The cash rate is the interest rate in the overnight market for exchange settlement (ES) funds. It is the rate around which all other IR are based on and can be adjusted by the Reserve Bank of Aus (RBA) when it meets on the first Tuesday of every month (except January). At its meeting on March 23rd 2010, it decided to raise the cash rate by 25 basis points to 4%. This is the 4th rise of IR since the Global Financial Crisis (GFC).  The RBA decided to lift the cash rate because a number of economic indicators indicated that economic activity is improving and will continue to do so.

One reason was that the global economy is growing, and world GDP is expected to rise at close to trend pace in 2010/11.  Because of this, many governments around the world are reducing the degree of stimulus to their economies, indicating that the global economy is improving.

Also, the global financial markets are functioning much better than they were a year ago, with support from governments and central banks being gradually wound back. This indicates that governments think that the markets will continue to improve.

The economic conditions in Australia have also improved, with the rate of U/E appearing to have peaked at a much lower level earlier than expected.  Also, lenders are starting to become more willing to lend to some borrowers. Investment in the resources sector sectors is very strong, credit for housing has been expanding at a solid pace, and dwelling prices have risen significantly over the past year.

Also, CPI inflation has risen somewhat recently as temporary factors that had been holding to unusually low rates are now abating. To maintain price stability, the RBA must increase IR to combat forecast rising inflation.

As the risk of serious economic contraction in Australia has passed, the RBA lessened the degree of monetary stimulus last year. This means that the RBA thinks that the economy is in the middle stages of its recovery and past the initial stages, it has raised IR back to a neutral level of 4-5% after bottoming out at 3% in September 2009.

These indicators forecast growth likely to be close to trend and inflation close to target over the coming year, so the RBA has decided it is appropriate to raise the interest rates back closer to a neutral level, and this rise has been a further step in this process.

Transmission Mechanism

A higher cash rate will result have an impact on the following things: economic activity (through consumption & investment), exchange rate, inflationary expectations and on wealth and asset prices.

↑ Cash Rate → ↓C

A rise in the cash rate will increase the attractiveness of saving as it increases the reward for postponing consumption. AS ↑

It also encourages households to defer consumption spending, especially on durables and housing which are sensitive to interest rate changes. AD ↓

Also makes existing borrowers have less liquidity (ie. Ability to convert assets to cash decreases).  Liquidity ↓

Households that don’t owe any money will gain and experience an increase in their income from the higher interest rates paid on their assets. However, if money is owed, a decrease in income will be the resultant effect as they have to repay with a higher interest rate on assets.

If owe: Y↓. If don’t owe or is owed: Y↑

Overall, RBA believes that by tightening monetary policy by increasing the cash rate will cause economic activity to fall, especially because Australian borrowers are highly indebted.

↑ Cash Rate → ↓I

When making investment decisions, firms compare anticipated profits to the cost of borrowed funds needed (interest rates). This is the marginal efficiency of capital (MEC)

MEC =

If MEC > IR, project is viable

As IR ↑, probability that MEC > IR ↓, reducing no. of feasible investment projects.

↑ IR from r1 to r2 → ↓I spending from Q1 to Q2 → AE function decreases from AE1 to AE2 → multiplied ↓ output & U/E from Y1 to Y2. This has an overall effect of decreasing economic activity.

↑ Cash Rate → ↑AUD

High IR encourages inflow of financial capital. This leads to a appreciation of the Australian dollar (AUD).  AUD↑, demand AUD↑

Appreciation of AUD forces price of Australian exports up in world markets, making them less competitive, meaning less people will buy them. X↓

Also leads to fall in import prices, making them more attractive. M↑

X↓ + M↑ → ↓(X-M), ↑CAD, contraction economic activity, ↓output & employment in X & competing industries

The relationship between domestic monetary policy and value AUD is important for policy makers. Effect reinforces ↓AE (C↓, I↓, (X-M)↓)

↑ Cash Rate → ↑inflationary expectations

Spending decisions are affected by perceptions about the stance of monetary policy. Perceptions of likely price stability will be affected by monetary policy actions.

In the past, the RBA has sent out strong messages that it wants to keep inflation down through pre-emptive rises of the cash rate. This causes households and businesses to expect inflation to be on the rise whenever the RBA lifts the cash rate. This causes a decrease in the positive expectations and confidence of households & businesses, making them more unlikely to spend on durables and invest, having a contractionary effect on economic activity.

↑ Cash Rate → ↓Wealth & Asset prices

Rise in cash rate makes shares on the stock market will fall, making them less attractive to investors than bonds. ↓wealth households with share portfolios → ↓C → ↓AE and economic activity

This lowers the prices of other assets such as property.

↓wealth households → ↓C → ↓AE and economic activity

Advantages/Disadvantages

Like all economic policies, monetary policy has its strengths and weaknesses. During the recovery, the strengths of it are that it is flexible, is independent from political policies and is most effective under a floating exchange rate. However, it also has weaknesses, including time lags, being less effective in a recovery, and being a blunt instrument.

 Flexible

This is arguably the greatest strength of monetary policy. Decisions about appropriate domestic operations are made every day by RBA – more flexible than fiscal (once a year). It also doesn’t need specific permission from parliament, so decisions can be made and implemented very quickly, making it a strength of monetary policy during a recovery as the RBA can change its cash rate every month (except Jan) according to changing economic conditions.

Greater political neutrality

Transmission route for monetary policy is more subtle than that of other policies. Interest rates affect every sector of the economy so people are less likely to see the policy as being aimed at them. Decisions made by RBA are based solely on economic reasons, with no political influence, meaning that the decisions it makes are intended to help the economy through its recovery, even if it means doing things that aren’t viewed favourably by the public such as raising interest rates.

