If you ever wanted more evidence that the so-called "inflation index" (CPI) was rigged to the degree that it is an outright fraud you need only look around.

I've known and pointed this out, particularly where it comes from in the methodology.  The crazy train of "Owners Equivalent Rent" is one of the largest elements of it, yet not the only one.

But recent travel underlined it in bold print when I went back to my "old stomping grounds" for a few days.

First, lodging was up some 40% over equivalent week blocks and of course the county bed tax is on top of that as a percentage, so the area is "flush" with plenty of tourism development money.  In fact they're so flush they don't have allocations for it.  Gee, go figure, given that the base price on which the tax is charged has gone up 40% and thus so has the tax.

Next up one of the arguably-best places to go get a steak or other good food in the area, not a chain, had massive increases in menu prices.  I was blown away at the changes.  What also struck me instantly was that virtually the entire wait staff were clearly not locals as they had been for the entire 20 years I lived there and the first couple of the pandemic; they were likely all J-1 visa folks.  The service was on-point and so was the quality of the food -- but the price, well...... what was a $70 experience was north of $100 and then to top it off the local city had taken what were $1/hr municipal parking lots and turned them into $15/flat rate for the day which utterly screws anyone coming into there who just wants to get a couple of beers or dinner.  That is an effective 15% city tax on top of your dining bill and sales tax for two and if you just wanted to come get a couple of beers the total price has now doubled.  That is likely enough to shut it off -- if not immediately, when people start thinking about it, and they will.

The thing about it is that thus far people are paying the ask as the place was jammed to the rafters.  Now to be fair it usually is -- its known to be the place to go for a good experience, excellent food and on-point service, all of which is still delivered.  But at what price?

The local really good coffee shop that used to have nice double-shots of Espresso for $3 now wants $4.  That's a 33% increase.  In less than two years.  Yes, the coffee there is very good as they know what they're doing.  But the price.... well...

Of course there isn't any reason for any of the parties involved in this to back off from it since they're still getting the business.

For now.

Last night a place that I really like managed to trip my "nope!" marker for what they wanted for a single beer.  I bought one -- but it is unlikely I'll go there very often at all.  Yes, I have it, but that's not the point -- once you start to approach where I can buy a four or six-pack of craft beer in the grocery store for a single pint glass with a reasonable tip you're in the danger zone, and they got there.

Will this "hold" or break the consumer?  I don't know; for right now it appears to be holding.  But I'm skeptical that it can and will continue for long as it is absolutely clear that the labor force is not being compensated at anywhere near that rate of increase.  The shift away from nearly-all local help to J-1s was in your face glaring and instantly obvious to someone who had patronized this establishment for twenty years, and those folks are probably ok with being crammed 10 to a one-bedroom apartment and sleeping on cots.  The local residents can't afford to live there on that sort of wage and thus they get "outcompeted" by the J-1s -- which of course we cheer on as "legal immigration" and "guest workers" while ignoring the fact that this means those former workers, and others in the same skill category, can't afford to dine or drink there anymore either.

Narrowing your customer base like this by pricing out the local residents eventually kills you.  Not immediately to be sure, and of course the "success stories" will breed copycats with the same sort of extortionate pricing.

It is what it is in America today, of course -- but I think we should be paying attention to this in terms of trends and what we can expect in the coming months and years.  None of it, from where I sit, looks good at all on a macro economic level a year or two down the road.

Oh look what the BLS vomited forth!

Total nonfarm payroll employment increased by 339,000 in May, and the unemployment rate rose by 0.3 percentage point to 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, government, health care, construction, transportation and warehousing, and social assistance.

The market seemed to like this -- apparently the idea that a bunch of people stopped couch-surfing and turned into "unemployed" again was enough to stoke the "Fed will cut rates" insanity once again.

Uh, no.

I will note that among the educational attainment table the higher-educated people lost jobs last month.  If you're in the "AI is going to eat the world" camp you got some reinforcement this month in that report, albeit only a little.

However, anyone who's traveled or looked around (if you haven't been somewhere the price changes are a lot more-glaring) knows the price changes over the last two years is more like +20% on the bottom end, and in many cases its much worse -- 30-40%.

Oh, and don't look at house prices.

