Archive for the ‘bank deregultion’ tag
Stagflation Index Ends Positive for 2008
Simplified Stagflation Index for 2008
The November and December Simplified Stagflation Index (SFI) jumped due to negative inflation and wage increases. Given all the bad news about unemployment, cuts in factory orders, foreclosures, and bank insolvency, this was some good news for those of us who hung onto our jobs. The positive SFI numbers mean that workers are rebuilding some economic strength to buy, save, and invest after several years of losing it. That sunny thought, however, and hope for economic recovery, requires we continue to keep our jobs and create a lot of new ones.
The December data from the Bureau of Labor Statistics indicates that wages rose faster than inflation for non-managerial workers in the private sector, who make up about 80% of the American workforce. The key data:
Consumer Price Index (CPI) -0.7%
Average Hourly Earnings (AHE) +$0.05 or +0.27%
Average Hourly Wage $18.36/hour
Calculating the December percent increase in wages adjusted for inflation:
AHE – CPI = 0.27 -(-0.7) = 0.97
December Simplified Stagflation Index = 0.97 X 100 = 97.
The 12-Month Cumulative SFI = 317, with big increases coming since August and lower fuel prices. Real estate prices, in general, are also down over that period.
When the experts boil down all the details about the economic crisis, they will likely find three main culprits: (1) rising fuel costs (gas prices over $4 per gallon); (2) banking deregulation leading to the securitization of bad debt; and (3) the Commodities Futures Modernization Act of 2000. The problems we face as a result were preventable.
We could have avoided this mess by getting serious about energy efficiency, redesigning cars to meet higher CAFE standards, and developing renewable energy. We could have avoided the current bank bailout fiasco by keeping intact the banking regulations that separated commercial banks from investment banks. We could have kept commodities prices, including oil, from skyrocketing by requiring sane margin requirements for speculators.
For a fascinating discussion on the banking and commodities deregultion, listen to Michael Greenberger on NPR’s Fresh Air with Terry Gross