↑ Effectiveness under floating exchange rate

Changes in IR affect the IR differential between Aus and other countries. In a recovery, the RBA will initially cut IR to encourage spending, causing a fall in capital inflow. This reduces the demand for our currency causing depreciation in the AUD. This has a positive effect on the domestic economy as export prices fall and become more competitive internationally while import prices rise, making them less attractive to Aus buyers. This increases net exports (X-M), increasing AE in economy.

Time lags

Two types: inside lag and outside lag

Inside lag is the time taken to undertake a policy action. It includes the recognition lag (time to recognise change in economic conditions), decision lag (time taken to make a policy decision) and action lag (time taken to implement policy decision. This lag however, is relatively short compared to fiscal policy as MP can be implemented quickly and easily.

Outside lag is the time it takes for the policy to actually affect the level of economic activity, also called “the effect lag”. This lag for MP is longer than for FP because Mp works indirectly through IR to affect level of AD, whereas FP works more directly through changes to gov. spending or tax which affect AS quicker.

These lags are bad for the economy because they slow down the recovery of the economy.

Less effective during recovery

MP is more effective in a boom than in a recovery. This is because low IR may not be enough to stimulate spending as they have low levels of confidence in the economy in and do not expect favourable conditions in the future during the early recovery. Eg. Japan – 0 % IR – still not v effective. This situation is called a liquidity trap where low IR don’t help to stimulate C or I. Fiscal policy is needed to help the economy through the early recovery as it has a more direct impact on C and I decisions.

It is more effective at the end of a recovery as IR are better at controlling high levels of AD and inflation apparent in late recovery. This is because higher IR has a more direct effect on economic conditions than lower rates. Therefore, when IR high, they assume a very important role in the decision making process of borrowing households or investors calculating their MEC.

Blunt Policy

Effects everyone – changes in IR same for everyone – can’t just ↑WA and same for rest of Aus. Falls unevenly of sectors of economy – eg. Heaviest on housing and cars.

Ineffective dealing with cosh push inflation

MP doesn’t cure cost push inflation, only demand pull inflation because it is a demand side policy. This means if there are supply shocks such as labour shortages during the late stages of a recovery, changes in IR by RBA will have little impact in helping solve the problem.

But what has driven such a rise? Food costs, Fuel costs, and prices of clothing have all been contributing factors. 

RPI inflation, which takes into account mortgage intertest payments, showed that the rate was its highest in 20 years, at 5.5%, a 0.4% rise since January.

With more pressures on the way, it is expected that inflation will rise to 5%. 

Benefits of higher inflation

• Interest rates may rise, resulting in increased foreign investment
• Value of assets rise

Disadvantages of higher inflation

• Uncertainty – consumer spending decreases as people may believe prices will fall in the future – this can cause a recession. Unemployment may rise.
• Business investment may fall due to uncertain costs for raw materials, etc.

Prove: In order to win WWI, the U.S. needed to raise money and manpower, and find the means to produce and distribute all needed materials to support the military. In order to do so, the size and power of the federal government changed and social norms and organization altered.

In order to win World War I, the United States needed to raise money and manpower, and find the means to produce and distribute all needed materials to support the military. In order to do so, the size and power of the federal government changed and social norms and organization altered. 

A first display of the size and power of the government increasing was when Congress gave President Wilson direct control over much of the economy, including the power to fix prices and to regulate certain war-related industries. The main regulatory body was the War Industries Board (WIB), established in 1917 as a federal agency to regulate the economy during the war. It encouraged companies to increase efficiency by using mass-production techniques and to eliminate waste by standardizing products. Under the WIB, industrial production increased about 20 percent, and retail prices almost doubled within a year. Not only was this federal agency shown as an expansion of government power, but the Railroad Administration and Fuel Administration, introduced in 1918, were examples also. They controlled the railroads and coal, gasoline, and heating supplies, respectively, while the National Labor Board established by President Wilson in 1918 dealt with disputes between management and labor. Workers who refused to obey board decisions could lose their draft exemptions. “Work or fight,” was basically their only option, but the board also worked to improve factory conditions, including pushing for an eight-hour workday, promoting safety inspections, and enforcing the child labor ban. Another demonstration of increased government power for war efforts was the introduction of the Food Administration by Wilson, set up under Herbert Hoover. Instead of rationing food, he called on people to follow the “gospel of the clean plate,” also declaring one day a week “meatless,” “sweetless,” “wheatless,” or “porkless.” As seen, the United States government managed to expand its size and power, effectively extending its control over the economy.

Once the U.S. government had expanded, it had to raise money and convince the public to support the war. In order to raise the $35.5 billion that the United States would later spend on the war effort, the government further increased its power by implementing taxes, including progressive income tax, war-profits taxes, and higher excise taxes on tobacco, liquor, and luxury goods. Involved with this great amount of money spent was the alteration of social norms and organizations. Social norms— the behavioral expectations and cues within a society or group— were significantly affected by government efforts. The use of propaganda, a biased communication designed to influence people’s thoughts and actions, changed how people felt about the war. To popularize the war, the government set up the nation’s first propaganda agency, the Committee on Public Information (CPI). The head of the CPI, muckraking journalist George Creel, persuaded the nation’s artists and advertising agencies to create thousands of paintings, posters, cartoons, and sculptures promoting the war. He recruited over 75,000 men to speak about everything relating to the war, and also distributed some 75 million pamphlets, booklets, and leaflets. The overall campaign was highly effective, however it not only promoted patriotism, but also inflamed hatred and violations of the civil liberties of certain ethnic groups and opponents of the war. It sufficiently altered the social norms regarding society’s attitude towards war. 