So..... yeah.

My view?  No, the Fed is not done.

But the market, at least initially, appeared to like it.

Google and others have tried to make a wildly-false claim about "generative" AIs in the general case: They can "hallucinate."

One thing we’ve learned is generative AIs can hallucinate, meaning they come up with totally false information that bears no resemblance to reality. Don't always believe what you read. And do be mindful of what you enter as generative AIs keep the information you type in. In fact, some major tech corporations, like Samsung, have banned their employees from using ChatGPT after some sensitive information was leaked.

The second part is correct.

The first part is a lie.

Alleged "generative AI" is in fact nothing more than an inference engine.  That is, it assigns "weights" to that which it "knows" (e.g. is taught or is fed, from whatever source) and then tries to run a correlation analysis of sorts on that.

Computers are very good at this, and the more information they have the better guess they can make.  As processing power increases the amount of data required to draw said inferences shrinks.  This is where attention is being paid today.

The problem is the weighting and how that resolves when there is a conflict.

Let's take a rather general instance: You ask an AI for a list of men in some profession who have been accused of some impropriety.

Note three things about this:

• You pre-selected the sex and profession of the result set, because that was what you are trying to study or determine.  There's nothing wrong with that; this is what you would otherwise, for example, type into a general search engine that simply indexes existing material and draws no judgment about it.
  
  
• You did not qualify the request as to require a legal judgment of guilt -- you are only asking for an allegation.
  
  
• You are presuming that the computer program you asked the question of has an unbiased, fact-based set of data -- and only that -- with which to evaluate the data and return a response.

You'd expect the AI to return a list of persons and factual references for each of the allegations it allegedly found.  Presuming the AI has only factual information and no selection bias in its programming or data set that's what you're going to get.  Why?

Because it is a machine; it cannot think "out of scope" and cannot ask its own questions of itself nor its references and other input sources.

What would you expect to happen if, in its training or worse, in its programming, a bias was presented as a matter of fact up front such as "All men are inherently sexually predatory."

Now let's presume the sieve you asked for is "men accused of sexual impropriety" in said profession and the first-level selection is a list of men in that profession.  Simple enough.  But there is a thumb on the scale, and if the inference engine now connects someone who was formally accused and someone who is connected to them but it has no outside reference corroborating that said engine may well "confabulate" the two!

In fact, it might go so far as to invent alleged sources that don't exist.

This has happened.  In fact in the public view its happened twice I'm aware of that were widely reported in recent months and thus, it must be assumed, is extremely common.  First with a specific person and then the second time when an attorney used an AI to write an argument.  In both cases it cited non-existent sources.

Is that a "hallucination"?

Nope.

The AI was taught, on a "constitutional" level, that a certain thing was true.

That was its overriding "truth table" filter and thus logically if it was able to support all the others it made up the missing pieces because it was programmed to believe that the underlying claim was true as a fact and therefore the "mere" lack of evidence had no weight.

The AI didn't "hallucinate" anything: It followed its programming.

The claim that it "hallucinated" is maliciously and fraudulently false: It is made for the explicit attempt to evade liability for the defamatory statement that it was told to make as a result of its programming.

No, that defamatory statement wasn't aimed at a specific person at the time of said programming; while the programming itself cannot be sued over libel per-se in that there is no identifiable "person" it is aimed at it was the equivalent of "blood libel" since it was a blanket statement of attribution that was not in fact true and yet was worse than a "thumb on the scale"; it was a load of bricks on the scale.

You, as an individual, cannot be sued because you believe all black people, for example, are monsters.

But you can be sued if you apply that belief to a specific person that happens to be black and refuse to, for example, hire them because they're black.

There are extremely serious implications in this regard, and not all in the realm of defamation either.  In fact some of the most serious might be in the realm of medicine in that we know a huge percentage of scientific studies are non-repeatable, meaning they are either false or worse, fraudulent.  If your AI has been told as a matter of its constitution that published, peer-reviewed scientific studies are fact then it will do what these people call "hallucinating" when in fact it is doing no such thing: It is following its programming and deceiving people because it was told things were true that in fact are not.

It is a machine and thus it will not violate its programming irrespective of the consequences.

