No Inflation Thanks To Obamacare

No Inflation Thanks To Obamacare

by ECONMATTERS | JUNE 26, 2014

This is the real world that many Americans live in Healthcare Data Skewed On Thursday the Personal Income and Outlays Report came out also known as the spending report and just like yesterday`s GDP downward revision the Healthcare component is playing havoc with the overall numbers, and it is pretty obvious due to the newly enacted Affordable Care Act also known as Obamacare.

Just throw out any comparisons or expectations regarding any government data for the foreseeable future because Obamacare is going to skew all the historical comparisons as it effects the calculations that go into the Healthcare component of any government report. The data in the calculation of Healthcare has changed, and from here to eternity the Healthcare component is going to massively under-report healthcare spending, just throw any previous assumptions out the window regarding Healthcare spending.

Many Data Points Show Healthcare Costs Continue to Rise The government now has another measure which under-reports inflation by accounting chicanery. We all know actual healthcare costs continue to rise, and only 7 million actually signed up for Obamacare, and far less are properly qualified and using the system, but yeah Healthcare costs went down despite data in other reports of a non-governmental nature that point to the contrary! This just tops the cake, and at this point all government data is losing more credibility by the hour, just try to read between the lines and get the big picture, because the actual data points are so unreliable and flawed.

Real PCE Price Index Over 2% PCE Price Index — Y/Y change came in at 1.8 %; the real number is probably above 2% if the Healthcare component was properly calculated and conducted, basically any proper comparison has to strip out the healthcare component for an apples to apples real comparison. Way to go Obama the entire

team is working together from Janet Yellen at the Fed to bean counters at the Whitehouse reassuring the American people that there is no real inflation in the economy! Yet every American experiences inflation in almost every category that is above the government calculated numbers!

No Inflation Here Have you noticed car prices these days? What about Chicken, Fish and Beef? Apartment prices are going up because most Americans cannot afford houses. The affordability index for houses is not where one would expect after a massive recession and housing collapse with an economy growing at roughly 2% for the past 5 years in a consistent fashion. It is inflation, inflation is everywhere one looks! It`s great that the government can change how Healthcare spending is calculated to artificially show that look, Healthcare costs are coming down and Obamacare was the savior that we knew it would be! But throw out any items that aren`t necessary for surviving as those are in essence worthless components in any inflation calculation. Because in the end, consumers just don`t acquire those items that they cannot afford, these become ‘luxury items’, and prices seem cheaper than they are because of demand, and this skews the inflation numbers.

Inflation Methodology Flawed This is why government inflation calculations and methodology always underreport inflation and are basically a joke! Focus on the items that consumers have to buy to stay alive. Food is number one, if humans don`t eat food they die, they have to buy these items! Energy is another, if they don`t buy gas, they cannot commute to work, lose their job, and cannot buy food! Focus on Apartment Rents, if they don`t pay for minimal housing in the form of Apartment Rent, then they are living with family, shelters or under a bridge! All three of these essential areas are going up, and quite notably in many cases, and yet the Fed refers to them as “Noise”!

Increasing Purchasing Power Should be the Focal Point of Fed Policy How much higher does the stock market have to go? Does it really matter relative to improving the quality of lives of average Americans by bringing down Real Inflation in the economy? How about instead of being so focused on raising wages to keep up with soaring inflation costs, which never seem to keep pace Janet, bring down inflation so that it is commensurate with a 2% growing economy, that in the end does so much more for the majority of the population?

Janet Yellen might just realize that by getting Inflation in line with the actual growth of the economy and wages, that she would vastly improve the Consumer`s Purchasing Power, and thus be stimulating the economy! The Fed has it all backwards, and they wonder why they keep having to implement these stimulus programs, it is because they don`t work – except for creating asset bubbles in stocks and bonds!

Wealth Redistribution Policy at Federal Reserve Fed Chair Yellen had better start focusing on Inflation or she is going to have an economy that starts slowing down and enters a stagflation stage because the tepid retail sales numbers are a direct correlation to rising inflation pressures in the bulk of the economy. Struggling college students need this money to fill up their tanks to get to school and a job, forget about the fancy outfit or the new Coach Handbag! This is the real world that many Americans live in, not one characterized by ‘Noisy Inflation’ interpretations to peddle more easy money to rich Wall Street Banks at the expense of the majority of the population!

American Dream, Recurring Nightmare: Mortgage Meddling And Moral Hazard

BY DAN SANCHEZ | LEWROCKWELL.COM | JUNE 26, 2014

In response to the U.S. government gearing up to go to war in Iraq again, in spite of the disastrous failure of the last war, Justin Raimondo recently tweeted: “American foreign policy is a recurring nightmare.”

