Financial repression

Financial Repression Back to Stay: Carmen M. Reinhart

As they have before in the aftermath of financial crises or wars, governments and central banks are increasingly resorting to a form of “taxation” that helps liquidate the huge overhang of public and private debt and eases the burden of servicing that debt.

Such policies, known as financial repression, usually involve a strong connection between the government, the central bank and the financial sector. In the U.S., as in Europe, at present, this means consistent negative real interest rates (yielding less than the rate of inflation) that are equivalent to a tax on bondholders and, more generally, savers.

More

Comment: Sooner or later the repressed will strike back and we're closer to the sooner than the later.

World Economic Outlook April 2012

THE CONTINENTAL ECONOMICS CURRENCY REVIEW

WORLD ECONOMIC OUTLOOK

APRIL 2012

Economic growth

The world economy remains in a weak condition. The stagnation in Europe continues and the United States is still waiting for a stronger recovery. Monetary policies in Europe, Japan and the US keep interest rates at extremely low levels. In contrast to the US and Japan, the group of European countries which concluded the fiscal pact, will try to practice more restrictive budget policies. This clash of policies will contribute to the turmoil in the months and maybe years to come.

Economic growth in the highly industrialized countries decelerated in 2011 from 3.1 per cent in the final quarter of 2010 to 1.6 per cent in the final quarter of 2011. The same trend took place for the Eurozone where the deceleration was from 2.0 per cent to 0.7 per cent. Germany, which had a relatively strong growth performance by the end of 2010 and early 2011 with a growth rate of 3.8 per cent in the final quarter of 2010 and 4.6 per cent in the first quarter of 2011, slowed down to 2.0 per cent at the end of the year 2011. While the United Kingdom could still managed to keep its growth rate in positive territory in the period from the end of 2010 to the end of 2011 -- with 1.3 per cent in the final quarter of 2010, and 0.8 per cent in the final quarter of 2011--  the Japanese economy had to register negative rates. After ending on the plus side at the final quarter of 2010, quarterly growth rates were all negative for Japan in 2011 with -0.6 in the first quarter of 2011, - 1 per cent in the second, -0.2 in the third quarter and at –o.8 percent at the end of 2011.

Weak economic growth, or, in the case of Japan negative economic growth, exacerbates the sovereign debt situation. Japan, the country with the highest debt to GDP ratio shows the weakest growth performance. With economic growth rates like those for 2011 it will not only be Japan but all others major industrialized countries, too, whose debt situation will continue to deteriorate to the point of full bankruptcy.

Industrial production weakened even more than GDP in all countries under review. From the first quarter of 2010 to the final quarter of 2011 industrial production deteriorated in the USA from 5.8 per cent to 0.9, in the Eurozon from 8.1 to zero per cent, and in Germany from 13.0 per to 4.2 per cent. In the United Kingdom industrial production turned negative in the second quarter during the year as it was the case with Japan.

It is a futile hope that growth in service could substitute industrial production as a motor of wealth creation. It is the same with consumption. Consumption by itself cannot make the economy grow in the long run. The causality is the other way round: Consumption can expand as much a production will grow.

International trade

In international trade, earlier trends are still in place. The US continues to have a deficit in its current account balance as does the United Kingdom, while Germany, Japan, and China show surpluses. It is notable that while the American and British current account balance worsened over the past year, the surplus of Germany, Japan and China receded. This does suggest that a growing part of the American and British current account deficits is due to imports from non-industrialized countries. The rising price of oil impacts negatively on the global economy and fills the coffers of the oil-exporting countries. Like it was the case with the oil price spikes before, massive global wealth redistribution takes place. A side effect of this constellation is that the world is drowning in liquidity. 

It remains to seen whether these trends can continue. The current account deficit of the US has become highly persistent. Over the past couple of decades, the US economy has changed its structure from a productive economy to one that has become deeply dependent on foreign imports. The question remains how long foreign creditors will tolerate this dependence and will continue to finance the persistently high US current account deficits.

In Europe, in the US and in Japan, interest policy has hit zero bound. Interest rates have approached a point where they cannot sink much more. By the end of 2012, the US had an official interest rate of 0.25 per cent per year, while the equivalent rate was one per cent for the euro area, 0.50 for the United Kingdom and 0.10 per cent for Japan. China held its rate steady above six per cent in order to cool its economy.

