Food for Thought on Deflation: With Prices Dropping Worldwide Since 2008 Why Are Public Employee Unions Still Getting Raises?

Written By: Robert Cox

wheelbarrow of cash.jpegPublic unions have gotten so used to clamoring for pay increases to keep up with inflation that when faced with an economy with little or no inflation they know nothing better but to keep making the same argument even as the greater danger in today’s market is moving into a deflationary period which, as any one who has studied the Weimar Republic in post-WWI Germany can tell you, is a very dangerous economic situation in which civil order breaks down and maniacs like Adolph Hitler can be elected as dictators.

I am not suggesting deflation is imminent but the notion that public union workers needs raises when private sector employees are losing their jobs, having their hours scaled back or facing pay reductions is absurd. That they are making such demands in the face of state and local governments at the point of insolvency risks permanently discrediting the union movement and the workers they represent.

The biggest source of public sector funding in New Rochelle goes to F.U.S.E., the teachers union. While claiming to have negotiated a new contract last year, in fact, the “contract’ was yet another extension of the existing contract which was to expire several years ago. Because, the contract extension only ran for two years (the union was hoping that the Obama Stimulus Plan would have revived the economy by now so they could seek “make good” pay increases in the next round), the district finds itself in a position, starting this fall, to scrap the contract first negotiated in 2003 and begin from scratch with a deal based on the new reality of a state in bankruptcy, a still-moribund housing market, double-digit unemployment and an unsustainable set of public-sector commitments for salaries, benefits and pensions.

New Rochelle residents would do well to start looking at the hard data and begin now to press the district to toss the current F.U.S.E. contract and reign in spending that is an insult to drunken sailors everywhere.

Read it and weep…

CNBC: Housing Double Dip a Done Deal

[The] Pending Home Sales Index from the National Association of Realtors…rose even more than expected, as buyers rushed in to take advantage of the home buyer tax credit. And yes, those numbers will show up in Existing Home Sales in May and June, but then look out. This index is based on contracts signed in August, and that’s how the credit was set up; you had to sign your contract by April 30th and close by June 30th in order to get your $8000 if you’re a first time buyer and $6500 if you’re a move up buyer.

And then came May, traditionally the height of the spring housing season. Mortgage applications to purchase a home began to sink. Now, four weeks later, mortgage purchase applications are down nearly 40 percent from a month ago to their lowest level since April of 1997. Yes, you can argue that a larger-than normal share of buyers today are all cash, but those are largely investors.

Telegraph (UK) US money supply plunges at 1930s pace as Obama eyes fresh stimulus

The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc. The assets of insitutional money market funds fell at a 37pc rate, the sharpest drop ever. “It’s frightening,” said Professor Tim Congdon from International Monetary Research. “The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly,” he said.

Washington Post: Price of single-family homes drops for sixth straight month

The Standard & Poor’s/Case-Shiller home price index showed that prices of single-family homes were down 0.5 percent between February and March, the sixth consecutive month-over-month decline. On a seasonally adjusted basis, prices were flat, according to the index. Prices in 13 of the 20 cities tracked by the index fell in March, including the Washington region, where prices were down 0.7 percent. Detroit and Minneapolis saw the largest price declines, 4.1 percent and 2.7 percent, respectively.

AP: Falling home prices stir fears of new bottom

Tax credits and historically low mortgage rates have failed to lift home prices so far this year. Prices fell 0.5 percent in March from February, according to the Standard & Poor’s/Case-Shiller 20-city index released Tuesday. That marks six straight months of declines — a sign that the housing market is going in reverse. “It looks a little like a double-dip already,” economist Robert Shiller said in an interview. “There is a very real possibility of some more decline.”

WCBS 880: Mortgage Delinquencies and Home Foreclosures Break Records

The number of homeowners who missed at least one mortgage payment surged to a record in the first quarter of the year, a sign that the foreclosure crisis is far from over. More than 10 percent of homeowners had missed at least one mortgage payment in the January-March period, the Mortgage Bankers Association said Wednesday. That number was up from 9.5 percent in the fourth quarter of last year and 9.1 percent a year earlier.

Social Security Increase Unlikely For a Second Year

For the first time since 1975, Social Security beneficiaries received no cost-of-living adjustment (COLA) this year because prices fell in 2009. President Obama tried to offset the loss by proposing a special $250 check in lieu of a COLA, which would have cost more than $13 billion . But the Senate rejected that measure by a vote of 50-47. Now, there may be more disappointing news for 43 million seniors: This year’s low inflation may mean no COLA increase in 2011.

New York Times: Inflation Rose in April at Lowest Rate Since the ’60s

Consumer prices fell in April for the first time since early last year, and inflation rose at its slowest rate since the 1960s, a new government report said…Subdued prices suggest that a more pressing concern could be deflation, which occurs when weak demand causes prices to fall…if the economy continued to get closer to deflation, there was the risk that debt service burdens could go up. He said he thought that from the Federal Reserve’s perspective, “the best inflation is between 1.5 and 2 percent, and you are below that and moving further down.”