As people began to support war efforts, drastic measures were needed to build an army large and modern enough to make an impact in Europe. When war was declared, only 200,000 men were in service. In order to step up the pace, Congress passed the Selective Service Act (another demonstration of increase in governmental power). It required men to register with the government in order to be randomly selected for military service, and by the end of 1918, over 24 million men had registered under the act. In addition to American-born citizens, about 400,000 African Americans served in the armed forces, seeing more continuous duty on the front lines than any other regiment, and being the first Americans to receive France’s highest military honor, the Croix de Guerre—the “cross of war.” Women were also reluctantly accepted in the Army Corps of Nurses, where 13,000 accepted noncombat positions. All these improvements showed how there were alterations in social norms and organizations.

Shown from the War Industries Board, all the way to the Food Administration Act, there are countless signs that show the expansion of the power and size of the government. The reactions of society, increasing public support, and greater involvement in the war clearly show an alteration of social norms and organizations.

Image by Francisco Diez via Flickr

Is the government really reporting the truth about living expenses? It is said you can manipulate statistics to say whatever you need at the moment and this is what is appears may be happening today. Nobody has enough money to last until the end of the month any more and savings is next to nil for most Americans in 2010.

The Consumer Price Index (CPI), is the government’s most closely watched economic barometer for measuring inflation at the consumer level, in the U.S. and they report American Inlfation Rate is 2.6 percent yearly.

But here are the facts on the street in my neighborhood:

1. Gasoline has gone up 15 cents per gallon in the past week and is averaging $2.78 per gal. (Texas)

2. Bread prices have gone up 30 to 40 cents per loaf in the past month.

3. Meat prices have sky rocketed from $4.99 per pound for a rib-eye steak to $7.99 per pound.

4. Can anyone afford fresh veggies? I don’t want to think about the prices. $1.99 a lb. for squash and $2.99 per pound of green beans…WoW!

5. How about paper products? Have you really checked out what you are paying for toilet paper when it is not on sale??? Too much!

6. Then there are electric bills that have doubled and it is not just from a cold winter.

7. Water bills are soaring as the shortage of clean water is becoming an issue in many areas around the U.S.A. and the world.

What is really going on with inflation and hyperinflation?

Hmmmmmmmmm….prices of essentials are rising, but salaries and jobs are in the dumps!

On a very base level one would think that while unemployment surges crime rates would also increase. But if we look for the one true root cause of higher crime rates we can easily see the true root cause was not present in 2009. What is the one true root cause of higher crime rates?

As I pointed out in an article published in January of 2009 – Why Crime Rates Rise and Fall – the overriding determining factor for crime rates is Inflation. During times of high inflation high crime rates will always occur and during times of low inflation crime rates will decline and remain low. Why is this so?

Inflation destroys the value of money. We work for money so in effect money represents our labor. When the money we work for is destroyed through no fault of our own all the work or labor we put forth to earn the money is also destroyed. When inflation occurs people are being robbed of their labor and feel that a wrong has been committed against them. Under such circumstances people are much more likely to commit wrongs against other people which causes crime rates to rise.

The first fundamental rule or pillar of a civilized society must always be No Inflation. When individuals go to work each day they are paid with money. The money is used to survive and buy food, cars, homes and all the necessities of life. When money loses value through inflation it makes it much harder for individuals to survive and the work they put into earning the money is abused and destroyed. Inflation is an uncivil act since it destroys the work or labor of citizens. A main side effect of inflation is that it causes citizens to act uncivilly towards each other causing higher crime rates.

Cover via Amazon

In his massive work entitled The History of the Decline and Fall of the Roman Empire Edward Gibbon concludes that Rome fell mainly due to the loss of civic virtue among its citizens. What Gibbon did not say and clearly did not understand was that the loss of civic virtue or civility in Rome was due to the continual inflating of the money supply by Rome which caused inflation throughout the Roman Empire. My copy of Gibbon’s book is some 1,500 pages long containing millions of words and all he needed was one word to explain why Rome fell – Inflation (do not believe Gibbon mentions the word once in his book).

According to the Bureau of Labor in 2009 the Consumer Price Index (CPI) declined in 8 out of the 12 months and was zero in January in the United States. Inflation was not present in 2009 in the United States.

In 2009 the unemployment rate surged higher in the United States especially in the inner cities. Despite the massive layoffs crime rates continued to decline in the United States including in the inner cities because the overriding factor that determines crime rates – Inflation – was not present in 2009. (Whether inflation will be present in 2010 or into the future is an open question and not the subject of this article nor should any inferences or conclusions about inflation be taken from this article – you got that Ben and FOMC?)

A pure market economy is one with only consumers and suppliers. However, the modified market economy is one where the government is involved. In the modified market economy, the government has four economic objectives: sustainable economic growth, price stability, full employment and external balance.

Economic growth is the increasing capacity of an economy to satisfy the wants of its people. This is done by increasing the gross domestic product (GDP), which is what economic growth is measured by. However, economic growth is only good if it can be sustained. If growth is too quick, it is bad as it increases inflationary pressure. However, if the economy is growing too slowly or even contracting, then it is also bad as the unemployment rate will go up. This is why the government prefers to keep economic growth steady at around 4% p.a.

Price stability is the avoidance of inflation and deflation. Inflation is the persistent and appreciable rise in the general level of prices and is measured by the consumer price index (CPI). Deflation is a general decline in prices. The RBA’s target range for inflation is 2-3% p.a. The objective of the government is to maintain low inflation. This is because high inflation can impact negatively on economic efficiency and the economic well-being of some people in the society.

Full employment is when everyone who wants to work as a job. This is virtually impossible so the goal of government is to maintain a low level of unemployment. The unemployment rate is measured as a percentage of the workforce. A low unemployment rate is favourable as it means the economy is working efficiently and maximising its ability to produce while reducing the level of income inequality.