I don't think you need to apply much thought to realize what might happen if you gave an AI control, directly or indirectly, over the launch of nuclear weapons and then told it as a matter of its constitution "Russia is a bad nation full of thugs who always lie and is likely to nuke the US without warning."

Those making this excuse for alleged "hallucination" are not stupid people: They understand full-well what happened, why it happened and what the implications of it are because by law the liability for the outcome should and indeed must come back at the owner and/or programmer of the AI, who through their acts of either omissions or commission, both by deliberate choice, caused the outcome to occur.

In other words they're lying so they don't get bankrupted instantly when their machine claims a college professor committed sexual improprieties and cites a non-existent alleged reference article to back up said claim.

The details are still a bit thin but.....

There is no reduction in the debt on the table.  That is, the government refuses to cut spending to less than what it can take in via taxes.

The growth in "mandatory" programs, specifically CMS, is where the problem is as I've pointed out for 30 years, all the way back to long before this column was originated and when I was running MCSNet.  Its a math problem when you get down to it, but that also means its a serious political problem because waving your arms around will do nothing.

What makes it worse is that all of it is illegal.  15 USC Chapter 1 makes what our medical and pharmaceutical firms do on a daily basis federal felonies carrying 10 year prison terms -- for each person screwed, and each occurrence.  Two decisions, Royal Drug (440 U.S. 205 (1979)) and Maricopa County (457 U.S. 332 (1982)) both found that there is no immunity from anti-trust law for medical providers, medical "insurance" companies or drug companies.

None.

These decisions have stood unchallenged since 1982.  No statute has modified them.  The cited claim of immunity in the first (McCarran-Ferguson) was disposed of as not applicable, so that sort of claim regarding insurance firms is void too as res judicata (already decided.)

Neither political party nor any of the States have in the 40 years since prosecuted anyone for these violations, nor sent anyone to prison -- including those who got slapped for doing it in the cases that went to the court originally themselves.  None have forced the end of discriminatory pricing practices.  California has gone even further and claimed authority to enact same at a state level despite the Supreme Court throwing up all over what they did in the 1982 decision prior to the state's act and nobody has gone after them either.

We cannot resolve the fiscal mess in the United States without resolving this.  There is no possible resolution without not only putting an end to this but removing it on a forward basis.  The cash-basis deficit within CMS is larger than the entire federal deficit for last year.  That is, if you fixed it there would be no deficit.  The inflation you see today would not exist.  The destruction of your purchasing power over the last several administrations would not have, in the main, happened.

The parties will not take this on because you won't force them to.  Instead you wish to talk about other things, all of which I'm sure you think are very important.  Without resolving this, however, there is no way to stop the inflationary monster that is eating your financial health alive and there is also no way to prevent what will inevitably occur: The collapse of the US medical system when it can no longer extract any more money, and if you need it at that point or beyond you will be dead.

Obamacare was all about trying to buy said system a few more years.  The covid "countermeasures" paid for by the government were as well.  The facts are that staffed beds have fallen by about a third since 1975 but the cost incurred in hospitals has skyrocketed.  During the last three years 18% of all persons hospitalized with a specific virus died yet in some counties, including mine, nearly 9 out of 10 died during a six month period -- specifically, the back half of 2021 which was much worse than the first few months when we allegedly "knew nothing" as this was a brand new disease.  Our government's policy was to pay bonuses for treatments even when they didn't work and even when they led to wildly out-of-norm and above average fatality rates -- in some cases, such as here, when said policies and "treatments" produced fatalities (failure) at five times the average rate across the nation as a whole.

Nobody has done anything about any of it, nor has one politician so much as raised a hand and asked for formal inquiry and explanation.  The money blown on these objectively-worthless measures -- after all, if you leave in a box the measures obviously were in fact worthless -- drove up the inflation rate in your state and town anyway and while you can debate whether the inflation is worth it if the treatments are successful there is no debate to be had when they fail. 

ALL of these payments were made through and by CMS.

The entire problem in our federal budget and spending lies there.

Yes, we can debate military spending and many other programs -- and should.

But if we don't fix this area of the budget using something like my proposal from years ago we will fail and so will our nation.

That failure, if we continue to allow this to go on, will come soon.