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Ed Butowsky: Calculating The True Cost of Living Increase

Why it's much higher than we're told/sold
Sunday, March 20, 2016, 1:06 PM

Over the past decade, we've been told that inflation has been tame -- actually below the target the Federal Reserve would like to see. But if that's true, then why does the average household find it harder and harder to get by?

The ugly reality is that the true annual cost of living increase is far outpacing the government's reported inflation rate. By nearly 10x in many parts of the country.

This week, we welcome Ed Butowsky, developer of the Chapwood Index, to the program. His index is a 'real world' measure of how prices are increasing much faster than the wages of the 99% can afford:

In my business, I wanted to make sure that I was building portfolios that weren’t just efficient but got people the rate of return that they needed. I thought: My goodness, what I need to do is give people a list of everything they spend money on and have them track quarter by quarter exactly their increases, so I can do a better job as a financial advisor in determining what return I need to target.

I got a hold of a list of 50 major metropolitan areas and found people in every city and I gave them a job: I asked everybody to send me what items they spend their after-tax dollars on. I got about 4,000 different items. Then I took the 500 that most frequently appeared on the list and we've been tracking specifically these same items in every city since that period of time. I weight this list based on what percentage of a normal income people spend on each item.

The purpose of this index is to let people know that, if you live in California, your cost of living increase goes up somewhere between 12-13.5% a year. And if you're not making 13% more in salary, then you're losing purchasing power; and that's why people fall further and further behind. If you are in New Mexico, it's about 7%.

Basically, over the last five years, the average increase for all 50 major cities is 10% vs the average CPI of 1.5%. So it's easy to see that for people who are in the middle income, lower income or people who are living off of a pension that's adjusted based on the CPI, they've lost 8.5% of their purchasing power if everything was adjusted to the CPI year over year. Do that over five years, over 10 years -- now you know why there's such a separation between wages and wealth. 

Click the play button below to listen to Chris' interview with Ed Butowsky (38m:05s)

Transcript: 

Chris Martenson: Welcome to this Peak Prosperity podcast. I am your host, Chris Martenson. In the Crash Course in Chapter 18 we cover something I call “fuzzy numbers” and in there we find out all the ways the government statistics are bent, stroked, massaged, manipulated—always with the net effect of making economic conditions seem rosier than they really are. Unemployment excludes discouraged workers and GDP is over stated by understating the true price increases of consumption expenditures. But the worst statistical lie of them all is perhaps the Consumer Price Index, or CPI, which purports to measure inflation.

Here today to discuss the true nature of inflation with us is Ed Butowsky, who created the Chapwood Index—an actual measure of inflation that is devoid of the usual statistical tricks. From the website, ChapwoodIndex.com, we find this description: The Chapwood Index reflects the trust cost of living increase in America. Updated and released twice a year, it reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after tax dollars in the 50 largest cities in the nation. Ed, I really can’t wait to dive into this with you. Thank you for agreeing to be on our program today.

Ed Butowsky: I appreciate it more than you know, having me and shining a light on this. I started this index many years ago—and maybe we will dive into why I started it. It just blows me away how impactful the under reporting of the CPI is in the entire world. I mean I can actually draw a conclusion that this under reporting has actually impacted the balance of power in the world. Absolutely. It might be a little bit of a reach but I get there and it seems logical when I say it.

Chris Martenson: How about we start here – before we dive in. Tell us a little more about yourself and your background.

Ed Butowsky: Sure. I’m a wealth manager. I grew up at Morgan Stanley in the business. I was very fortunate and somewhat lucky, but I became the top investment broker in the country. I actually had the most assets under management and did the most business back in 1998, 99. And I eventually left Morgan Stanley in ’02 and went over to Bank of America, which was a really bad move. Then I eventually just went off on my own. So I managed money. A lot of people know my work through a movie called Broke on ESPN. I do a lot of work with professional athletes and I put that movie together. It’s a documentary talking about the – basically how many people go broke and the financial struggles that athletes have. And now I manage a firm, it is called Chapwood Investments, in Dallas. I have clients on both coasts and around the country.

Chris Martenson: Fantastic. Now let’s get to the Chapwood Index. What initiated – that is a big labor of love I assume. What prompted you to start and create the Chapwood Index?

Ed Butowsky: This is what happened: My mother was dying from cancer. We knew she was going to die and I went home to surprise her on the last birthday that she was going to have. When I surprised her, she actually surprised me by not being in the house. She was still about four months away from passing away. But I went in and couldn’t find her. I drove down to the hospital. I drove to the different places where she might be. Then she walks in from work, and what was shocking was—I didn’t even know she had a job. I said "where have you been?" out of love and concern. She said, “Well, I was at work.” I said, “You got a job?” Her words were, “Your father didn’t adjust my alimony for COLA.” And that statement right there was the statement that changed my life. First I thought she just drank Tab. I was like "what do you mean COLA?" I didn’t even know what COLA was.

As I looked into it I found a man named Albert Sindlinger who wrote an article about the manipulation of COLA and how the government in 1983 started manipulating that number so it would be lower, so they didn’t have to pay out as much money in government entitlement programs and increases in transfer payments of different kinds along with government salaries. And that really caught my eye because it made me realize that my mother—if she was having that alimony adjusted for COLA—she wouldn’t be able to keep up with her standard of living anyway. I wanted her to always live as a princess.

Chris Martenson: Of course. Thank you for that story. I’m sorry for your loss and also for the way in which you had to discover this ugly truth, which we all get to at some point, which is that this COLA, or Cost of Living Adjustment—there are good, solid reasons on the fiscal side why the government wants to keep that down. The COLA is adjusted based on something called the Consumer Price Index, or CPI. What is wrong with the CPI?

Ed Butowsky: Well there are many things, and you are right, this was done by the government to keep the government expenses down. Here is what people miss: The negative unintended consequence of them manipulating this number is this: People in the middle income and lower income brackets in the private sector – their salaries go up based on that number. So an employer will say "you know what – the cost of living or the CPI went up 2% so I am going to give you a 2.5% increase." And that is how that number impacts the world. And what is wrong with it – I mean people can go – there is a man named John Williams who you and I communicated over the internet about. John Williams does spectacular work in explaining how many different ways the government has manipulated the statistic. But up until 1983 they had looked at 1,700 items month after month after month without any manipulation. And then in 1983 they started playing games and saying "well you don’t need a steak. You could have had a hamburger and that didn’t go up as much, so we are not going to give you a price increase."

The other thing that has never been part of it has been taxes and insurance costs. So that has never been part of the CPI, but people should study it -- it would make for a lot of boring radio, but they have been doing it. And they did it again in '93 and '94 under the Boskin Commission. They got lots of academics together to try to justify keeping that number low. And eventually they will find someone who supports their thesis.

Now, democrats and republicans are both behind this because they all want to keep the amount of money the government spits out lower. Again, the negative unintended consequence is that people who work their tails off every day, follow the rules and get their increase on their salary based on that number they are being—literally they are committing financial suicide by following that and not challenging what their cost of living increase was because the CPI doesn’t reflect reality anymore.

Chris Martenson: Well absolutely. And at the risk of creating the boring radio, the details don’t matter because what these little wiggles and jiggles in statistical hitches do is they shear a percent or two off. And it doesn’t sound like a lot, but over time we are talking percentages so this is a compounding function. You just take a percent off for 10 years, you have got a big number on your hands when all is said and done. So this is something I do cover in great detail in the work I put out just to track it, not to try to recreate it. I was just pointing out the hedonic substitution, weighting. Here is an example: According to the Bureau of Economic Analysis, when I look at the cost of new cars, they say they have been going down every single year. Then I wander over—because of hedonics because the cars are getting better, the quality is better and so they adjust and do all their funny things. I don’t even purport to know what they do. All I know is they say cars are going down in price. When I look at the actual total lease terms and new car expenditures, those go up every year. They are just like two ships crossing in the night. So we cover a lot of that. Your Chapwood Index though doesn’t try to do any of that. What does it do?

Ed Butowsky: I was going to get into that. I was just afraid you might get upset if I got that boring.

Chris Martenson: No. We go into detail all the time.