The aim of external balance is to balance the external transactions between Australia and the rest of the world who are our trading partners. The goals are to achieve a sustainable trade balance which is usually in deficit (current account deficit – CAD), to avoid excessive exchange rate fluctuations and to have a sustainable foreign debt ratio as a proportion of GDP. This is because if the CAD is getting big, it means that there will be inflationary pressure, affecting price stability. This also applies with the exchange rate as if the dollar is too strong, then it will increase inflationary pressure too. The opposite of these two also has a negative effect on the economy. Also, if foreign debt is too low, it means that people aren’t spending enough money, which could indicate a high level of unemployment, while if it too high, then it indicates increased inflationary pressures.

Taxes can be put into two broad categories: direct and indirect tax. A direct tax is where where the tax is placed and group that pays for it is the same, for example, personal income tax and capital gains tax. An indirect tax is one where the group who finally pays the tax is different from the one it is initially placed on, for example, GST and tariffs.

There are 3 different types of taxes that government uses to help achieve the four economic objectives. These are: progressive tax, regressive tax and proportional tax.

A progressive tax is one where as income rises; the percentage of income paid in tax also rises. A few examples of this are Pay as You Go (PAYG) income tax and capital gains tax (CGT). A progressive tax can be used by the government to stabilise economic growth. If the economy is growing at too fast a rate, then the government can increase income tax so people have less disposable income, helping reduce economic growth to a more sustainable level. Similarly, if the economy is growing at a slow rate or contracting, the government can give out tax cuts so people have more disposable income, helping increase economic growth so it is sustainable.

In a similar way to sustainable economic growth, price stability can also be achieved through changes in levels of progressive tax. If inflation is too high, the government can increase taxes, thus reducing disposable income so spending falls, making inflation fall. If the economy is experiencing deflation, then the government can reduce taxes so people have more disposable income so more money can be spent, helping stabilise inflation at the RBA’s target range of 2-3% p.a.

Progressive tax can also be used to help achieve full employment. If the tax levels are too high, it may discourage people to work, especially the higher income earners who are taxed more. The government can solve this problem by lowering the amount of income taxed, which will encourage people to find a job as they will have increased disposable income.

A regressive tax is one where as income rises, the percentage of income paid in tax falls. An example of this is GST because it penalises lower income earners as a bigger proportion of their income is spent on it. This tax is used by the government to raise revenue while it can also help achieve full employment as it can encourage the unemployed or low income earners to get a job or work more so their income rise which will mean that the tax they pay as a percentage of their income falls.

A proportional tax is one where as income rises, the percentage of income paid in tax stays the same. An example of this is company tax where a company is taxed 30% of its profits.

All of the above taxes raise revenue. This revenue can be used by the government to help achieve its economic objectives. It can help sustain economic growth by giving out stimulus packages if the economy is slowing down or contracting. These stimulus packages increase people’s disposable income and are funded by the revenue raised from taxes. Other schemes and organisations set up by the government to help it achieve these four economic objectives are also funded by revenue collected from taxes, such as the RBA (although the RBA acts independently from the government). The aims of the RBA include the stability of the Australian dollar, maintenance of full employment and price stability, which are all part of the 4 economic objectives. The RBA helps the government achieve these objectives by using its control over interest rates and the amount of money printed.

All photos have been approved by and are courtesy of the Illinois Ghost Society and the Confidential Paranormal Investigators. All audio / EVP clips are posted on and linked to my personal web site.

The Invitation

For the past seven years I have become among the millions of people who are completely enamored by the paranormal. I am not an investigator nor do I belong to any paranormal group. I simply consider myself a very intrigued student who cannot get enough of this amazing field.

Besides watching all of the popular paranormal shows religiously, I do quite a bit of networking with people involved with the paranormal field including investigative teams, psychic mediums, ghost hunters, authors etc. I do this through My Space, a community called Super Natural Connections and a writing community called Triond.

A few months ago I was fortunate enough to befriend Laura of Illinois Ghost Society (IGS) and Mary from Confidential Paranormal Investigators (CPI) . Over the course of a few weeks we exchanged emails, comments, thoughts, articles and ideas. I had no expectations other than to learn from them and become friends. They were both very sweet, friendly and open with sharing whatever information they could, including their ideas, views and beliefs on various topics in the field.

After a few weeks, Laura extended a very gracious invitation to accompany her team (Illinois Ghost Society) on their follow-up investigation of the Manteno Insane Asylum in Manteno, IL. Needless to say, I was honored and excited. I had been dying to go on an investigation for years! She told me to do my own research on the site because it has quite a history of paranormal activity. This would give me a feel for what I could be facing and would help get me prepared, which I did.

During my communications with Mary, she told me that CPI would actually be leading the investigation and Laura was a member of that team as well. She seconded the invite and thought it would be a great first experience for me. She also advised me it would be good because she was bringing her daughter Jackie on her first investigation. So, I would not be the only first-timer, which made me feel much better.

Fueled with excitement, it did not take me long to decide I really wanted to do this. I have never had any kind of paranormal experience in my life. I am not a sensitive nor do I have any kind of psychic abilities. I needed to find out what this was all about. The hundreds of episodes of Ghost Hunters, Ghost Hunters International, Paranormal State and Psychic Kids gave me an idea of what it would be like, but I assure you, there is nothing like the real thing.

After graciously accepting the invitation, both Laura and Mary left me with these instructions. Dress warm in layers. Bring a flashlight. Bring any kind of equipment I wanted including digital camera, audio recorder, video camera etc. Be respectful of the process and the spirits. Go with an open mind. Do not go anywhere alone.

For some company, I invited my good friend Mark, who also has a passion for the paranormal. We were both very excited, but agreed that we would know our role and place. We would be students and observers, who would not get in the way, would follow the rules and would help in whatever way we could.

The Manteno Insane Asylum

The Manteno Hospital / Insane Asylum dates back to 1929 when it was first built. It closed in 1985, but for sure remnants of its past roam throughout the grounds to this day. There are several buildings including underground tunnels. The tails of abuse, pain and suffering are numerous. So, it is easy to understand why spirits would linger. For years there has been documented evidence of strange sounds, EVP’s, apparitions, strange mists etc. So, it is rich with paranormal history.