Interest rate policy in Europe, the US and Japan has reached its end point.  Little more can be done. With an annual interest rate of 0.10 per cent, Japan is at absolute zero bound. The expectation that lower interest rates would stimulate investment activity has not been borne out. The burden has shifted to fiscal policy, but here too, the results of the stimuli policy have been disappointing.

Monetization of debt through quantitative easing, extremely low interest rates and highly expansive fiscal policies provide an environment that is perfect for the storm of hyperinflation to appear anytime soon.

Currencies

The European debt crisis left its mark on the exchange dollar/euro exchange rate. Over the year 2011 the euro weakened against the dollar from 1.44 to 1.29 dollars per euro. Government interventions have kept the dollar from strengthening more significantly against the Japanese yen and the Chinese yuan. Massive interventions, the proclamation of a currency war by the Brazilian government and a slower growth of the Brazilian economy, have led to a recovery of the US dollar against the Brazilian real. While from the last quarter of 2010 to the first quarter of 2011 the US dollar still weakened dramatically against the real from 1.67 to 1.59 at the turn of the year to 2011, the dollar began to strengthen thereafter – much to the relief of the Brazilian government – from 1.59 in the first quarter of 2011 to 1.79 in the final quarter of 2011. This trend has continued in 2012 so far and expectations of appreciations of the US dollar against the Brazilian real seem justified.  

Giving the global uncertainties, the sovereign debt crisis in Europe, the financial crisis in the US and the ongoing weakness of the Japanese economy, it is no surprise that the gold price has kept on rising. From February 2011 until February 2012 the price of gold rose from 1410 dollars per ounce to 1711 US dollar per ounce which made gold one of the better investment of the year 2011. Likewise during this period petroleum was on the rise, with a price increase during this period from 111.8 US dollar per barrel to 127.7 US dollars per barrel.

After their extreme run-up in the past years, the prices for corn, coffee, soya, sugar and grain weakened somewhat in 2011 but compared to the past decade, they are still relatively high and together with the extreme price for oil surely contribute to inflationary pressures. Up to now it was mainly only the overall weakness of the major industrialized economic areas that loose monetary policy and rising prices for natural resource have not yet led to much higher inflation rates.

Conclusion

Most of the trends that can be currently observed have been in place for quite some time and most likely will continue such as monetary and fiscal expansion, the rise of the price of commodities and of oil in particular as well as the price of gold.

The longer these trends continue, the more they become incompatible with rising bond and stock prices. One of these two groups must knave in. For the first group - gold, oil and commodities - to crash, the emergence of a deflationary depression will be required. There is no doubt that the world economy may be close to it. For the second group - bonds and stocks - to crash, the outbreak of inflation will be required. Over the past couple of years, monetary and fiscal policies of the major economies of the world have provided all that is necessary for hyperinflation to happen.

The world economy finds itself in the curious situation that conditions for both, inflation and deflation, have been prepared. The world economy resembles a boat on high sea that has been loaded up with explosives. Either a spark will make the load explode before the boat will sink or the boat will sink on its own and take the explosives with it to the ground.

Antony P. Mueller

The Continental Economics Institute (CEI) - April 2012

When inflation explodes right into your face

Amity Shlaes explains:

"... The thing about inflation is that it comes out of nowhere and hits you. Monetary policy is like sailing. You’re gliding along, passing the peninsula, and you come about. Nothing. Then the wind fills the sail so fast it knocks you into the sea. Right now, the U.S. is a sailboat that has just made open water, and has already come about. That wind is coming. The sailor just doesn’t know it.

“Sudden” has happened to us before. In World War I, an early version of what we would call the CPI-U, the consumer price index for urban areas, went from 1 percent for 1915 to 7 percent in 1916 to 17 percent in 1917. To returning vets, that felt awful sudden...."

More

Comment: The most important thing about inflation is that you must get ready for it before it happens.

What Bernanke doesn't get

Anna Schwartz explains:
"... Today's crisis isn't a replay of the problem in the 1930s, but our central bankers have responded by using the tools they should have used then. They are fighting the last war. The result, she argues, has been failure. "I don't see that they've achieved what they should have been trying to achieve. So my verdict on this present Fed leadership is that they have not really done their job."...
More
Comment: There are people who are smart and there are people who are dumb. Bernanke is one of those who are very smart and very dumb at the same time.