Ed Butowsky: What I did is I started thinking that in my business I wanted to make sure that I was building portfolios that weren’t just efficient but got people the cost of... the income, or the rate of return that they needed. Then I thought well my goodness what I need to do is give people a list of everything they spend money on and have them track quarter by quarter exactly the increases so I can determine—to do a better job as a financial advisor—I can determine what I need to target. So I actually sent this out to my clients and I got a lot of people telling me to go stick it somewhere because there is no way in the world they were going to do that. Then I thought, you know what? I have a lot of friends on Facebook. I got a hold of a list of 50 major metropolitan areas and found people in every city and I gave them a job and I sent them – I asked everybody to send me what items they spend their after tax dollars on and I got about 4,000 different items. Then I took the 500 that most frequently appeared on the list from my friends. I then gave that list to my Facebook friends in all the different cities, and we have been tracking it—specifically the same item in every city for that period of time. And then we weight it based on what percentage of a normal income people spend. So if it is on a house, well there is a percentage of your income you spend on a house. There is a percentage you spent on food. So we weighted that based on that. I never give out the exact numbers because the last thing I need is people a lot smarter than me—and there are a lot of people smarter than me—really going at me. That is not the purpose of the index. The purpose of the index is to let people know that if you live in California, your cost of living increase—not your cost of living, but your cost of living increase—goes up somewhere between 12 and 13.5% a year. And if you are not making 13% more in a salary, then you are losing purchasing power and that is why people fall further and further behind. If you are in New Mexico it is about 7%.

I use this, and my Facebook friends have been terrific. I have a couple of them who bailed out. Matter of fact that's what happened. I just released my numbers today for 2015.

Chris Martenson: I am looking here on your website. My eyebrows are up on my forehead because this is really, really far away from what the Federal Reserve is talking about. They are afraid of deflation, "oh my gosh inflation is too low." There is nothing too low. Let me just average this by eyeball. I can do 10% in my head. 10% using the rule of 72, that means that my cost of living is going to double in just seven years—this is what you are saying. For these people living in these areas, every seven years basically the cost of living is going to double.

Ed Butowsky: That is exactly accurate. What is not is the CPI number, which has averaged 1.5% over the last five years. So basically over the last five years the average increase for all 50 major cities—I break it down on the website city by city, but the average is 10% and the average on the CPI is 1.5. So it is easy to say that for people who are in the middle income, lower income, or people who are living off of a pension that is adjusted based on the CPI—they have lost 8.5% purchasing power if everything was adjusted to the CPI year over year. You do that over five years, you do that over 10 years, now you know why there is such a separation.

I have to highlight one point: There is a lot of discussion in this country, Chris, about the cost like—how the rich are getting richer and the poor are getting poorer. Here is the difference and something people don’t highlight, which I am happy to do today. People who are upper income earners, generally speaking, their income is dictated by their performance, not from a salary increase tied to the CPI. These people take risks. If they do well they make a lot of money. If they do poorly they make no money. But that is what a one-percenter—as everyone in this country tends to call them—works. They don’t make money based on salary. They make money based on performance, and that is why we have had such a widening of that gap.

Chris Martenson: And they make their money in many cases on their assets as well. A paycheck is a sure way to the poor house by what we are talking about because if your paycheck is growing at CPI and you’re 8.5 full points away from reality, you are going to fall behind. I get goose bumps—I guess I am nerdy this way. I get goose bumps when I talk about this because all of a sudden, Ed, everything that I am reading about makes sense. Allegedly my economy is doing really well—2-3% growth, right? But I look at the actual levels of employment. I look at the number of people on food stamps. We look at maybe even how the political parties are developing and we discover that there is real stress there. Stress that you wouldn’t detect in a 4.9% unemployment world. Stress that you wouldn’t detect in a growing economy, but we feel it there and your work explains that, right? That is the way I tie those pieces together.

Ed Butowsky: It does and I'd like to make a comment about the jobs numbers at some point. But in terms of focusing—at the very beginning I said how it has changed the balance of the country or the world. Let me now jump on your nerdiness for moment and double down on it and let me share this with you: The reason our country isn’t as powerful as it is used to be is because we don’t have enough money in this country to pay for what we spend. The reason that we spend so much more is because people, once they reach a threshold of pain, they will do anything to take care of their families. They will do anything to take care of themselves and so on. So what do they do? Well, they reach out to the government when they have no other choice and it puts more strain on the government. Then the government doesn’t have the money so then we go and we borrow the money from other countries. Well, I got news for you – we are borrowing money from other countries to pay for programs because of the CPI manipulation and over spending, and the biggest part of our expenditures are these—I call them entitlement programs or government programs—and those are only having more strain and more demand on them because people are falling behind in the private sector.

So China loans us money and Russia loans us money and so do the OPEC nations because first of all we need it, but the reason we need so much of it is because so many Americans are falling behind and they need assistance. To me, that goes back to that 1983 decision to start manipulating the CPI.

Chris Martenson: Great. Thank you for that. This is why I focus on it is because they feel like white lies. I understand why the government does it and you know this has happened under every administration I have tracked. This is not a political statement. This isn’t Democrats. This isn’t Republicans. As you mentioned before this is both. Both parties have this interest in sort of shaving at these things. Your interest is tracking things and reading off of the interest here you got Starbucks Coffee, it is Advil, it is gasoline, it is sales and income taxes tolls, fast food restaurants, toothpaste, oil changes, car washes, I recognize everything on this list. These are the things I spend money on. So you are saying if I live in one of these 50 major metropolitan areas I am going to experience roughly 10% increase across all of these.

Ed Butowsky: That is correct. You know what, anyone listening right now, they all know it is true. Ask anybody, did your cost of living not go up? Does it not cost any more? Of course it does. When was the last time you saw a happy old person? It is because of this kind of nonsense. And they don’t understand the virus that they live with every day. It is not just old people but everybody. They live with this and now with interest rates low, any money in savings, they are getting nothing on it or 1% and they are just committing financial suicide by having it there because of this manipulation. I want to shine a light on it. And I am really happy you do the work you do because this needs to be discussed.

Chris Martenson: It absolutely does. And here is my – I promise people listening: last bit of nerdiness. But I want to convey this. It is actually really important. I know it sounds a little bit complex, but of those three ways that they statistically manipulate these – the CPI, Consumer Price Index, I want to talk about weighting. Weighting is important. I love what you said about how you weighted yours. And I understand you are not going to release the actual weightings, but no matter how many smart people want to shine a light on the way you do your weighting, you can’t do worse than what I am about to describe. Healthcare. Healthcare is weighted in at less than 5% in the current CPI basket. So that means that one out of $20, according to the people who assemble the CPI, is spent on healthcare because that is what it is weighted at. But when we wander over to the Bureau of Economic Analysis and we peer into our GDP numbers, we discover that healthcare spending is 18% of our gross domestic product. I can’t reconcile those numbers. Those are not even in the same zip code with each other at this point in time—the idea that 5% of the basket is healthcare. And I can tell you that for people in my position as a small business owner who is self insured—thank you for the Affordable Care Act—it just went up for me 28% last year by the way. Thank you very much for that, everybody who was responsible. That is like one of the largest and most obvious gaps that people can understand completely. Look at the drug prices increases last year from all the majors not even including that pharma bro guy and all his craziness. But drug prices, cost of trips to the ER, delivery room for maternity, or watch what happens when your new insurance policy is delivered and your deductibles have skyrocketed and the coverage options have declined and all of that. That is what happens when we weight something inappropriately: Even if it is going up a lot, we end up counting it less. Your index then is weighted, but it is weighted towards what people actually spend their money on. It is the whole universe and you are coming up with an average of 10%.

Ed Butowsky: Yeah, and I will tell you the way I get the information is as pure as can be. It is directly from people in those cities. I used to do it quarterly and then people started revolting. They didn’t want to do it, so I do it semi annually now. You know what? The numbers are there. Nobody can refute—these are the numbers. You can call companies and say "how much did this go up? How much did that go up?" And when you start doing this—nobody has done the work. I have. And when you do this, it is kind of sobering because now you finally understand what is going on and why people can’t keep living the lifestyle that they had grown accustomed to. My parents, sadly, as I had mentioned earlier, my mother had passed away and so did my father. But when we would get cards from my in-laws with the Christmas money, it was $100, it was $50. Now my kids just kind of get a card. My kids are older now. I say, “Don’t worry. It is the manipulation of the CPI.” So every time they get a bad present they go, “I know. Manipulation of the CPI dad. I know. I know.” So you can tell what an excited family I have, right? It is okay it is the manipulation of the CPI, it is not her fault.