There are several web sites that detail the history and haunting of this location. Just click on these links for more info: The Unexplained World of Manteno and Manteno Hospital. There are also various EVP’s and videos available on You Tube. Just got to You Tube and perform a Manteno search. For those that do not know, EVP stands for Electronic Voice Phenomenon. This is a disembodied / unexplained voice or noise, captured by an audio recording device. In the case of voices, they usually cannot be heard by a human ear.

Below are some photos of the outside of the buildings at night. Notice the orbs. Although orbs have never been proven to be entities, and are very questionable evidence, they do make you wonder some times, as you will soon find out.

Image courtesy of Laura of the Illinois Ghost Society

Image courtesy of Laura of the Illinois Ghost Society

Preparation

A few hours before the actual investigation, we all met at an IHOP restaurant near Manteno. This gave us time to say hello, meet everyone and get a feel for what really goes on within in the inner sanctity of a paranormal group. Both Mark and I were very impressed. The enthusiasm and passion were inspiring and contagious.

Everyone greeted and treated us warmly. None of the team members complained that first-timers were on board. As a matter of fact, most of them jumped at the opportunity to not only welcome us with open arms but to share some of their experiences and ask us about our interests.

Kathy of CPI led the meeting. Although the contents are confidential, as they should be, we both learned quite a bit. Everyone was very gracious with answering our questions and explaining things, which really made us feel included.

As we prepared to head towards the location, Kathy gave instructions that were pretty similar to what Laura and Mary had informed us earlier. However, we were told that a group prayer would be conducted before we entered the buildings, and after we exited. This is standard procedure for these folks and with good reason. You want protection going into an investigation, and you do not want to take spirits home with you, which has been known to happen.

A Walk to Remember

Everyone arrived in a convoy of vehicles. All totaled there were twenty-four people and four paranormal teams. Along with IGS and CPI were members from TRAP (Tyszko’s Research About the Paranormal) and JPS (Joliet Paranormal Society). The TRAP team has some documented evidence on You Tube and on their web site from other visits to Manteno.

Everyone geared and bundled up. Mark had his digital camera and I had an audio recorder. We decided that one of us would take pictures and the other would handle the audio, instead of us trying to fumble around with both. One piece of equipment and a flashlight each were enough for two rookies.

Within minutes we all headed out on a long walk to the asylum. This was the only time things felt kind of eerie to me. The quietness spoke volumes and voices turned to whispers. I simply assumed that many of them were mentally preparing themselves for any kind of paranormal encounter. After the first block the streetlights ended and the only lighting came from flashlights.

I thought I would start to get nervous or become a bit scared, but to be honest, I didn’t. I felt very excited, but not afraid. I usually do not scare very easily, but then again, I have never had a paranormal experience, nor have I ever come face to face with a ghost, so I do not have a reference point. We’ll see if that changes over time.

A Prayer

After about a half a mile walk, we approached our destination. With no working lights around the building, we all gathered around the entrance using our flashlights as guides. Below is a picture of the main entrance that night.

Photo courtesy of Laura of IGS

We quickly broke up into four groups. Mary and her daughter Jackie offered to work with Mark and I. Then Michael another member of CPI, and his friend Mike, joined up with us to make six.

Before entering the building, Laura led us in the opening prayer of St. Michael the Arch Angel. So, when you hear this prayer on television programs like Paranormal State, it is not just for show. It is something most investigating teams do for real, and with good reason.

After the prayer, we were all reminded to not leave the premises without saying the closing prayer. Spirits are known to attach to people. So, as a defense mechanism you need to let them know they are not welcomed.

The Investigation

Michael and Mary were the veterans of our group. Between them and Michael’s friend Mike, they had some serious equipment: digital cameras, digital audio recorders, KII meter, video camcorder, infrared video, and a ghost box.

At this point my heart began to race a bit and I took a deep breath. I looked around to catch my surroundings and for the first time I realized it was pitch black and we were about to enter a beat up, old building that is known to be extremely active with paranormal activity. Mark stood to my right, and I caught him looking around as well.

I patted him on the shoulder. “You ready for this?”

He turned and grinned. “As ready as I’ll ever be.”

As we reached the doorway Michael hesitated for a second and turned around waiting for us to catch up. He then gave some further instructions. “I only ask one favor guys. If you are going to take a picture please warn everyone by saying flash. This way when we are going through evidence we know what it is and no one gets surprised by the light.”

The inside of the building was completely falling apart. There were concrete, drywall, wood and porcelain pieces all over the place along with dangerous ruts and holes in the ground. Most of the windows were busted out or cracked. Several areas of the ceiling were caved in, some to the point of being able to see right through to the dark evening sky. There were also ice patches in various spots so we had to be extra careful. We walked slowly trying to take in as much as we could without tripping or missing anything.

We made a few turns and came across a few small rooms that were used for various therapy treatments and bathrooms. Graffiti from previous visitors appeared all over the walls. We then entered one of the main hospital rooms.

Photo courtesy of Laura of IGS

Photo courtesy of Laura of IGS

Photo courtesy of Laura of IGS

There were several of these rooms throughout the buildings, each the size of a basketball gym. I could just picture beds lined up along the walls like you see in the movies.

We spread out and kept quiet for a while trying to pick up noises or movement. Every few minutes a picture would be taken. After about twenty minutes of roaming trying to see or hear something and letting recorders do their work, Mary suggested that we conduct an official EVP session. So, we separated along the walls leaving the middle unattended. I stood in the middle of the left wall. Mark migrated to the corner on my right and Michael to my left. Mary and Jackie stood in the corner across to my left and Mike stood in the corner diagonally to my right.

Mary and Michael alternated with the various standard questions.

“Is there anyone here with us?”

“Please make yourself known to us.”

