Cause and Effect of the Global Crises

The effect of the Global Economic Crises on the US Economy is many fold is a severe and prolonged
period of Deflation. While many experts claim that the mortgage crises created the Global meltdown,
this was merely a tipping point and the cause goes back further to the 1960's.
The main direct cause is a period of inflation caused more by slight of hand and creative statistics than
economic a single crises.
Under John Kennedy, out-of-work Americans who had stopped looking for jobs — even if this was
because none could be found — were labeled "discouraged workers" and then excluded from the ranks
of the unemployed.
Lyndon Johnson orchestrated a "unified budget" that combined Social Security with the rest of the
federal outlays. This innovation allowed the surplus receipts in Social Security to mask the emerging
federal deficit.
Richard Nixon created a division between "core" inflation and headline inflation. If the Consumer Price
Index was calculated by tracking a bundle of prices, so-called core inflation would simply exclude,
because of "volatility," categories that happened to be troublesome . In the 1970,s, it was food and
energy and these items were removed from the CPI.
Under Ronald Reagan, the Bureau of Labor Statistics decided that housing was overstating the
Consumer Price Index and substituted an entirely different "Owner Equivalent Rent" measurement,
based on what a homeowner might get for renting his house. This methodology, controversial at the
time but still used, sidestepped what was happening in the real world of homeowner costs. This plus the
use of unproven credit scoring created the mortgage crisis of 2006 through 2008
Under the first President Bush, officials moved to reorient U.S. economic statistical measure away from
old industrial-era methodologies toward the emerging services economy and the expanding retail and
financial sectors. Skeptics said the underlying goal was to reduce the inflation rate in order to reduce
federal payments — from interest on the national debt to cost-of-living outlays for government
employees, retirees and Social Security recipients.
Under President Clinton, the convoluted CPI changes proposed under Bush were implemented. And the
Clinton General Accounting Office under-reported the unemployment number, in part, by changing its
housing economic sampling, disproportionately eliminating inner city households. That is believed to
have reduced urban unemployment estimates and eased worsening poverty figures.
The unscientific tinkering with these economic numbers masked a period of hyper inflation that
occurred in energy and housing from 2002 through 2008. As housing values plummeted because of
oversupply, a period of deflation started in 2008 and is continuing. This is not only affecting home
values in the USA but wages and purchasing power.

Thus, The Global economic crisis is a crises of honesty within the United States Government
Accounting Office, the Federal Reserve, and the United States Treasury to honestly report accurate
information which businesses can rely and plan upon. Unfortunately, many other nations relied upon the
same misinformation.
Business and Consumer Credit Reporting agencies also played a significant role in inflating the credit
worthiness of everything from Mortgage Bonds to consumer credit reports, thus a period of credit
downgrades are now occurring in the United States further restricting credit and cash.
The effect of this period of deflation will decrease imports, a decrease in domestic spending, cause a
devaluation of the US Dollar and increase unemployment among the population of the United States.
An outflow of US investment dollars into emerging markets will also increase.