Chris Martenson: "Did you grow up scared of monsters?" "No. Much worse."

[Laughter]

Ed Butowsky: Exactly. Much worse. The CPI manipulators. That is what you got to worry about.

Chris Martenson: Well, here is a question: Another index came out a little while ago; I’d love to get your view on this – The Billion Prices Index which purportedly tracks the prices of a billion items. Huge difference between what they are reporting. They seem to come in really close to the CPI with very minor sort of sub percentage adjustments. And you are coming up with a very different number. How is that?

Ed Butowsky: Well a billion items I mean 1.) They can track lots of things that don’t go up, but the things that matter are the things that you use. That is great. Keep doing that. But it sounds kind of worthless to me. I would rather only look at the things based on what we actually spend our money on. I mean I don’t buy dentures so I don’t – it doesn’t really matter to me. What matters is the amount of items, the amount of money we spend on what we actually use. I mean there is – I would love to look at the list but that is kind of – that has got to be a pretty boring thing to look at. It just doesn’t have any relevance to the real world just like the CPI doesn’t.

Chris Martenson: Yeah. I don’t buy a billion things every year so I am pretty sure that index doesn’t really track me either. Question: Have you had any response from or interactions with the Bureau of Labor Statistics—the keepers of the CPI—to your index? Have they responded?

Ed Butowsky: No. But I will tell you this: I rarely ever promote this. What is amazing to me is how many people find my index really refreshing in basically confirming what it is that they had already had in their minds. I got a call one day from the SEIU which is the Service Industry Labor Union and they wanted to use my index in their negotiations, which I thought was pretty cool. But I never really marketed it. I don’t make any money at it. I really just did it to honor what went on with my mom, but I also look at a lot of older people and I want them to understand the only way you fix something is to understand it. So I do want people to look at it more. I do want people to talk about it more. I want people in my industry to focus on it so when they are building a portfolio that historically gets them a 6% rate of return and your client’s increase is 10% you are really not doing anything for them except helping them commit financial suicide.

Chris Martenson: At a slower rate. Maybe somebody else is getting 3%. If a measure of a country is how it treats its citizens, particularly its poorer citizens, I look at what the Federal Reserve did in driving interest rates to zero. So anybody who is on a fixed income looking for bond returns, something reasonably safe or maybe a return on a CD or a savings account even, they have just absolutely been given zippo for that. And on the other side, the other branch of the government—because I consider the Federal Reserve just a branch of the government, even though it is a private sort of thing. The other side is over here manipulating the cost of living adjustments. And so there are 10,000 people retiring per day from the boomer cohort. It really sounds like they are getting squeezed from both ends. They are getting treated just very badly in this story.

Ed Butowsky: Without any question. It is a double negative play. Rates are low, your costs are going up. I call it modern day stagflation. You know stagflation is probably the most devastating economic situation you can be in because in order to cure one leg, which is slow economic growth, another leg is high unemployment, which we have. And then also rising costs. You have to then implement something to fix one part of it that hurts the other legs of it.

Modern day stagflation, I call it that because we are in a period where we are not reporting the numbers accurately, which is the great work that you are bringing to the people's attention. Because of that, people don’t realize we are in stagflation but we are. The government numbers on jobs—I am just going to throw this out there. One of the things that gets me about that one statistic is they report numbers based on what is projected, Chris, but not what is needed. I started figuring out what is it that we do need, because when people – when we report these numbers, the numbers should all be reported based on what is needed. And what we need is 44% of the revenue from the US government comes from federal income taxes. So let’s assign half of the $500 billion deficit to Federal income taxes. I will make it easy. Let’s say that $250 billion that we are short needs to come from new jobs. Well, each new job, give it a $50,000 income and give it a 25% tax. That means each new job represents $12,500 new dollars to the government. So how many $12,500 new jobs do we need? We need 20 million, which comes out to be 1.6 million net full time jobs a month for 12 months.

This last report we had 242,000 jobs supposedly, that 88% of them were part time. So we need 1.6 million full time new jobs a month and last month we got 29,040. Now that is a – like you just heard it. You are in this. Anybody listening is like wait a second. Wow. Because all the news reports were "what a great job; we beat the forecasted number." And I just want to throw up every time I see this.

Chris Martenson: Yeah. It is really far from reality. It feels like, at this point, to me that it is more about image management and perception management, which makes it seem all just a little bit fake and false. And we have had the best statistical recovery that money can buy, at least thin air money. I am really curious at what do you – how do you work with your clients and what can somebody do who is caught in this vice right now?

Ed Butowsky: Find a way to supplement your income. I volunteer at a church once a month and I speak to families about debt and about the markets and so on. These people are not wealthy people and they all suffer from the same thing, not being able to make ends meet. And I tell all of them that—the majority of them are middle income families that have salary increases based on the CPI. And I said, best thing you can do is go find another job to supplement what you are doing. The way to cure this – you can only cut so much out of your life and then you will be cutting more and more and before you I know it, you will have very little. You can do that or you can become a revenue producer and go make more money. And you can do that outside of your salary job. I love multi level marketing, but truth is that is what they have to do, otherwise they will just sit back and their lives will get much tougher every single year.

Chris Martenson: And this is absolutely the trend that has been in play for a long time. People say "hey what happened to that one income family from the 70s?" Well it got inflated away is what happened. It is not possible to really make do with minimum wage in a lot of the country, which is adjusted slowly and sort of in alignment with the CPI. But that tension that we are feeling in the country now is that it is literally impossible now to make do on a minimum wage salary. By the way, minimum wage for my family, if I was earning minimum wage, is almost enough to cover my health insurance costs if I had to buy it outright. And I know there are like programs that would supplement this and that but just that one item, if I wasn’t getting subsidized on it, would consume 100% of my income. That was not true when my father was raising a family.

Ed Butowsky: You can call it the minimum wage, which is a different discussion, which is an appropriate one but different, but think about the person who makes $100,000 a year. Their taxes, right away they are at $50,000 so now you divide that... So what do we have? Somewhere about $4,400-$4,500 a month. That is very, very difficult to raise a family of two on. Let’s just say you have a mortgage, call it $2,000, what do you have left? That’s the point. So you are right.

That is why now more and more people have two people working. You made an excellent point there that is one of the reasons why we have more and more people who are two working people in a family. I need to point that out to my wife. I really do, because I never even thought about it quite the way you put it. That is exactly right. We have a lot of families where people – the man and the wife – husband and wife are both working and yeah that is going to be a good conversation tonight. So thank you.

Chris Martenson: Be sure to let me know how that goes and if it goes well I will talk to my wife about that. We will see if we can start a movement of sorts. But this is very real and joking aside, we are damaging ourselves is how I look at it, and that annoys me a little bit. I admit I get a little emotional about this. It is really, you know, there is white lies, fibbing, but this is really self harm, and I don’t know anybody really talking about this on the political campaign trail. By the way, I am not one of those people looking to politics to really solve anything. As you mentioned – first you have to recognize the problem. First thing you have to do is admit you have that problem and then you can begin to figure out how to address it. It still feels to me like both parties in this country are very comfortable with the "lying to ourselves" stage of this and I am very interested in figuring out how to go about really revealing this to people. Either anecdotally or more broadly, how do people respond to this in your practice, if you could, when you are advising them and you show them the reality?

Ed Butowsky: By the way, I got to say I love what we are doing here in this interview. I think there is so much good that we are talking about. I hope a lot of people find a way to share this because the more people that talk about it, it might actually affect who they elect. I am actually a very political person, just so you know, and I lean far right on almost everything. And I have actually advised a couple of campaigns and shared some of this with them. The first way to start off is: Why do prices rise? Ask people, "why do they go up?" Especially right now when commodity prices are dropping to almost historic low levels. People kind of look and, "well the reason is, in a lot of cases it is cost for regulations, we know that. Obviously, cost for more taxes." Well why do you get more taxes? You get more taxes because you have more programs and spending programs and you have to pay for those. Well, not that you have to, because we can always borrow money, but that is the goal is to have a balanced budget. But you want to have expenditures that can be covered by taxes. Well then you have a slow economy because you have more taxes and because you have a slower economy you then tax more and it kind of just starts to have this rolling effect that you are actually creating a slower economy because of taxes. You don’t get the growth, you don’t get the jobs, and as a result of that you have to raise taxes again. That is why these prices are rising and we are already at a level that we can’t sustain.

