That nasty Paul Krugman is at it again, poking former Fed Reserve chairman Alan Greenspan with a sharp stick. Greenspan, like so many US Generals, has taken the opportunity of his retirement to write a book criticizing the Bush regime – criticisms they all carefully kept to themselves back when they might have done some real good.

Krugman has for years criticized Greenspsan for kowtowing to the Bush administration over its tax cuts and deficit ways. In today’s New York Times, he gleefully castigates Greenspan for his “moral collapse” that began in 2001 and continued until his recent retirement. Greenspan has a little problem with his credibility – it’s called “facts.”

Meanwhile, Asia Times Online, has published an interesting article that suggests the current subprime mortgage meltdown is the result of our governments deliberately lying to us. Richard Daughty is general partner and COO for Smith Consultant Group wrote the following:

Robert Hardaway, who is a professor of law at the University of Denver Sturm College of Law, tells how this started. He relates, “In 1983, the Bureau of Labor Statistics [BLS] was faced with an awkward dilemma. If it continued to include the cost of housing in the Consumer Price Index, the CPI would reflect an inflation rate of 15%, thereby making the country’s economy look like a banana republic. Worse, since investors and bond traders have historically demanded a 2% real return after inflation, that would mean that bond and money market yields could climb as high as 17%.”

Yikes! What to do, what to do, what to do whattodowhattodo? “The BLS’s solution was as simple as it was shocking: exclude the cost of housing as a component in the CPI, and substitute a so-called ‘Owner Equivalent Rent’ component based on what a homeowner might ‘rent’ his house for.” Hahaha! The government resorts to lying! “Wow! Why didn’t we think of this before?” they are heard to ask among themselves.

Fortunately for the government, it worked. “The result of this statistical sleight of hand was immediate and gratifying,” Mr Hardaway writes, “for the reported inflation index quickly dropped to 2%”, down from the real, and horrifying, 15% which was due “in part” to the drop in rents caused by speculators wanting to “offset their holding costs by renting out their homes while their prices skyrocketed, thereby flooding the market with rentals that pushed down the cost of renting a house or apartment.” Hahaha!

You can almost hear the contempt in his voice when he says, “While the BLS was correct in assuming that this statistical ruse would fool the average citizen into believing that inflation was only 2% (and therefore be willing to accept a meager 4% return on his bank savings), what is remarkable is that the ruse also fooled the bond traders, and apparently continues to do so, leading analyst Peter Schiff to describe these supposed savvy bond traders as the ‘hormonal teenagers of the capital markets’.”

Putting it all together, he concludes, “The present subprime credit crisis can be directly traced back to the BLS decision to exclude the price of housing from the CPI. It is now clear that the ‘benign’ inflation figures reported over the last 10 years” were, (using my awesome editorial powers to insert my own words for special emphasis), “A big stinking load of lying crap by the corrupt Federal Reserve and the despicable government (except Ron Paul).” 1

In essence, the claim is that we’ve been living in seriously inflationary times for years now while we avoided taking the only effective remedy – higher interest rates. By dodging realistic interest rates it became possible to get rich (at least in the US) by making mortgage loans to unqualified buyers, fueling the ongoing but unsustainable housing bubble.