Is China already in hard landing?

China’s Premier: Curbs Needed to Prevent Property ‘Chaos’

By Michael Shedlock03/15/20

 JPMorgan analyst Adrian Mowat says Chinese Economy Already in 'Hard Landing'

“If you look at the Chinese data, you should stop debating about a hard landing,” Mowat, who is based in Hong Kong, said at a conference in Singapore yesterday. “China is in a hard landing. Car sales are down, cement production is down, steel production is down, construction stocks are down. It’s not a debate anymore, it’s a fact.” His team was a runner-up for best Asian equity strategists in a 2011 Institutional Investor magazine poll.Mowat said in May the risk of a hard landing was building in China as fixed-asset investment in real estate had increased even as property demand remained weak.

More
Comment: Maybe Mowar is right. The question with China was not if but when. Let's call the Chinese lucky when the contraction is already happening now. The longer these artifical booms last, the worse it gets. How big are the distortions of the Chinese economy? That's the central question now. In order to find out, you must visit China and search.

Quo vadis, China?

After Bo Xilai, Which Way Is China’s Red Ferrari Headed?
“Seek truth from facts,” goes an old Chinese saying favored by Deng Xiaoping. That injunction should also apply to the story of Bo Xilai, the recently ousted party chief of Chongqing whose fall has become something of a morality tale.
To hear some tea-leaf readers tell it, the high-flying Bo was the creator of the “Chongqing model,” a program that melded support for state-owned enterprises and measures to help the poor with a relentless campaign against crime and corruption and a rekindling of revolutionary fervor...
The real lesson of Bo’s downfall is that the Communist Party as a whole is losing its ability to stay on top of public disaffection with widespread corruption and rising inequality...

More
Comment: Most countries outside of Europe and the US have traditionally a very hard time to change. Will China make it? Doubts still remain.

End "TBTF"

Break Up The Banks! Dallas Fed President Calls for The End of “Too Big To Fail”

By CHRISTOPHER MATTHEWS

Since 2008, there have been plenty of calls to forcibly dismantle the “Too Big To Fail” (TBTF) Banks, but few of those calls have come from those in positions of real power. But the Dallas Federal Reserve Bank President, Richard Fisher, has been consistent and vocal in his belief that our economy will not reach its full potential until those bloated financial institutions are cut down to size.

Read more: http://business.time.com/2012/03/22/break-up-the-banks-dallas-fed-president-calls-for-the-end-of-too-big-to-fail/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+time%2Fbusiness+%28TIME%3A+Top+Business+Stories%29&utm_content=Google+International#ixzz1pqlmicER
Comment:  It's a beginning. Next in line: End the Fed!

Stocks contra bonds

Goldman Sachs: Best Time in a Generation to Buy Stocks, Sell Bonds

By Matt Nesto

As much as most of us could effortlessly list a dozen reasons why the next 10 years will be as hard on stock investors as the previous decade, what matters today is that Goldman Sachs (GS) is making a big call to the contrary.

In a research note out this morning, "The Long Good Buy," Goldman's chief global equity strategist, Peter Oppenheimer, unveils a whopper:
"The prospects for future returns in equities relative to bonds are as good as they've been in a generation."
In one fell swoop, Oppenheimer has not only called out the analysts that we just highlighted for being 6-months late in supporting the current rally, but raised the ante by calling for more of the same, for the foreseeable future. Specifically, "a steady upward trajectory over the next few years."
"It's a curious time to do it," Macke says in the attached video. "They're either very, very late or prescient as all get out."
The heart of the call is really about bonds, in that Oppenheimer's preference for equities is couched in a belief that rising bond yields are going to basically ruin fixed income returns forever.
Truthfully, there are so many variables at play that mega-calls like this can be unhelpful since you need to wait around 20 years to see if they're right or wrong. How can anyone expect to be able to reasonably predict where earnings, the economy, interest rates, the political climate or geopolitical events will be next year, let alone in 10 or 20 years from now.
More
Comment: Yes, alright, Oppenheimer, see you in 20 years. Anyway, you may be right, particularly given a terrible performance of bonds so that relative to this junk, stocks could indeed do "relatively" well. An investor may lose terribly with you being right, Peter.

