BarroMetrics Views: The Fall of the American Empire
This I saw yesterday
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From Dow Jones Wires:
WASHINGTON -(Dow Jones)- Lawmakers are considering changing how the Consumer Price Index is calculated, a move that could save perhaps $220 billion and represent significant progress in the ongoing federal debt ceiling and deficit reduction talks.
According to congressional aides familiar with the discussions, the proposal would shift how the Consumer Price Index is calculated to reflect how people tend to change spending patterns when prices increase. For example, consumers tend to drive less when gas prices increase dramatically.
Such a move is widely seen by economists as resulting in a slower rise in inflation. That would impact an array of federal programs that are linked to CPI including the Social Security program and income tax brackets set by the federal government.
The proposal could lower federal spending by around $220 billion over the next decade, based on calculations by last year’s White House deficit commission, which recommended the change as part of its final report.
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I could not help but recall Gibbons’ , The History of the Decline and Fall of the Roman Empire. Most reviews I have read suggest that Gibbons laid the blame for the fall on:
- A decline in civic values - the desire to serve for the good of Rome and
- Christianity
See http://en.wikipedia.org/wiki/The_History_of_the_Decline_and_Fall_of_the_Roman_Empire and http://1207books.wordpress.com/2009/02/27/the-decline-and-fall-of-the-roman-empire-by-edward-gibbon-reviewed/.
I have a different take on the reasons for the Fall. Romans stopped practising the values that made it great. One of these was the value of honesty; in Randian terms “the virtue of never consciously faking reality”. It seems to me that the US since Bush has been guilty of doing just that. And the Dow Jones Wire is just another example.
Let me explain:
The worry is this: the cost of the price of living in the US is going up. So rather than face up to this fact, US politicians want to play a numbers game and mask the risk by changing the basis of the calculation. Only problem when you do this is reality eventually wins out - much like the ‘paper loss’ some traders refuse to acknowledge as ‘real’ until the margin call comes.
So what does the DJ Wire have to do with trading? Just this, another small example of why Sept/Oct is likely to mark a top in the S&P.
Refer this blog post to a friend or colleague…