I explained this to these people and you know what happens? They say "well can you break it down into 30 seconds?" And I promise you, three campaigns said that. I said "well why do we have to have 30 seconds? It is probably the most important thing you can talk about and why do you want to make it 30 seconds?" "No, no everything has to be 30 seconds." I was blown away because it wasn’t just one it was two other – three republican candidates everything was, “Can you break it down into 30 seconds?” I’m not kidding you.

Chris Martenson: And so here we are, it brings back that John Maynard Keynes quote of: Not one man in a million can diagnose inflation. Which is why it is the loved practice of politicians everywhere because you can really get away with deficit spending and it is very hard for people to detect that that is why their lives are progressively getting worse. If you are delivering something but you are taking it away that they don’t get it.

This is a really important conversation to have, and I want to have it before Venezuela-style inflation visits my country. Before we lose our standing in the world. Before we ruin our currency by just trying to print our way to prosperity, which has never worked, ever, in all of history. Maybe this time it is different. Maybe Janet Yellen is smarter than any Roman politician could ever dare dream, but I doubt it and those are my concerns. But this is really important, to start with this one simple recognition: You are not crazy if you feel like your inflationary experience is vastly different from what you are being told it is—the very definition of cognizant dissonance. Anybody listening, if it feels like it is worse than it is, that is the reality. Go with that.

And I loved, just by way of commentary, Larry Summers coming out saying, "hey we don’t need the hundred dollar bill—just druggies and criminals need it." In this whole war on cash they are trying to sort of get out of the gate. I am like "Larry you haven’t been shopping lately. $100 is what I use to buy a single bag of groceries now, if it has meat in it," right?

Ed Butowsky: Yeah. Here is the thing: They know this. I have actually called up the producers at one of the shows at FOX. I’m proud to say I get to appear from time to time on FOX and I know some of these producers. And there is a man I want to debate and it is Austan Goolsbee. The reason I want to debate him is he is a smart guy.

It is because of people like Goolsbee and people who share information that they know is not correct to keep this liberal agenda going in the country where we continue to spend so much more money and when we get a number that is the jobs number saying it is good when it is nowhere even close to being good. It is not even on the same planet as good.

Chris Martenson: Or what is necessary. Of course the jobs number is a whole other discussion but the over 55 crowd has taken a lion’s share of the jobs gains, not because they want to but because they need to, as you just described. But we are losing a generation here again. Much like Europe is losing—by the headlines Europe is going to say "our headline unemployment isn’t that bad," but the truth is that they are actually about to lose an entire generation of people who may make it to adulthood without having a job. That is not good. So playing with the statistics, you know, it helps make things look better, but it doesn’t help us have the right conversation, understand what we need to do, make priorities, basically act like adults. Things that any business person has to do I guess.

And I want to thank you so much for your time today. This is really good work that you are doing. I really hope that the index continues, that you can continue to have your wonderful volunteers perform this important service.

Anybody listening, you can find this at ChapwoodIndex.com. Any other way for people to track this and follow you?

Ed Butowsky: That is the best way. I don’t do much more than publish it every six months and then do some TV shows and radio shows to talk about it. It is just ironic that today was the day I released it from 2015 and I was on your show. I have got to tell you, you do a great job. It is a pleasure to be on your show. Thank you.

Chris Martenson: Thank you so much. I really appreciate your time today and I’d love to revisit this in six months perhaps.

Ed Butowsky: Look forward to it. Thank you.

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30 Comments

ecb's picture
ecb
Status: Member (Offline)
Joined: Apr 7 2012
Posts: 8
We've suspected it.

We've felt all along that CPI numbers are a fraud, this is proof. My question is: doesn't this correlate directly to the purported rate of inflation which we're told is 1.5%. I am convinced that the inflation figures are equally false, and that our economic policy (such as interest rates) which is founded on these false figures is simply put: a massive lie. We are compounding our nation to the poor house. 

Thank you for posting this interview. After reading so much about complex economic theory and exotic financial maneuvering, this hits home, allowing the average person to understand the current economy. Now to go find that extra income source....

LesPhelps's picture
LesPhelps
Status: Platinum Member (Online)
Joined: Apr 30 2009
Posts: 538
Wow

Fudged inflation reporting is one of my favorite subjects gripes.

It is integral to fudging so many other reported numbers, such as GDP growth and overall economic growth vs decline.  As mentioned, it is used to justify lower or no pay raises, cost of living allowances and negative real interest rates on savings.

A couple of points.

Ed mentioned that the top 1% are paid based on performance.  While that may be true of some, I believe there are exceptions.  For example, from everything I've read bankers and financial managers were paid very well in both salaries and bonuses after 2008 regardless of how they performed.  Banks that would have folded had the Fed not bailed them out, largely paid their managers as if their decisions were golden.

The second issue is government debt.  As near as I can tell, US deficits now exceed what can be covered by borrowing money from foreign sources.  It appears to me that more than a small part of the money being printed by the Fed is being used to fund current US deficit spending.

Excellent discussion.

Mark Cochrane's picture
Mark Cochrane
Status: Diamond Member (Offline)
Joined: May 24 2011
Posts: 1107
Rural populations suffer too

As anecdotal support of the Chapwood Index, we carefully track how much we spend on food/home supplies year after year. In recent years, our realized inflation rate for these expenses has been 10-11.5%/yr. That doesn't even factor in the 'substitutions' that we've made (goodbye lamb chops hello turkey sausage...), never mind the addition of our gardening and canning efforts to defray expenses and improve health. To compensate, other 'expenses' have been progressively axed over the years. Theoretically my salary goes up every year but financially we are stretched more and more over time. Thankfully we have no debt to weigh us down further....

Erwinhightrain's picture
Erwinhightrain
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Posts: 3
I calculated my families

I calculated my families inflation rate using the federal numbers for each category of expense and our actual exposure to that category.  Even using federal numbers we were at 11.3% from 2011 to 2012. 

dryam2000's picture
dryam2000
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Posts: 189
Cost of living going up = passing peak easy oil

The cost of living going up is another way of saying the standard of living is falling, no?  Of course the government is doing to do the best it can to disguise this fact.  Are they going to come out and say "We have discovered the world has passed peak easy oil.  This means that this well populated, interconnected world is in store for some dramatic changes over the next 20-30 years, and it's probably not going to be very pleasant"?

Waterdog14's picture
Waterdog14
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Posts: 73
Cogniive dissonance

It is so FRUSTRATING that the CPI, inflation, unemployment, etc are such false statistics.  Ed Butowski interprets the consequences from a right wing perspective, while I'm likely to interpret it from a liberal / leftwing perspective (as a small business owner in the mining industry, of all things). 

It's not the LIBERAL agenda that creates this "false reality", Ed.  All intelligent people on all sides of the spectrum are seeking the truth.

I'm a social liberal.  A hard-working business owner.  I'm as frustrated as the rest of you (us!) about the false statistics that our government is publishing.  It's not right!  And it has gone on through the administrations of Kennedy, Nixon, Ford, Reagan, Bush 1, Clinton, Bush 2, Obama...

Thank you, Ed. for tracking and publishing real data.  We know from our own experiential evidence that the published CPI is a lie.  It helps to know that I'm not the only one seeing one thing and hearing a line of B.S., wondering what is real and what is false.

Keep up the good work, Ed, but don't assume that the authoritarian-oriented right-wingers the only ones seeking the truth.  There are more of us than you realize that seek truth over lies and obfuscation. 

Grover's picture
Grover
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Posts: 558
What can you do?

I knew going into retirement with a small pension and whatever savings I had that eventually real inflation would eat it all away. You can run as fast as you can ... but still not keep up with a hockey stick chart. dryam2000 listed one of the problems - we're past peak easy oil. A bigger one is that all the unfunded government promises are finally coming due. It is going to get much worse as more and more Boomers retire.