The same, unfortunately, can be said for American economic policy as well. The Obama administration seems intent on making a recurring nightmare out of the Inception-style, artificially-induced “American Dream” of widespread government-supported home ownership.

The Department of Housing and Urban Development (HUD) announced in a press release earlier this month that “Preserving the Dream” was this year’s theme for “National Homeownership Month.” The press release is replete with both the right- and left-wing variants of “American Dream” rhetoric—the “Ownership Society” palaver of the Bush years and the egalitarian pandering of the Clinton era—all to justify continuing the disastrous policy of artificially expanding housing credit to as many people as possible, on the easiest terms possible. In particular, it highlighted its “Blueprint for Access” (BFA) document that it released earlier in the year, “outlining the additional steps the agency is taking to expand access to credit for underserved borrowers.”

This is all in keeping with the policy direction that the Obama administration announced over a year ago through its mouthpiece The Washington Post, in an article titled “Obama administration pushes banks to make home loans to people with weaker credit.”

The Federal Housing Administration (FHA) offers lenders taxpayer-backed insurance against defaults for certain mortgages. However, HUD and the Justice Department have, especially since the housing crash, undertaken investigations of loans that go bad, and have, in addition to other penalties, withheld coverage from lenders if they uncover wrongdoing (the BFA calls these “back-end enforcement actions”).

The Obama administration, as expressed in the article, was concerned that such potential “desocialization” of losses was causing banks to add stricter requirements (known as “credit overlays”) that were restricting credit access to “underserved” (i.e., potentially insolvent) borrowers. Such a restriction is abhorrent to the administration, which wants to open the “American Dream” to as many people as possible so as to “help power the economic recovery.” So, as the WaPo article states: “The FHA, in coordination with the White House, is working to develop new policies to make clear to banks that they will not lose their guarantees or face other legal action if loans that conform to the program’s standards later default. Officials hope the FHA’s actions will then spur Fannie [Mae] and Freddie [Mac] to do the same.”

The BFA refers to these FHA policies as “enhancements to our quality assurance processes.” (Emphasis added below.)

We want to work with lenders to provide clarity and transparency in FHA’s policies to encourage lending to qualified borrowers across the credit spectrum. We believe changing the way in which we provide policy direction and monitor lender compliance and performance better protects FHA and reduces uncertainty for lenders in their interactions with HUD. Our initial efforts are paying-off as some lenders are already beginning to reduce credit overlays.

As more lenders move in this direction, we want to create a policy and quality assurance framework that ensures that underwriting quality and compliance with FHA’s requirements sufficiently protect FHA from manufacturing risk.

So basically, the FHA wants to maximize lending “across the credit spectrum” (especially, of course, to the “lower wavelengths” of that spectrum) by hand-holding lenders through compliance issues on the front-end (as opposed to “back-end enforcement”) so that they can (as the BFA says elsewhere) “confidently originate loans for a larger number of FHA-eligible borrowers.”

This, according to the BFA, keeps the FHA from “manufacturing risk” for the lenders. Of course, what the policy really does is “manufacture risk” for the taxpayer by shifting the loan portfolio risk away from lenders and onto us. It does this by making sure that, as much as possible, not a single socializedrisk, subprime loan goes unmade. They want to make it as easy as possible for lenders to put taxpayers on the hook.

This is all very ominous, because it is this kind of moral hazard that helped precipitate the last housing bubble and crash, which in turn inaugurated the financial crisis we are still suffering through. The implicit taxpayer backing of the mortgage GSEs (government-sponsored enterprises) Fannie Mae and Freddie Mac, as well as the “Too Big To Fail” philosophy underpinning the “Greenspan Put” and, later, the “Bernanke Put,” made mortgage lending (especially through mortgage-backed securities) seemingly a No Lose Bet. The bet had a tremendous upside of privatized profits (mortgage GSE shares paid dividends and were traded on the NYSE, and thanks to legislation during the first Bush

administration, they were allowed to hyper-leverage their balance sheets), and almost no downside, thanks to the implicit guarantee of socialized losses in the case of major default.

This made the housing industry the Go-To Place for much of the Fed’s swelling sea of money sloshing around. The Fed’s inflation (although nothing compared to the quantitative easing going on now and since 2008), in unsustainably bidding down interest rates, overpriced future durable-good services, resulting in the the overpricing of homes anyway. But the moral hazard made this overpricing even worse, exacerbating the bubble.

Also exacerbating the bubble was the constant “American Dream” pressure, through both policy and jawboning, to lower mortgage lending standards of that era, on the part of both the Clinton administration (especially the “National Homeownership Strategy” at HUD, and the resuscitation of the Community Reinvestment Act) and the second Bush administration (especially the “Ownership Society” push). Money-printing, “American Dream” policies and rhetoric, government-lowered lending standards, and moral hazard; this is a nightmare we’ve had before.

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