“Can you make a sound, so we know you are here?”

After just a few minutes I heard something. Mark made his way over to me, so I thought he heard something too.

“Did you hear something?” I whispered.

“No.”

“Wait. Shh. Shh. Listen”

Mark shrugged his shoulders.

I held my one finger up. “Oh shit. That’s one of the other groups talking. Damnit!”

The session continued with more questions. Each question followed with a pause long enough to get a response.

“If you want, we are open to being touched.”

“Can you please show us a sign of your presence?”

“Are there any past residents here?”

“Are you stuck here? Do you feel trapped here?”

“Can you knock on something for us?

After about ten minutes, Mary decided to end the session. “Okay. We’re going to move to a different room.”

As soon as she finished her sentence, BANG!!

Click on the word BANG to go a recording of this EVP. Scroll to the bottom left of the web site where it says Ghost Hunt Evidence and click on the first link called Loud Bang EVP. There is some vulgarity in the recording and I apologize for that. The voice is mine, and it just shows my initial reaction.

“Are you okay?” Mary calmly asked us.

I kept my composure. “Yep.”

Mark happened to be standing about ten feet to my right, and we both immediately looked in the direction from where the sound came from, which was down from our right. “That was from down there.” I said. We both immediately headed in that direction.

Everyone followed. “Was that one of you?” Mary asked us.

“Nope.” I replied.

I asked Mark. “Was it right here or what?”

“Down there, but I felt it hit the ground.”

Mary came closer. “Alright. That was not you?”

“No. Absolutely not!”

“Cool”

We all gathered in what used to be a bathroom.

Photo courtesy of Laura of IGS

I remembered seeing a wood pallet resting up against the far wall during our walk through. I thought for sure that’s what the noise was. But, when we got there, the pallet was still upright and leaning against the wall.

“Thank you!” Mary said to the possible spirit.

We collaborated and deliberated for a few minutes. We tried everything we could think of to reproduce the noise, but we could not do it. None of us really knew if this was paranormal, but it sure gave us something to think about. The timing to me was impeccable because it occurred exactly as Mary began to end the session.

We found out later that just about everyone heard this noise, and no one could duplicate it or figure out what it was.

After a few minutes we decided to move on to allow another group to come in. We spent some time in what is called a therapy room.

Photo courtesy of Laura of IGS

In the middle of the room were structures that looked like tubs that were supposedly used for bathing and some kind of water therapy.

Michael took out his KII meter and set it in the middle of the floor. Mary started another EVP session. Both Michael and Mary asked all kinds of questions geared towards patients, their experiences, how they were feeling, what the room was used for etc. But, none of us caught or felt anything. After about twenty minutes we moved on to another large hospital room.

We all spread out again. This time I stood near the middle of the right wall. Mark hung right next to me. Mary and Jackie were in the corner to our right with Michael a few feet from the corner across the room. Mike stayed in the back of the room by the entrance.

We agreed to shut off all flashlights, which made it pitch black and impossible to see. Within seconds Mary spoke up.

“Michael can you please point your infrared to the corner by you?”

Michael quickly turned. “Did you see something?”

“Yes. Just point your infrared there please.”

Michael obliged, and we all stood perfectly still.

“What did you see Mary?” Michael asked.

“A figure, like a man standing there.”

Mary was absolutely right. There was something there. Within minutes of Mary’s sighting Mike took a picture of the corner where Mary saw the full bodied apparition of a man. This picture produced the image of a dark shadow man. Look closely at the two pictures below. A ghostly figure sits in wait way in the back of the room on the left. The second picture highlights the figure with a blue outline.

Photo courtesy of Kathy of CPI.

Photo courtesy of Kathy of CPI

About twenty minutes later another group came into this room and started taking random pictures. They just happened to take a picture of that same corner in which there was a sighting. The picture they took showed the corner now void of any apparition, shadow, or discoloration of any sort. This clearly indicated that our ghostly friend had moved on.

After Mary’s apparition encounter, Michael took out a gadget called a ghost box. Simply put these are radio type contraptions that perform linear sweeps of AM or FM bands. Voices can be heard as they happen. Supposedly ghost voices can be carried through the audio fragments with white noise. However, the difficult part is deciphering what is a radio voice and what is a ghostly voice.

After numerous attempts to get a response, and getting nothing but radio voices and white noise, we were on the verge of ending the session. In a last ditch effort, Mike posed this question. “Can you say the name of someone in this room?”

Mike was standing right next to the box so no one picked up on what he heard, but he thought he heard the name Dave. “Did you say Dave?”

Then Mary asked, “Who is Dave?

Mike followed with, “Do you want us to leave?” Then it happened. Click on EVP to hear a recording of this exchange. Scroll down to the third link called Ghost Box EVP.

“Leave.” Said a voice.

Michael questioned. “Leave?

The voice responded again. “Go away.”

Again Michael asked. “Go away?”

Mark turned to me. ”I heard go away.”

“So did I”.

Jackie turned towards the both of us wide eyed. “Then lets go!”

We walked around a bit more trying to find new rooms to investigate, but it was getting late and cold. Besides, many people, including us, had long rides home. All of the groups gathered around and Kathy asked us all to gather in one of the hospital rooms for one big, final EVP session. Unfortunately, after even trying to provoke the spirits with comments like: “You worthless spook!” “We ain’t afraid of you!” “Come out you chicken!” Nothing happened. With that my first paranormal investigation ended.

Other evidence:

A few days after the investigation, other evidence started to filter in to CPI and IGS. Here is what the teams captured. .

At one point, while standing in one of the large rooms, Kathy felt like someone touched her elbow. At that moment she asked someone to take a picture. Below are two photos. The first has an orb and the second, taken seconds later does not. As stated before, orbs are controversial and when captured alone are rarely considered evidence. However, when they are captured in conjunction with some other kind of evidence like a personal experience, it does give reason for thought.