Governments exist to provide services. We the people want more and more. A politician who can promise more without having the voters actually pay for it will get the nod. We can pretend that someone else will pay (the rich) or we can pretend that some accountant's rosy projections will actually come true (stock markets going up 8% per year forever) or we can just push off the real cost on the next generation (resource depletion, pollution, SS, Medicare) or even to other countries (China.) There are more options available. All the tactics have been used to the maximum extent. It always worked, so let's try it again. As PT Barnum noted, nobody ever went broke underestimating the intelligence of the average American.

So, what can you do about it? Well, you can try to get another job and trade more of your time for wages that will be taxed. For what? - Bling. Really? Perhaps you can focus on what is really important to you and figure how to provide those things for yourself. Once you get past the basics of food, water, shelter, clothing, and health, the rest is more or less bling. Do you really need it? If you think you do, you better get another job. It is that simple. Next year (or the year after) you'll need another job on top of it. What's the bling really worth?

A friend of mine rents life. There's a leased car, rented apartment, new furniture every 3rd year (or so,) new clothes frequently, the latest electronic gadget, eating out almost every night - you get the picture. Every day, there is a trip to Charbuck's to buy a lousy latte with lots of additives and then a tip. It costs $7 per day. If you only look at the hourly salary (pretax and pre-expenses,) it isn't that expensive. It takes less than 15 minutes to earn that amount. The daily latte habit costs over $200 per month. With all the other "obligations," that is more than what is left over. It gets charged to the credit card. Another day older and deeper in debt. The worst part is my friend can't envision life without the bling.

Don't get me wrong, bling is kind of like spice. A little it wonderful. Too much ruins the meal. I love coffee, so I bought a sturdy roaster that fits in a BBQ rotisserie. Roasting is a fun hobby. I get green beans in bulk and I make lattes at home. I can make a double tall latte for about 75 cents. Of course, I have to take the time to roast and make the coffee. How much should I pay myself to do a hobby?

The bottom line is that it will get worse. Either get off the treadmill or accept your fate. What happens when the treadmill stops working?

Grover

Mark Cochrane's picture
Mark Cochrane
Status: Diamond Member (Offline)
Joined: May 24 2011
Posts: 1107
Economic death spiral

The idea may be to fool all of us into thinking that we aren't getting poorer by the day but you can't fool the math, at best you can just put off the reckoning a little longer.

1. At 10% inflation per year your effective income falls by 50% every 7 years!

2. If you are lucky enough to get a 3% raise every year, your income still falls by 50% every 10 years.

3. If you try to work your way out of daily expenses with added debt you will just go broke faster. You may feel like you are escaping for a short while but credit card debt (average interest rates of 16-20%) runs much higher than the inflation so your amount of discretionary spending that you can afford quickly hits a wall and drops like a rock.

4. You can work harder with more hours and more jobs to increase your income which is what many of us have done until we feel that our lives have been consumed. What happened to nights and weekends, never mind vacations? This option is becoming less and less available for many. It is unsustainable in the long run (it damned near killed me) and it still only keeps your head above water a little longer, regardless, unless you can keep increasing your income by 10% or more each and every year.

5. You can try to be more efficient, modest and thrifty as Grover advises. This is the route my family has taken. Sold the house to rent a smaller one, got rid of things like television service (addition by subtraction!), eating lower on the hog, growing/storing more, etc. This beats wracking up more debt but the fact is that you are only buying yourself more time until you will simply not have enough to feed your family if your purchasing power keeps dropping by half every 7-10 years.

6. Even if everyone lives lives as thrifty as those who came out of the Great Depression we are in for an economic world of hurt because 70% of the US economy (so we are told) depends on consumer spending. The more we cut our personal expenditures, the more we undercut the general economy, putting more and more people out of work.

7. The more people we put out of work, the greater the drag on all of our social support systems, exacerbating the whole process further.

When it gets slammed into reverse, this is the death spiral for an economy that is predicated on ever more exponential 'growth'. If I had to guess, I would say that if you could really parse the last several years of supposed consumer expenditures that we have had, you would find that more and more of it is going into basics like food or for durable materials more associated with preppers than preppies.

The only thing holding up our economic house of cards at this point is collective disbelief in our predicament.

cmartenson's picture
cmartenson
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Posts: 4626
Utterly precise and completely inaccurate

In shooting one learns the difference between accuracy and precision.

To be able to hit the center of the target means you can shoot with accuracy.  To be able to group shots, even if they are all clustered to the far side of the target's center, means one has precision.

The government's CPI (inflation) measure is immensely precise.  See here:

Month after month after month the reported rate of inflation is 0.2%/mo (ex food & energy).  Sometimes a tick higher, and sometimes a tick lower.  that's wildly precise.

But as Ed noted, it is also wildly inaccurate.

One the 'features' of offering up such robust precision is that it creates the appearance of authority.  We see this when studies report such things as "26.2% higher chance of death if you do/don't so this!" 

Wow.  26.2% hunh?  that sounds very precise so it must be correct!

Beware false precision.  it is the hide-out of the self-delusional and the purposely misleading.  

Precision is not the same thing as accuracy.

Instead, as we know here, the reported figures are wildly inaccurate.  The gap between the reported precision and ultimate inaccuracy is maddening, because it is so utterly obvious and anybody with the slightest amount of curiosity can determine as much.

Which means the US press is either totally bereft of curiosity or spineless.

Helix's picture
Helix
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Posts: 58
My Kaspersky Virus protection

My Kaspersky Virus protection program is saying that the Chapwood Index links to an infected web page.

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
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Posts: 1132
The Press: Incurious or Spineless?

Chris wrote:

Instead, as we know here, the reported figures are wildly inaccurate.  The gap between the reported precision and ultimate inaccuracy is maddening, because it is so utterly obvious and anybody with the slightest amount of curiosity can determine as much.

Which means the US press is either totally bereft of curiosity or spineless.

Another option is that those who own the press are active participants in the deception.

Uncletommy's picture
Uncletommy
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Posts: 172
Interest? Okay in an exponential world.

Combine fractional reserve banking charging interest a finite world and you have the predicament we fine ourselves in. In order to pay an interest fee, the borrower is required to produce value out of newly found materials and turn them into advantageous goods or services for the rest of society. If resources are limited or labor scarce, it forces those required to pay the interest to take from those who have neither resources or labor. To sit and contribute nothing, then charge a fee for access to currency,leads in only one direction -- the poor house. I think that explains the peasant wars of the past and the reasons for the growing gap between the wealthy and the rest of us. Inflation? What can you expect. Deflation? Somebody is going to have to get off the sofa and start producing or the result will be obvious. I think I'll check my balance. . Damn; its lower, again! I wonder what kinds of implications this might have?

http://www.cbc.ca/news/politics/youth-budget-important-student-1.3498080

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 3470
the cause, and the fix

The numbers make sense; why do I believe his rather than Shadowstats?  I don't know.  His method is simpler, perhaps?

In order to figure out the cause, (and possibly a fix), we need to understand where the problem is coming from.  Is it a trade imbalance?  Is it globalization - competing with workers in Vietnam?  Is it primarily monetary - i.e. too much bank lending & deficit spending?  Might it be peak cheap resources?

Here's my thought:

America had a competitive advantage earlier on (through, say, 1970) for four reasons: 1) strong domestic rule of law allowed winners to win, and losers to lose.  This allowed for an efficient allocation of capital.  2) economic imperialism kept resource costs low: the "central banking/warfare model", along with the IMF's "economic hitmen."   3) semi-protected markets prevented wage competition from overseas and/or companies from outsourcing to the LDCs.  4) a large domestic natural resurce base.

Fast forward to today: we've exposed our workers to wage competition with LDCs and encouraged our companies to outsource (making the investor class rich - its more profitable) or import workers that we're short of (H1-B visa workers from India), our domestic natural resource base is diminished, esp in energy, our rule of law has drastically weakened - so all we have left is the central banking warfare model and the economic hitmen.

To cover over the problems during the 30-40 year transition period, we've used debt (government & private) which has caused monetary inflation, but also we've capped wage inflation via globalization.  During the 70s wages would inflate along with the money which would lead to big CPI inflation.  However, globalization stopped the wages from inflating along with the money, so we're only seeing half the CPI "inflation" rate we normally would.  Domestic natural resources losses result in more effort placed into the warfare model to keep resources cheap.