700 bn. euro bailout fund

Euro zone may up bailout fund capacity to near 700 billion euros: officials

ReutersBRUSSELS (Reuters) - The euro zone may raise the combined lending power of its bailout funds to close to 700 billion euros from 500 billion in a trade-off between German opposition to committing more money and calming markets, euro zone officials said.
More
Comment: Watch out speculators againist the euro, the point is that you play with private money, which has its limits. The eurocrats play with public money and thus play without a limit.

The third oil price shock is here

Brent At $126 As Israel Security Cabinet Votes 8 To 6 To Attack Iran

Submitted by Tyler Durden on 03/16/2012 15:44 -0400

Looking at the tranquil sea that is the S&P one may be forgiven to ignore the rapid intraday surge in Brent which was up over $3 in a few hours, approaching $126 once again. But why? After all the FOMC minutes were oh so very slightly hawkish, and not to mention that the Fed's scribe Hilsenrath told everyone at best the Fed would proceed with sterilized QE which would leave risk prices untouched. Maybe it has something to do with this. According to Israel's NRG, in a just completed cabinet vote, for the first time Netanyahu has gotten a majority (8 over 6) supporting an Iran attack. NRG also notes that at this point Israel has decided to not wait until the US elections in November before proceeding with sending crude to the stratosphere. From NRG (google translated): "Israeli political sources believe that Prime Minister Benjamin Netanyahu a majority Cabinet support Israeli military action against Iran without American approval....He announced that he would not hesitate to perform the operation without the approval of President Obama mentioned the precedent of the decision to attack the Iraqi reactor, Prime Minister Menachem Begin, and with the comments heard yesterday some cabinet ministers say privately that "It sounds like a speech preparation for attack." Political - Security Cabinet 14 ministers. According to estimates, at this stage tend to support Netanyahu and
Barak's approach eight ministers, and six against it (including the traditional opponents octet: Moshe Ya'alon, Dan Meridor, Benny Begin and Eli Yishai)." So... $4.00 gas is just around the corner. As is, probably, $5.00 gas. And $6.00 gas.
More 
Comment: The question now is: will the third oil price shock also mark the beginning of the third world war?

US interest rate 10 year Treasury May 2011 - March 2012

Game over for bonds

PIMCO’s Bill Gross: QE3, Inflation, Muted Growth on the Way

By Daniel GrossAnother round (or two) of quantitative easing from the Federal Reserve, muted growth and an end to the 30-year bull run in government bonds.
That's what Bill Gross, one of the largest bond investors in the world, sees for the U.S. economy in the coming year...
Gross says long-term interest rates have been rising in recent weeks (here's a chart of the 10-year U.S. bond) for two principal reasons. "Yes, inflation is rearing its head. We're seeing that in oil prices and other commodities, and we're seeing it in the numbers," he said. The consumer price index has risen 2.9% in the past 12 months. In addition, Gross says, the Federal Reserve's "Operation Twist" is scheduled to end in a few months. Under this plan, the Fed sold short-term debt and purchased long-term bonds in an effort to keep longer-term interest rates lower. At its meeting earlier this week, the Fed indicated that it didn't plan to extend the operation. "Yields have risen based upon the possibility that the Fed simply stops buying long-term bonds," he said. "If they do that, the question becomes, who is left?"...
More
Comment: Watch out, things may mover swifter than expected. Bond rally is over. The question is: will there be a smooth decline or a crash?

Goldman Sachs is leader in Wall Street's degeneration

Goldman Banker Quits In Disgust, Blasts Firm For “Ripping Off” Clients

By Henry Blodget | Daily Ticker Another PR disaster is unfolding for Goldman Sachs (GS), the Wall Street investment bank that has already borne the brunt of popular wrath in the aftermath of the financial crisis.
A senior executive at the firm, Greg Smith, quit today in spectacular fashion, announcing his resignation in a scathing New York Times editorial in which he accused the firm of gleefully "ripping off" its clients and succumbing to short-term greed.
Within today's Goldman Sachs, Smith says, senior bankers often refer to the firm's clients as "muppets."
The firm has lost the culture of integrity, teamwork, and humility that once made it great, Smith says, and instead has become a place that is "as toxic and destructive as I have ever seen it."
"It makes me ill how callously people [in the firm] talk about ripping their clients off," Smith continues... "Leadership [at the firm] used to be about ideas, setting an example, and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence."
More 
Read article: Why I Am Leaving Goldman Sachs By GREG SMITH
Comment:  GS has not only ruined Wall Street, its leaders have also had corrupting influence on American politics. The GS clique in politics is even worse than those back home who just make money.

