The Hole in the FDIC
There are two options to replenish its insurance fund.
Outrageous! -- Artificial Deflation!
Speaking of deflation, let me mention something I find totally outrageous. Normally, I actually take up for the bureaucrats who are stuck with the task of trying to monitor inflation. It's a tough job, and like Monday-morning quarterbacks, everybody thinks you should have done it differently. I can understand the rationale for hedonic measurements, housing rent equivalents, and so forth, even if I don't agree with them. You have to set some rules and live with them. But the latest imbroglio is disgraceful.
It seems the US Bureau of Labor Statistics in the CPI next week will treat the subsidy received by those 800,000 car buyers who bought a car in the Cash for Clunkers program as if the price of a car fell by $4,500. My tax dollars account for nothing?
This does several things: It will decrease the inflation used to adjust the GDP for this quarter. Not the end of the world, but annoying But what really matters is that the CPI is used to calculate Social Security increases and interest paid on TIPS.
If I tried to defraud one of my clients using such accounting legerdemain, I would be shut down, sued, and taken to court (at the minimum) by the host of regulators who look over my shoulder. And I should be! You don't make such changes in the rules to your own benefit. But that's what the BLS did. This policy should be overruled immediately. There are enough deflationary forces in the world without having to artificially create some more.
If You're in a Hole, Stop Digging
Right outside my office window I'm watching what is to me a visual parable for the banking crisis that has beset the world. I lease a rather large home in a nice, quiet neighborhood in Dallas, and moved my office here last year.
My quiet neighborhood changed a few weeks ago. Trying to sleep in the morning after the Paul McCartney concert, I awoke to find my bed literally vibrating. Earthquakes in Texas? No. It seems my neighbor decided he needed a bigger home, and the first thing to be done was to tear down the old one, which they did rather efficiently, if not quietly, over the next few days. I literally had glasses vibrating in the house.
Then, after removing a large pecan tree, they proceeded to dig 26, 25-feet-deep holes and fill them with iron and concrete piers on my side of the lot. The plans called for a rather large basement, and the very experienced builders (exceptionally nice guys) wanted to make sure the earth didn't move, causing my home to have problems. So for three days I had a very noisy drill literally ten feet away from my window.
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