From what I see, it has been a wealth transfer - from the US to the LDCs, and from the domestic wage earners to the international investor class, along with a continuing monetary inflation, but a deflation in wages due to globalization.  As proof, I give you BRIC nations, Asian Tigers, and the top 0.1% including the CEOs that make 300x what their average workers make.  That's where the money went, that's where the money came from, and - I think, that's why.

I do not believe that austerity (restraining growth of government deficits) will fix this problem.  That's only one component of the beast, and not even the largest one.

America has one thing it can definitely control: the rule of law.  It is really useful to have this; it allows new entrants to kill off existing, stagnant businesses w/o the founders getting shot for their effrontery.  We can also engage in a bit more protectionism; keeping jobs in country will benefit our people, at the expense of the investor class.  "Fair trade" vs "Free trade".  Can't go too crazy or you get a capital mis-allocation problem.  We can also control money creation, but attempts to solve the problem via austerity will end up having that nasty first-year recessionary impact.  Plus, we need to fix the private debt problem.  Not sure how to do that.  Some sort of a default needs to happen.  And we need to curtail the central banking warfare model.  Its expensive, and while it does get us cheap resources, we don't have the economic base to keep it going indefinitely.  And its - shall we say - morally questionable.

Ultimately, some reallocation was bound to happen.  The US was vastly richer (per capita) than most of the rest of the world, and that couldn't last forever.  But our own stupidity (and/or a deliberate plan by those who ended up getting the bulk of the reward) accelerated the process.  Accelerating debt (largely) served to hide the problem until 2008.  Now it has pretty much been laid bare.

That's my current thinking anyway.  Ed's cost-of-living analysis simply highlights the ongoing wealth transfer.  And that's all it really is - a wealth transfer.  And if your salary is not going up, and someone else is getting richer, wealth is being transferred from you to them.   But its not just about credit, or deficits, or peak resources.  Address just one of those, and you still have the others that will end up hosing you.

treebeard's picture
treebeard
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Joined: Apr 18 2010
Posts: 500
everything is wrong

What is wrong with our industrial farming is the same thing that is wrong with the medical profession, which is the same that is wrong with the banking system, which is the same thing that is wrong with our political system. It is also what breeds the endemic corruption in the "system". And of course, as sand_puppy pointed out, it is collusion, as difficult as that is to accept.  We know that the rating agencies are paid by those entities whose equities they rate, as one example among millions that happens to be top of mind, yet we still, over and over again, put on the pretense that there is somewhere within the system there is an attempt or a desire for fairness, or at its heart, the "system" cares about the good of the whole.  This is emphatically not true (there are of course many fair minded people caught, through momentum in the system).

We have supplanted cultural norms and standards with economic norms and standards. As Joel Salatin pointed out, it is a whole different set of questions the created polyface farms, and indeed if those same questions were asked of any other sector of our society, lets add a few more that were not mentioned above, education, social welfare, the world would be turned on its head.  Yet we still are asking the same old questions, if only the people managing the system were a little smarter, as if we had accurate reporting of the CPI somehow things would be different.  If we had accurate reporting of the CPI the system would look nothing like what exists today.

We didn't fudge the CPI before 1983, not because we were more honest back then, but because we didn't have to yet.  We had not reached the consequences of our own actions yet, as we have now.  Turning back the hands of time will simply land us back where we are now.  The perceptual reality shift that occurred at polyface farms produces fives time the productive capacity of conventional agriculture.  Abundance is here now for the asking, yet we insist on wallowing in darkness. Yet another indicator how badly the system is failing, interesting perhaps because my morbid curiosity has gotten the better of me. What, get another job?!  There is a solution of sorts.  Get out of the system and take as many people with you as you can!

Time2help's picture
Time2help
Status: Diamond Member (Online)
Joined: Jun 9 2011
Posts: 2067
Sanctioned Liars

Just listened to this now. So f****** pissed.

Br3dS01's picture
Br3dS01
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Posts: 16
The Chapwood Index - Wants vs Needs

From The Chapwood Index:

Butowsky began calculating the Chapwood Index in 2008. Using social media, he surveyed his friends across the country to determine what they bought with their after-tax income. He narrowed the list down to the most frequent 500 items and asked his friends in America’s 50 largest cities to check the prices on those items periodically. The Index shows the fluctuation in each city in the cost of items such as:

Starbucks coffee, Advil, insurance (car, house, life), gasoline, sales and income taxes, tolls, fast food restaurants, toothpaste, oil changes, car washes, pizza, cable TV and Internet service, cellphone service, dry cleaning, movie tickets, cosmetics, gym memberships, home repairs, piano lessons, laundry detergent, light bulbs, school supplies, parking meters, pet food, underwear and People magazine.

Wants vs Needs?

Brad

kaimu's picture
kaimu
Status: Silver Member (Offline)
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Posts: 114
THE PROOF IS IN THE PUTTING!!

Aloha! Putting money in the pockets of those in Washington DC who produce the least yet cost the most! This is the "Politician Class" of society that needs to be reduced to a semi-microscopic size. One factor everyone graciously ignores in the cost of goods rising is government. A gallon of gas would cost a lot less without excise taxes on all levels of government.

Beautiful, so 18% of what you spend to buy gas goes to government. That 18% gets added into the supply chain as well, not just your commute. That means the trucks or trains or jets transporting food and other goods to WalMart pay that 18% also. It is also a factor in the manufacturing process. That increases the cost for all goods across the board.

How would you know what the real percentage of taxes is in a gallon of gas. Is it trumpeted from the highest mountain every time government raises tax rates on products and goods and resources? Is it front page news like the Kardasians or Trump rallies? Does any politician mention it in their platform when they run for office? NO! The government is more corrupt than Exxon!

Forget inflation rates ... no matter how you want to define it ... push pull or whatever! Try adding up what your real rate of taxation is not just your 1040 bracket! The cost of this "road kill" we all lovingly call "our government" exceeds common sense logic. If your car mechanic was half as inept as your Senator how long would you let that mechanic work on your car? Yet, decade after decade we continue to blindly believe total strangers in Washington DC, who do not even know your first name and nor do they care to know it, somehow have your best interest in their hearts! And as voters we have not even a second thought as to the destructive and corrupt nature of the Politics of Debt.  Look around you there are no victims here, only volunteers. If you haven't figured out who the sucker is yet then ... whatever ... It's all a grand illusion ... We can't all be King! Sorry ... yeah ... in real life there is no trophy for participating! It;s sink or swim ... do or die and even if you survive that God awful gauntlet there's still no trophy!

We can pretend all we want, but this is still the same reality since Roman days ...

Edwardelinski's picture
Edwardelinski
Status: Silver Member (Offline)
Joined: Dec 23 2012
Posts: 177
Cheaper Drugs

For anyone looking to save money on prescriptions there is a new heath startup called blink health.For example a 20 mg Prilocec pill retails for 2.60.They offer a generic for 23 cents a pill.This is an answer to outrageous pricing.Want to save money on your eyeglasses?mine cost 400 dollars for nothing fancy.There is a company called Warby Parker that was started by 3 UPENN college students to bust the Luxotica monopoly.How does a 100 dollars sound?I hope these help the PP crowd...

Waterdog14's picture
Waterdog14
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Joined: Jan 18 2014
Posts: 73
Gas Tax

kaimu wrote:

A gallon of gas would cost a lot less without excise taxes on all levels of government.

Beautiful, so 18% of what you spend to buy gas goes to government. That 18% gets added into the supply chain as well, not just your commute. That means the trucks or trains or jets transporting food and other goods to WalMart pay that 18% also. It is also a factor in the manufacturing process. That increases the cost for all goods across the board.

Most of the revenue from the gas tax goes to road and streets construction, maintenance, repair, and safety.  A small percentage goes to public transportation, which varies by state.  It seems only fair that the cars that are driving on the roads help to pay for those roads through fuel taxes.

Is all of the road & bridge money spent wisely? Not always.  It depends on what state you're in.  In my state, our road construction projects are sent out for competitive bid, and it's one area where capitalism seems to be working.  

kaimu's picture
kaimu
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Posts: 114
FAILED EFFICIENCY

Aloha! Good observation! Thank you for responding in the manner you did. This is true and I was hoping someone would take that issue and think about it. That is why I mentioned in my post that the 18% goes to "government". Government is the most corrupt entity to receive tax monies.