 

It's not yet over for Greece

Exclusive: More austerity needed in Greece: EU/IMF

By Jan Strupczewski

BRUSSELS | Tue Mar 13, 2012 9:12am EDT

BRUSSELS (Reuters) - Greece will have to slash a further 5.5 percent of GDP in government spending in 2013 and 2014 to meet agreed fiscal targets underpinning the second international bailout for Athens, a European Commission report said.
More
Comment: Like with a spoiled brat, discipline must be imposed permanently as a part of the cure.

California in crisis

California's Greek Tragedy - No one should write off the Golden State. But it will take massive reforms to reverse its economic decline.

 California's rising standards of living and outstanding public schools and universities once attracted millions seeking upward economic mobility. But then something went radically wrong as California legislatures and governors built a welfare state on high tax rates, liberal entitlement benefits, and excessive regulation. The results, though predictable, are nonetheless striking. From the mid-1980s to 2005, California's population grew by 10 million, while Medicaid recipients soared by seven million; tax filers paying income taxes rose by just 150,000; and the prison population swelled by 115,000.

More 

Comment: Different from the Greek tragedy, nobody is silkly enought to blame the commom American currency, the US dollar, for the Californian drama. The culprit is the excessive welfare state, stupid.

 

Greek bailout close to conclusion

Greek Bailout Payment Set to Be Approved by Euro Ministers After Debt Deal

Euro-area finance ministers will move toward completing the next Greek bailout this week as they meet in Brussels tonight.
Luxembourg Prime Minister Jean-Claude Juncker, who heads the group of euro-region finance ministers, said he had “no doubt” that a second bailout program for Greece would be approved and he expected a final decision on March 14.
More
Comment: For me it was pretty much clear from the beginning the euros would stage a bailout. Those who thought otherwise don't know how the world works.

Times are a changing

China Posts Massive Trade Deficit

• Article
• Comments (59)

MORE IN WORLD »

BY AARON BACK

BEIJING—China swung to a massive trade deficit in February, due partly to seasonal distortions but also to faltering demand for the country's exports.

The weak export performance comes on top of a raft of disappointing economic data on Friday that economists said will add to the likelihood of additional easing by the central bank and other policy makers.

"Overall, economic conditions are getting weaker at a fast pace," said Nomura economist Zhiwei Zhang. "The slowdown is happening faster than the government expected."

China posted a trade deficit of $31.48 billion in February after reporting a $27.28 billion surplus in January, ...

More

Comment: We'll have to check whether its transitory or permanent. If it's permanent all things have changed concerning international finance.

CDS on Greek debt

Greece Deal Triggers $3B in Default Swaps: ISDA

By Abigail Moses

Greece’s use of collective action clauses forcing investors to take losses under its debt restructuring triggers payouts on $3 billion of default insurance, the International Swaps & Derivatives Associationsaid.
A total 4,323 credit-default swap contracts may now be settled after ISDA’s determinations committee ruled the use of CACs is a restructuring credit event ...
More
Comment: No reason to get excited.

China's currency getting global

China: RMB credits for the Brics

March 7, 2012 8:30 pmby Henny Sender

China Development Bank’s initiative in bringing together the development finance arms of the five major Brics countries to sign an agreement – whereby each bank pledges to extend credit in its own currency to the four others – in Delhi later this month speaks volumes about the ambitions of the mainland policy bank.

China’s export of cheap capital is giving it increasing clout and the country is using it to press for a greater role for the renminbi, particularly in financing trade but not exclusively so. Generally, to denominate trade in your home currency is a huge advantage because it forces others to take the risk of adverse currency moves. The Chinese banks and regulators have long been concerned that the trajectory of the dollar is down and worry about being repaid in ever less valuable dollars.

More
Comment: This bodes ill for the dollar. China's leadership is adamant in its pursuit of global power status. Yet China's strategy is fundamentall contradictory. China cannot continue to grow and remain authoritarian at the same time.