Photo courtesy of CPI

Photo courtesy of CPI

Laura felt someone pull at her hair. Instinctively, she did the same thing and immediately asked for someone to take a picture. That picture is below. Again, you see an orb with a trail right by her head.

Photo courtesy of IGS

Finally, Carol and Cindy of CPI managed to capture another very impressive EVP while in the basement of the complex.

Carol: “My name Carol. This is Cindy. Can you tell us your name? Can you tell us now?”

Click here for the actual EVP. Click on the second link called Name EVP

Reply: “Butch”

Recap

This investigation lasted only about 2 ½ hours, but for such a short period of time, some pretty impressive evidence was captured:

1. Our group heard a loud, unexplained bang EVP
2. Mary saw a ghostly figure
3. That same ghostly figure was captured in a picture
4. A voice from a ghost box said, “Leave” and “Go away.”.
5. Kathy felt touched. A picture taken at the second showed an orb by her arm.
6. Laura felt her hair tugged. A picture taken indicated an orb with a tail by her head.
7. An EVP was captured giving a name

I’m no expert, but I am very comfortable saying the Manteno Insane Asylum is for sure haunted.

Special Note:

We have come to find out that this investigation was one of the very last full-blown ghost hunts at Manteno. It has since been locked down. No one can get in anymore. Below is a picture of Joe, a member of IGS, trying to get into Manteno about a month later.

Photo courtesy of Laura of IGS

Maybe one of the famous paranormal Groups like TAPS through the show Ghost Hunters or PRS through the show Paranormal State can pull some strings and do an investigation for television. It is certainly a prime location for activity. If they do, they should call in IGS and CPI to help them.

Thanks

I want to say thank you from the bottom of my heart to Mary and Laura for making my (and Mark’s) first ghost hunt possible. Offering up an invitation to complete strangers that are not affiliated with a paranormal group is not a common thing. Mark and I both realize that and will be forever grateful.

We also want to thank Kathy, her CPI Team, the IGS Team and everyone else that we met for making us feel so welcome. Everyone was patient, gracious, friendly, informative and helpful.

To everyone who took part in the investigation, your passion and enthusiasm for this field is contagious and extremely respected. I am still learning about the field, but I know for sure, I would recommend either of these teams in a heartbeat if I needed something investigated.

For more information about these paranormal teams please click on the hyper links below.

Illinois Ghost Society / IGS

Confidential Paranormal Investigators / CPI

Closing Thoughts

I have no idea what the future holds for me as far as ghost hunts and paranormal investigations go. I am certainly wide open to the idea of going on others. Every location with paranormal activity certainly has a story to tell.

I for sure have a better feel for what real investigations are all about. Watching TAPS and PRS perform investigations for television is one thing, but being on one for real is something else. As much respect as I had for all investigators, I have even more now.

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living. 

To us, CPI is recognized as the compilation of several school-essential items which are also stacked in a pecking order; more or less a hierarchy of the most important and most often used items to the least. Many economists like to refer to this as a basket. The basket we decided to use is the average prices of student at California Maritime Academy.

We determined our basket by coming up with the essentials for living at California Maritime Academy. The first essential we came up with is toiletries, because whether you shower once a month or everyday everyone needs toiletries. Toiletries include shampoo, body wash, toothpaste, toothbrush, deodorant, and anything else that involves personal hygiene.

The second group of items pertains to Room Improvement. We decided to not call it an essential because not everyone wants to buy items for their room. Room Improvement items includes buying rugs, furniture, televisions, paintings, and refrigerators. These may not be necessary to pay for but we found out that a lot of students pay quite a bit of money to improve their living space.

The third item is Food. We don’t mean food as in cafeteria food; we are talking about food you would buy off campus. Such as going off campus to buy fast food or buying groceries for your dorm refrigerator. Since our survey wasn’t limited to on campus residents but also off campus students we feel as if food is an important commodity.

The fourth item is entertainment. Being a college student, stress is almost a guarantee. Students need the opportunity to relax and have fun. Different forms of entertainment are used by students in order to combat the high stress levels that can and do occur on a daily basis. Whether that style of entertainment takes the form of a movie, a road trip, or a bottle of your favorite alcohol every student has some outlet for fun.

The fifth item while not exactly an essential, still manages to find its way into the clutches of nearly every student here at Cal Maritime. Alcohol is a daily expenditure for many students here on campus. As stated in the previous paragraph, alcohol presents an outlet for relaxation, therefore countless dollar amounts are spent on this avenue of entertainment.

The same principles that govern item five also apply to item six. Cigarettes, while not an essential, are widely used throughout campus. Whether students on campus smoke to relieve stress or just in social settings, countless dollars find there way to major tobacco companies. An expenditure of this nature is absolutely necessary when trying to compute CPI, it is for this reason that we included in our study.

However, laundry is an essential item. Whether students choose to wash loads individually or altogether, funds set aside for washing clothing is essential. Because uniforms are worn on a near-constant basis, it is likely they will be taken care of most often. A common trend is to wash weekly in order to conserve cash. As these machines are cash-operated, money rapidly disappears.

Obviously, tuition is a very necessary portion of the CPI. If not for such a large amount spent on this or loans and scholarships applied for, the average cadet at the California Maritime Academy would find themselves without room, board, and class. However, because many have applied for loans, received federal and state grants, and have been awarded scholarships, these prices may vary deeply.

Our final item, and in some cases seen as the least necessary, is the uniform. All students, regardless of major must wear them, so to get around the cost is plausible, but not at all likely. Uniform packages are more expensive for license major students, who also make up the bulk of the enrolled students. Students in the Global Studies and Business majors are likely to spend less, but make up a very minuscule portion of the student body. Though, many have cut costs completely by finding and buying their own uniform items for a much more considerable price or none at all, having private tailors adorn them with appropriate insignia. Again, this is one of the most important items, as it is a requirement for attending the California Maritime Academy.

