debt out of thin air, as it was before the gold standard was abandoned in 1933. How is this to be done? It must be done by an act of Congress to so control the Federal Reserve's ability to manipulate interest rates and debt creation, but no such law has been presented.


1. Is the U.S. a Free-Market Economy?
2. How can it be free if there is a federal reserve bank manipulating the money supply?

And the answer is > "To the extent that there is a central bank governing the amount of money in the system, that is not a free market," said former Federal Reserve Chairman Alan Greenspan said in September 2007 (on T-V to Jon Stewart)

There you have the answer to our questions > This is not a free market.

What will today's 12 cent dollar be worth when our grandchildren enter the work force? What will it be worth when they retire?

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit (debt creation)." by Allan Greenspan (#8) in The Objectivist newsletter published in 1966, reprinted in Ayn Rand's Capitalism: The Unknown Ideal.


* It should be recognized that the 88% decline in the dollar's value inside the U.S. does not include the further 70% loss in the foreign exchange rate of the dollar outside the U.S. since 1969. Those citizens traveling abroad during that period certainly recognized how little the dollar purchased abroad..
* The Foreign Exchange Rate Report shows the long-term trend graphic of the U.S. dollar's exchange rate, and includes a discussion about the new European Currency (the Euro). As of July 2007 the U.S. dollar has fallen 53% in value vs. the Euro. Such devalues the international value of assets of every single U.S. citizen without a peep from political leaders. They think the only way to reduce our nation's massive trade deficit is to cheapen individual pay rates and assets. It should not be presumed this opportunity will have a long-term life, and this may be a negative disaster to trade balances and reinstate the long-term slide of the U.S. dollar, unless firm action is taken by local producers to increase competitiveness, especially of our shrinking manufacturing base, and government spending and private sector debt ratios are lowered - - to become much more competitive internationally.

How about some inflation fun? Find out how much money you need today to equal the purchasing power of money in the past. Click the "Inflation Calculator." Up will pop the inflation calculator from the government's Bureau of Labor. As an example how it works, Enter the figure 1000 in the box, and then click the down arrow to enter the date: 1913. Then click "Calculate." You will see how much money, after taxes, you would need today to equal the purchasing power of $1,000 in 1913, the year of creation for the FED. The answer you will find is $18,585.86. Stated another way, this calculation shows that today it takes $18,585 to have the same buying power as just $1,000 in 1913. Isn't inflation fun? Now you can have fun with any number and year you choose to see what inflation has done.

The Nightmare German Hyper-Inflation of 1923-24 - The many parallels between 1919-24 Germany and present-day United States are cause for concern to many. This article explains events during this terrible hyper-inflationary period in Germany. (see article in our Links Page, item #19