-->Check out economist Paul Kasriel's recent commentary: (http://www.northerntrust.com/library/econ_research/daily/us/030509.html) In this piece he examines decline in the inflation rate that has confetti Al worried that we are about to fall off the edge of the world into a deflationary black hole from which we will never escape.

What Kasriel shows it that the single biggest factor responsible for the declining inflation is the fall in the owner-equivalent rent. This is the so-called rent that homeowners earn by renting their homes from themselves. Some years ago, the price of homes was removed from the CPI because it was too good an indicator of inflation, oops, I mean because it was"too volatile" or some other such bogosity. The"owner-equivalent rent" was put in its place. If you own your own home, I bet that you have noticed that you were writing yourself a smaller check every month for the rent that you pay yourself in order to allow yourself to live in your own home.

Due to the housing bubble, rents are falling because anyone who can breathe and can make an"X" mark on the contract can get a 0% down interest-only no-principal adjustable rate mortgage. Rental markets are tanking so the owner-equivalent rents are falling, thus dragging down the CPI. Kasriel mentions that the home ownership rate is at an all-time high (due to the housing bubble, which he doesn't mention). There was an article in the Washington Post a while back about how an apartment complex in Wash DC that was built for rental decided to go condo because the market for rentals is so bad. Yesterday the Journal had an article about how hotels are being converted to condos. These condo-hotel rooms are being purchased as second or third homes by individuals as a"good long-term investment". Basically, if it's not nailed down you can get a mortgage on it and move into it.

Kasriel doesn't make the connection with the housing bubble, but now with this information we can see the incredible scam that is being played to foist yet more inflation upon us:

flood the home mortgage market with inflation
thereby shifting the consumption preferences of consumers toward ownership, away from rental
leading to a fall in rents
remove the home price component from the CPI
so that the inflation doesn't show up in the CPI
on the contrary, the OER is falling
publicly promote the fear of deflation,
paving the way for widespread acceptance of more inflation

<ul> ~ http://www.northerntrust.com/library/econ_research/daily/us/030509.html</ul>