I will just examine the "infrastructure" issue you refer to. In the real world if you bother to follow the money these construction projects are called "Public Works". Public works is based on an antiquated law from 1934 invented during the FDR days. The law I refer to is the Davis Bacon Act. This act is the basis of union controlled labor rates called "prevailing wages". These are the same unions backing Bernie Sanders. I almost typed Bernie Madoff, but same difference. Unions are as corrupt as banks. The idea that Bernie brags about being backed by unions instead of Hillary's banks is sadly overlooked.

I speak from experience as for 25 years I was intimately tied to Public Works projects in California. Trade Unions set the wage rates on all Public Works projects where federal/state/county/city funding is required. Current total wage rate for a GED educated Laborer Class II is $93,000 per year, for the county of Oahu in the city of Honolulu, but go ahead and look up the rates for your county, they vary, but they vary at extreme rates for a GED educated ditch digger/broom handler. How much training do you have to have? Very generous benefits are included even vacation pay and medical and pension. In the 1990s I used to have all my payroll "certified" by the union. It's as if the Union had IRS powers to audit.

Is that an efficient rate for the labor duties performed? Or could you hire two laborers for the same price?

Now go down to the union hall and try to apply. The original legislation in FDR days was also a deterrent for blacks to join the union. So in the "Burn Speak" of today unions are some bigot and racist institutes. In my 25 years in the Public Works and union trades I saw about five blacks working on my projects. That's one every five years! These are the backers of Bernie's campaign.

In other words handing money over to any government has always been about total lack of efficiency and fairness. It is never what you know or how skilled you are it is always "who" you know. Being in the IBEW end of the trade unions I never saw anyone get in who did not know someone in the union and many times it was a generational issue. Government is always corrupt.

Our highly successful non-union company was always lobbied on all our projects by Union reps until they made us an offer we could not refuse. All the company execs got paid $80,000 each if we became a union contractor for a one year period minimum. We were taking so many Public Works projects from the union contractors that the union was forced to bribe us. We had such an issue finding qualified apprentices that we decided to go with it and see how it was biding as a union contractor. In one word once we were in we were "lied" to. The Union did not keep many of their promises and threatened legal action if we wanted out of our contract. We decided to quit bidding for a year to meet our contract time and went on a year vacation. We came back as non-union contractors and resumed out bidding union contractors and it became our most lucrative era. But ... that's your 18% at work and to be precise many Munis and States had to float huge bond issues because 18% wasn't enough. 

I have only covered half of the infamous costs, "labor". The "material" side is just as corrupt. This is where huge global corporations buy favors to get their products specified through architects and engineers. I assisted engineers and manufacturers by putting together bid estimates for preferential treatment.

Now add up all the tax dollars lost to this inefficiency and corruption from 1934 to now. There is nothing "free market" about government. The US government has added TRILLIONS of wasted taxes and debt onto American taxpayers to sway corrupt unions and keep intact antiquated FDR labor laws from the 1930s. Your kids kids will still be paying for these over priced union controlled projects. FEEL THE BURN!

I can vouch for all my bids on these projects and everything was competitive except the "labor and material" line items in my bids. Every job walk we did there was a union rep there to remind and reprimand any contractor present to obey "prevailing wage" rates. To me that was total government sponsored intrusion into free market capitalism!

Next time you are on a freeway and there is road construction ask yourself how much each guy you see is getting paid. Then when you are in an airport watch the union guys at work. Maybe a journeyman electrician is hanging a light fixture ... think $120,000 for that guy! Remember Halliburton and the $200 toilet seat or the $20 Coke six pack? What makes you think the cement and light poles and signage on freeway construction isn't another Halliburton? I can say I marked up both labor and material on my bids by 50%. In a corrupt system you have to do that to survive because you know you're going to run a gauntlet for the full duration of the project. In case I got audited I did not want to have a line item for "bribes"!

That's your 18% at work! It's not inflation ... it's corruption! Remember those old signs along roadways back in the 1970s? YOUR TAX DOLLARS AT WORK?

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grandefille
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Joined: Oct 11 2010
Posts: 32
Beware of useless significant figures!

They give the illusion of precision and of reliability!

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pinecarr
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Posts: 2071
Fantastic work, Ed!

Thanks for sharing it with us, and for validating the cognitive dissonance we experience between how we're told the economy is doing, and how we actually experience it.

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Grover
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Joined: Feb 16 2011
Posts: 558
Rising prices are a symptom

We all know that we can't have continual economic growth in a finite system. What is it supposed to look like when we get ever closer to resource limits? It seems that stagnant wages combined with rising prices provides a foolproof economic answer to resource distribution. It may not feel good, but it solves the problem.

I don't like it either. I'm not a fan of miserably hot, humid days in summer, and I tend to stay near the fire on bone chilling winter days. Those happen regardless of my wishes. If this is an economic solution foisted upon us, we either deal with it or suffer the consequences.

I've shown my strategy to deal with this situation. It isn't perfect, and it doesn't need to be. I've got about 2 decades left before I die of old age. By that time, my money will have about 1/8th of its current purchasing power. Those of you who have much longer to live (or have grandchildren that you are trying to guide,) really ought to think this out a bit more. If the system isn't going to be around, why participate any more than you have to? What can you do to limit your exposure? What can you do to mitigate the ever eroding purchasing power of the dollar?

Grover

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Waterdog14
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Posts: 73
Pay rates - another viewpoint

kaimu wrote:

Next time you are on a freeway and there is road construction ask yourself how much each guy you see is getting paid. Then when you are in an airport watch the union guys at work. Maybe a journeyman electrician is hanging a light fixture ... think $120,000 for that guy! Remember Halliburton and the $200 toilet seat or the $20 Coke six pack? What makes you think the cement and light poles and signage on freeway construction isn't another Halliburton? I can say I marked up both labor and material on my bids by 50%. In a corrupt system you have to do that to survive because you know you're going to run a gauntlet for the full duration of the project. In case I got audited I did not want to have a line item for "bribes"!

That's your 18% at work! It's not inflation ... it's corruption! Remember those old signs along roadways back in the 1970s? YOUR TAX DOLLARS AT WORK?

According to the IBEW union, "all IBEW journeyman electricians earn $20 - $50 per hour".  That equates to $41,600 - $104,00 per year, depending on U.S. location.  Seems like a fair living wage!  With experience, one would expect less "light fixture wiring" and more work on service panels, high voltage applications, and other skilled installations.  If you peruse one union website (IBEW Local 231 in Iowa, http://ibew231.com/offer.html), the case for a living wage, training, safety, retirement benefits, health & disability insurance, and friendship & community support are very appealing.  Isn't that what workers need?  (Incidentally, they also have a no-strike policy and must abide by binding arbitration).

I'm not saying that all unions are good and free of corruption.  But blaming government and unions for "squandering" the 18% gas tax is disingenuous.  Why not go after the 51% that is squandered by the oil & gas companies?  If we want to throw around anecdotal evidence about overpaid employees, how about the oil and gas companies paying exorbitant salaries? There were several young geologists my company hired right out of college.  These young guys needed a lot of training to "boot up", and after we investing 10 - 12 months in training, they were worth perhaps $36,000 - $42,000 per year to us & our clients.  Yet the oil & gas companies would hire these getting "wet behind the ears" geologists for $100,000 - $120,000 per year.  We couldn't compete with those salaries and our clients/budgets wouldn't support it.  I  thought about that every time I fueled up the company truck at $3.50 per gallon.   

Lest you think Haliburton's $200 toilet seat was limited to federal contracts, consider how much they've charged in the oil & gas industry and the mining industry (in which I work).  Same practices - overcharging, driving up prices, buying up competitors, gouging the customer.  A subsidiary of Haliburton purchased a pump manufacturer that we'd used for decades.  Suddenly, the price of purchasing and repairing our high-head slim-set submersible pumps doubled or tripled, meanwhile the service shop got crankier.  This was in private production, not government contracts.

Now, oil prices have crashed.  Geologists are on the streets along with drillers, roughnecks, landmen, and the like.  Couldn't happen to a nicer industry.  If only the financial industry would quickly follow...

Corruption is not limited to the US government. Nor to the banksters.  Nor to the unions.  Nor to the corporations.  It is rampant in our society.  Somehow we need to pull it out by its roots and replant with integrity, honesty, and compassion.  LOCALIZATION will allow us to do this.  Big corporations, big unions, and big government are not accountable to real people.  Small government and small companies can look you in the eye and be accountable. 

