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Inflation: The Hidden Fear Voters Should be Focused On
Pinnacle Digest writes: With every citizen in America crying out for more jobs and lower unemployment, it seems strange that jobs, or the unemployment level, is not at the top of American's list of fears. Peter Schiff explains in his most recent commentary that journalists, politicians and economists all seem to agree that the biggest economic issue currently worrying voters is unemployment.
They would be wrong.
A Fox News poll released last week (a random telephone sample of more than 1,200 registered voters), showed 41% identified "inflation" as "the biggest economic problem they faced." This is nearly double the 24% that named "unemployment" as their chief concern. Schiff finds this astounding, as both candidates failed to even mention the word, never mind discuss it in the most recent debate.
These statistics, or rising fears over inflation, obviously do not surprise Schiff, or our team at Pinnacle; however, they should shock the hell out of the establishment. Schiff reminds investors that, according to the Federal Reserve, inflation is not a concern at all. Time after time, in front of Congress and the press, Fed Chairman Ben Bernanke has said that inflation is contained and that it is below the Fed's "mandated" rate of inflation (whatever that may be.)
The Bureau of Labor Statistics is saying the same thing. The measures they use to monitor inflation, such as the Consumer Price Index (CPI) and the Personal Consumption Expenditure (PCE), show annual inflation well below 2%.
Inflation is a serious issue for voters.
Why is this a HUGE problem?
Schiff breaks it down by explaining that if annual inflation is actually higher than 3%, which it truly is, then the US is already in a recession. He explains this by assuming the government used a 3% inflation deflator (rather than the 1.6% that they actually used) to calculate 2nd quarter GDP. As such, growth should have been reported at negative .1% rather than the positive 1.3%. Schiff believes that if the government used more accurate inflation data over the past several years, it is possible that America would have seen no statistical recovery from the recession that began in the fourth quarter of 2007. This would help explain why the "recovery" has failed to create jobs or lift personal incomes.
If inflation is such a major concern now, imagine how much bigger the problem will become once the Fed achieves its goal of pushing the rate higher.
Schiff's final hypothesis is a scary one and should lead all investors to seriously consider protecting themselves against the inflation monster which Ben Bernanke is unleashing on the US and indirectly, the world.