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Diving for Consumers Don Bravo | 8/3/04 I'm going to take the liberty of parsing a Reuters story which is appearing, I suggest, all over the world, in newspapers and on the internet. The story, which I read on the Yahoo! Finance site, is titled Consumer Spending Dives and is a corrected version, which, again, I am supposing, corrects a more tame version, maybe something along the lines of Consumer Spending Off Slightly, but Don't Worry, Everybody Is On Vacation. The story cites the Commerce Department, reporting Consumer Spending off by 0.7% in June, and 0.9% adjusted for inflation. A nearly 1% drop in spending by the American spendthrift public is annoying to those who depend on these kinds of things being positive (George Bush), but alarming to anyone who follows economics with more circumspection. What's funny is the Commerce Dept. believing that inflation is only 2.4% or trying to suggest to the reading public that it is. Anybody who buys milk, meat, gas, real estate or any manner of a variety of consumer items will beg to differ in a very large way. Inflation, in real terms, is probably running at closer to 7% thus far in 2004. I saw the American inflation situation put into human terms the other day at, I believe, The Daily Reckoning, where one of their wise writers wrote something to the affect, "If you drive or eat, you're paying more." The comment was made in reference to the core inflation rate, which strips out energy and food. So, if you can't go anywhere and are starving, now you know why. The Reuters article goes on to quote the Commerce Dept. once again, regarding the measly 0.2% gain in disposable income, also for June. But then they add in this little note, ...but was unchanged when inflation was taken into account. So, nothing really has changed much, except that everything costs a little more. But if incomes rose only 0.2%, and inflation, which we are estimating rising at 7% annually, Americans actually got poorer in June, by 0.4% (7% inflation, divided by 12 months is 0.583, so we'll round it up to 0.6, and subtract that 0.2 gain in disposable income). The good news is that if we continue inflating at this precise rate, it will take all of 250 months, or just about 21 years, to reach FLAT BROKE status, where every penny you earn will be magically vaporized by runaway hyperinflation. Payroll and government checks will be written on flash paper so that as soon as you touch it, it disintegrates, like the rest of our super-duper-thank-you-Mr.-Greenspan phony, fiat, self-destructive economy. 250 months, or 21 years... that's 2025, which also happens to be just about the time that the government says Social Security will also be broke. So, let's see, nobody will be able to afford anything, and those of us in our retirement years (yep, that includes me, just barely and about a zillion other Baby Boomers), will get nothing. Hopefully, we'll have saved enough to be able to afford the rent ($2000 a month for a two-bedroom apartment, and gas ($4 a gallon - and that's a conservative estimate), and dinner out at Applebee's ($89.00) once a month. Enjoy that money now, because tomorrow it will be worth less, and less, and less, until it finally becomes completely worthless, unless the government decides to do something sensible, like stop running deficits as wide as the Milky Way, or stop printing more and more tens, twenties and fifties, or stop inflating the most enormous credit bubble the world has ever seen. I'll be honest. I think the chances of the government doing any of those things are about as good as the Arizona Diamondbacks winning the World Series this year. In other words, don't count on it.