Private Investors agree to swap Greek debt

Investors Agree to Swap About 85% of Greek Debt

By Christos Ziotis and Maria Petrakis - Mar 8, 2012 7:22 PM GMT-0300

Private investors agreed to swap about 85 percent of their Greek government bonds for new securities in the biggest sovereign debt restructuring in history, according to a banker briefed on the results.
Preliminary indications showed that as much as 155 billion euros ($205 billion) of the 177 billion euros of Greek-law bonds were offered, said the banker, who declined to be identified. Twelve billion euros of debt not under Greek law was also tendered, as was 7 billion euros of bonds from state-owned companies guaranteed by the government, the banker said.
More
Comment: Now comes the hard part. Will Greece have the stamina to keep down spending and get back to growth? It's almost like expecting a miracle.

State of the Union

35 Shocking Statistics That Prove That Things Have Gotten Worse In America
Most Americans know that things used to be much better in the United States, but they don't have the facts and the figures to back that belief up. Well, after reading the shocking statistics in this article nobody should be left with any doubt that things have gotten worse in America. There are less jobs, incomes are down, home values have plummeted, poverty is up, consumer debt is way up, dependence of the government has skyrocketed and government debt is totally out of control. Sadly, it hasn't really mattered which political party has had control over the White House. Things have gotten worse under Obama, they got worse under Bush, and they got worse under Clinton. We are in the midst of a horrific long-term economic decline and the American people desperately need to wake up.
The following are 35 shocking statistics that prove that things have gotten worse in America....
More
Comment: More problematic than these facts is that America hasn't yet begun to recognize and less so to go ahead to mend the malaise. While many things are equally bad in Europe, at least they face the decline and - albeit in vain - they try to do something against it. At least some chance of survival.

Will quantitative easing lead to hyperinflation?

Bernanke Seen Accepting Faster Inflation

By Craig Torres

Federal Reserve Chairman Ben S. Bernanke spent six years pushing for an inflation goal. Now that he has it, some investors are betting he’ll breach the 2 percent target in the short run to lower unemployment.
More

Comment: I'm currently reflecting the idea that the new, new thing will be a kind of explosion into hyperinflation, that is a black swan event which would catapult inflation rate from one week to the next from 3 or 5 to 50 or 500 per cent.

ECP plays with financial dynamite

ECB Balance Sheet Jumps to a Record $3.96 Trillion Amid Lending to Banks

By Jana Randow - Mar 6, 2012 11:37 AM GMT-0300

The European Central Bank’s balance sheet surged to a record 3.02 trillion euros ($3.96 trillion) last week, 31 percent bigger than the German economy, after a second tranche of three-year loans.
Lending to euro-area banks jumped 310.7 billion euros to 1.13 trillion euros in the week ended March 2, the Frankfurt-based ECB said in a statement today. The balance sheet gained 330.6 billion euros in the week. It is now more than a third bigger than the U.S. Federal Reserve’s $2.9 trillion and eclipses the 2.3 trillion-euro gross domestic product ofGermany (EUANDE), the world’s fourth largest economy.
Mais
Comment: The "new, new" thing" may be a hyperinflation that comes quasi over night. Under theses circumstances it is not avisable to hold cash. The flow of money into hard assets will continue.

What's wrong with the "inflation rate"?

ECONOMY & POLICY

How to Figure Out Your Personal Inflation Rate

To know what's really happening to your own standard of living, don't pay attention to government's statistics – just go to the grocery store or a department store and look around you.

By MICHAEL SIVY

If you’re like many Americans, you may find the recent economic news somewhat perplexing. Government reports show the economy improving and inflation under control. And yet, it may well feel as though your standard of living is eroding, and you may be shocked by prices when you go shopping. Well, there’s a reason for any disconnect between the official statistics and your own experience – and much of it has to do with the nature of inflation.

The fundamental problem is that people – economists and laypeople alike – talk about inflation as though it can be measured accurately and represented by a single number. In reality, though, inflation is a judgment call and varies enormously depending on what part of the economy is under consideration. The inflation figures that economists use when they calculate statistics can differ enormously from what you experience at the grocery store. In fact, you could say that every person has his or her own individual inflation rate.
Read more: http://business.time.com/2012/03/06/youre-already-the-victim-of-inflation/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+time%2Fbusiness+%28TIME%3A+Top+Business+Stories%29&utm_content=Google+International#ixzz1oLXvUPJK

Comment:  Note that an official inflation rate that is manipulated downwards, implicitly makes the the growth rate higher and productivity progress larger.