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kaimu
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Posts: 114
MONOPOLIZED CORRUPTION

Aloha! I do not think you are reading the "prevailing wage" table correctly. You have to look at total hourly rate and not just the basic rate. For instance the basic hourly rate for a carpenter area 1 northern california counties is $42.40/hr add on the benefits and the total is $70.38/hr x 2040 hours is almost $144,000 a year.

Next you have to compare apples with apples not oranges. The union is a "monopoly"! That means I cannot compete with the union if I want to bid a public funded project. It is a "monopoly" as decreed by a 1934 law that the US Congress still upholds. So long as a "monopoly" exists there is no such thing as "competition". There can never be a truly "competitive bid" in Public Works when labor wages are set by unions.

Since Exxon does not have a monopoly I can go get gas at Shell or Chevron. If they chose to over price labor then the company becomes less competitive. But STILL the US Congress is not telling you that you have to buy gas from Exxon. As a contractor on Public Works I am being told I have to pay a "union" imposed wage rate because it is law.

If you think that is a level playing field and a good deal for taxpayers then vote for Bernie. He's owned by unions. If you think banks are great for the Middle Class then vote for Hillary, as she is owned by banks. This is how career politicians make politics a career. This how corruption works!

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jcusick
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Posts: 3
The List

I usually make it a point to listen to the interviews and most are very good,but I was not overly impressed with this one. I have no problems with the theme, the CPI, Unemployment numbers, and the rest are a joke and I think most realize that this is common knowledge and why these numbers are manipulated, CPI to justify reduced COLA and SS benefits, unemployment numbers to put a smiley on the so-called "recovery", but after reading the "500" list, I'm not impressed one bit and I can understand his 10% or more inflation numbers. How often do most of the readers here buy 1st Class Airline tickets, botox, lawn service, pool service, pay-per-view rentals, private school tuition, play station games, People magazine, Country Club membership and dues, valet parking, eyebrow waxing, fast junk food, or luxury box rentals?  In other words,I found many of the items on the list to be disturbing examples that were picked to inflate the percentages, not to mention the fact that a lot of things on that list have gone down in price, for example laptops, dvd and blu-ray players, mobile air compressors to name just a few.

It sounds to me like a few of his customers need to rethink a lot more about their priorities when it comes to money, expenses, and good healthy food and exercise for their children. Bling has gone up a lot, good foodstuffs have gone up somewhat (definitely more than 2%/yr over the last 5 years), and no doubt, as a recent CA transplant, many of the basic costs here are borderline ridiculous. But, other than CA, I have just as hard a time believing the overall 10% or better numbers that he cites as I do the overall Govt 1.5% numbers.

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Boomer41
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Joined: Nov 30 2008
Posts: 117
Chapwood Index Understates the Actual Inflation.

The Chapwood Index provides excellent data on the inflation in each year. Kudos to Ed Butowsky for providing real data in defiance of .gov lies.

However, looking at the data on chapwoodindex.com, specifically the column titled '5 Yr Ave', the number given appears to be the average of the annual percentages. This is not mathematically correct since the annual increases are compounded.

For example the annual increases for San Francisco were 12.5, 13.4, 13, 12.7, 12.7 and the average is stated as 12.9%. But in reality those percentages, compounded over 5 years, result in a total increase of 83% which averages to 16.6% per year!!

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chipshot
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Joined: Mar 15 2010
Posts: 14
Proud to be on Fox?!

Know Chris is uncomfortable w political comments, but anyone proud to be on Fox has little credibility.

Blaming "our spending problem" on social programs, without mentioning war and defense spending, is completely disingenuous and reeks of Fox rhetoric.  Same thing w taxes and regulations being the cause for things being so expensive.

This guy's cola project is credible, but he and his right wing thinking are not.

We need more direct discussion about the erosion of discretionary income, especially given its effect on the  economy.  It has taken a major hit in the last 10-15 years  (for 90% of the population), primarily due to increasing medical insurance, out of pocket health care costs, and home owners insurance.

With aging demographics, poor overall health and climate change, we should plan on these expenses continuing to rise, probably at an accelerated rate.

Maybe even more important than finding an additional revenue source is improving health and reducing reliance on cars.

brushhog's picture
brushhog
Status: Member (Offline)
Joined: Oct 6 2015
Posts: 8
Living a deflationary life

In all of these statistics and collective conclusions it's easy to forget that whether your living costs inflate or deflate has alot to do with you. Its not all out of our hands and we are not all at the mercy of government policy.

I raise a son and support a stay-at-home wife/mom on 28k per year. Thats our farm income. We are able to do that because we raise most of our own food, we heat/cook with wood cut from our forest, I do my own repairs and maintain my home/vehicles/equipment. When we first started this life it was actually very expensive..equipment costs, infrastructure, land, etc But once we got situated the costs of living have steadily come down. We have been at this for 8 years now and the past 4 years have seen us using less and less money. We dont have cable tv or any cellphones at all. I'm typing right now on a 5 year old computer ( the only one in the house ). We drive around in a 15 year old pickup truck. We wear carhart clothing because they last many years. Every night we cook homemade meals from scratch using ingredients from our farm...braised lamb shanks, roast chicken, homemade veggie lasagna ( pasta made from scratch ). We bake bread and make our own butter and cheese from Ellie, our milk cow. We have more eggs than we care to eat. My wife sells them to pay for the feed.

I dont need to join a gym or go on medications because the hard work, clean living, and fresh organic food has our doctor ( and dentist ) shaking his head at how incredibly healthy we all are.

Our "job" is being self reliant, and its a very sophisticated trade that takes many years to master. As time goes on we get better at it and we need less and less money, yet ironically as we get better at it we produce more and earn more money. My wife learning to sow has saved us alot of money on clothes, my learning some basic mechanics and carpentry has saved us alot of money in repairs. For everything we buy, we discuss how that expense can be cut out and we have fun devising ways to do it ourselves. Sometimes it doesnt work, but quite often it does.

I'm not saying everyone should run out and be a farmer, its got a down side too and its not for everyone. But everyone can make progress at being more self reliant regardless or what you do or where you live. What you earn is only one side of the coin, what you spend is the other and as HD Thoreau said " A man is rich in proportion to what he can let alone".

Grover's picture
Grover
Status: Platinum Member (Offline)
Joined: Feb 16 2011
Posts: 558
Good work, Brushhog!

Brushhog,

I've been away from the computer for a couple of weeks. I just saw your post from last week. All I can say is "Good on you!"

We all know the system is unsustainable. Yet, we somehow are able to ignore all that and try to maximize our personal income from the system. I can't remember how many times I've told (older) folks the system is doomed based on simple mathematics. They agree ... and then tell me that they're planning to work until they get the maximum social security payment per month. I'm always amazed at the disconnect they are able to keep within their thoughts that quickly.

When the system crashes, most of the things we currently take for granted will be gone. The more dependent people are on the system, the harder time they will have when the collapse occurs. You are taking the right approach. Do what you can with what you have. Learn how to do more. Most importantly, don't covet that which is out of reach. I applaud you!

Today, I let my 5 - 2 month old pullets out of their coop to wander the yard with the older chickens. I spent the time pulling buttercups out of the yard since nothing I have will eat them. The chicks wandered and explored, but came rushing back at the first hint of perceived danger. They untied my shoes thinking it was a worm or something. They pecked at my fingers. One even jumped up to peck at my glasses. Most of the time, I had to be careful not to crush them as I crawled to the next buttercup. What an absolutely wonderful day! I wouldn't trade today's enjoyment for a million bucks.

Many of my friends are caught up in the system so completely that they can't fathom the joy of just being. They work and pay taxes to have bling to impress people they don't care about. Because they work so hard to make money, they feel the need to go on expensive vacations - supposedly to impress those same people. It is a cycle that they are trapped into. Escape is difficult, but not impossible.

The less you are tied to the system, the freer you become. My experience with inflation has been muted because I consume as little as I do. Sure, I feel the pinch of taxes and healthcare costs increasing as much as others do. I can only do what I can do. I make midcourse adjustments as necessary. The point being that I don't feel deprived when I have to let something go. The free things in life have an infinite return on happiness.

You've got the right attitude. Keep up the good work!

Grover

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