Survey Of 40 Students

The costs of the products listed below are the average cost based on our survey. The survey was based on a selection of products that are consumed by most California Maritime Academy students. Forty California Maritime Academy students took the survey. The products listed below are consumed on a monthly basis except tuition and uniforms which are paid on a yearly basis.

The calculation of our consumer price index (CPI) is based on the month of October hence, making October the base month. This was done by calculating the average of all the products mentioned in our survey. We did thisbecause the CPI (consumer price index) isa measure that examines the weighted average of prices of a basket of consumer goods and services.

Possible sources of error that can be found in our consumer price index are we could have received invalid information from the survey. Uniform costs also differ based on your major; if you are an international, in-state, out of state student. Tuition costs can also differ based on the same reasons as uniforms. Another source of error is that our survey was limited to only forty students.

License track students pay a much steeper rate than a student majoring in Global Studies or Business in both uniform and tuition. Global Studies and Business student do not have to worry about paying Coast Guard fees, while for Deck and Engineering students those are necessary costs. The variations in tuition leave room open for error. International students’ tuition is much higher than that of out of state students and in state students; hence we could have surveyed too many in state students resulting in a lower average cost.

The fact that our survey was limited to only 40 students at California Maritime Academy makes it a very possible error. We could have surveyed students who spend a lot of money on liquor and not on cigarettes or vice versa resulting in an error in calculating our consumer price index.It is extremely difficult or probably impossible to calculate consumer price index (CPI) without any errors one can only approximate.

To compensate for the potential errors we can survey all the students at California Maritime Academy. We can create a more advance survey that includes student majors and what tuition they are paying international, in state or out of state. Rather than getting the cost of tuition and uniform from the students we can retrieve that information from accounts.

A Tale of Two Economies

It seems every week a new report comes out claiming a recession in the USA, followed by a report saying the opposite. Similarly, the “decoupling” of the world’s economies keeps making the news. Some say European will probably and Asian economies certainly will go down, too, whereas others predict a decoupling of growth. The public becomes increasingly pessimistic about the future outlook, as dropping consumer sentiment measures across the industrialized world show. Optimistic pundits are getting increasingly exasperated at the seeming disconnect between what their numbers show and the gloomy feelings pervading the common people.

For instance, Brian Wesbury, chief economist at First Trust Advisors, points to all the good news. In an interview on Nightly Business Report he rejects the idea that the USA will go into a recession: 2007 U.S. growth 3% (4% excluding the housing sector), total sales including all of the new stores growing strongly, unemployment rate still at 5%, incomes up.

On The NewsHour with Jim Lehrer (PBS) Stephen Moore, senior economics writer for the Wall Street Journal, defends the good news against Daniel Gross, financial columnist for Slate and Newsweek magazine: a six-year economic expansion, steady job growth, very low unemployment. Nevertheless, Americans have been nervous about the future for over a year.

One Number for All

For starters it is difficult to express in a handful of numbers the experience of 60 million Britons, 65 million French, 82 million Germans, and much less 300 million Americans or 320 million inhabitants of the Eurozone. As Wesbury points out, the Midwest is not like New York City. The real estate market in Berlin, Germany, is not like the one in Paris, France. Certainly, a Consumer Price Index for the USA cannot reflect the many different lives from students to pensioners. A large economy also consists of many numbers. The American “Index of Leading Indicators,” for example, has 10 components. For every good number someone can quote a bad number. Daniel Gross points to the weak jobs report, the contracting manufacturing sector, rising inflation, and high energy prices.

Growing Disparity

The differences in experience show in one particular area in both the USA and Europe. The median incomes barely moved, but incomes at the very high end ran up tremendously. Corporate officers had large pay raises and now make over a hundred times more than their average employee. The radical wage demands of many European trade unions speak to the discontent. But it goes beyond the top. Tobin Smith of ChangeWave Investor justifies the continued strength in consumer spending with the “super-spenders,” the top 20% of earners who account for 40% of U.S. consumption. They saw their income growing at a 5% rate a year. The other 80% did not do as well and consequently feel left behind. Even workers are growing apart, though. The rapidly transforming economies require new skills that leave out many people without the proper education, while even young university graduates can score high paying jobs.

International Competition

By many measures the industrialized countries use far more resources per capita than the emerging economies. For instance, the USA has an Ecological Footprint over 10 global hectare, most Western European countries over 3, whereas most of Asia’s and Africa’s is under 1. In 2004 the USA with about 5% of the world’s population consumed 22% of the world’s energy production. Europe excluding Russia with about 10% of the population took 20% of the energy. For decades these countries could do that almost unhindered. Now, though, large emerging economies like China, India, or Brazil demand their fair share. All morals aside the additional competition drives up the price for resources such as metals, oil, or food. At the same time these countries provide large pools of workers. People in the industrialized world thus get squeezed from both sides. The lower cost labor supply threatens jobs, while the demand for resources drives up prices. While economies as a whole may profit from the increased trade, people feel threatened by the changing world.

Changing Calculations

Daniel Gross contents that the U.S. economy is nowhere near as bad as it was back in 1992. But is it really? Some pundits claim that the U.S. government kept changing the way statistics get calculated to make them look better. They complain particularly about distortions to the government debt, the gross domestic product (GDP), the consumer price index (CPI), and the unemployment numbers. The responsible organizations do not deny the changes, but list economic reasons for them. Some also continue to provide the numbers calculated the old way, but these figures are rarely reported by the media. At the very least comparing the widely reported current numbers to those reported 20 years ago is questionable. If the complaints are true, the new numbers distort reality.

Both the U.S. and European calculations of the inflation rate downplay price rises for real estate. Decreasing the CPI, because the quality of goods such as computers and cars has improved, may have its merits. If I have no choice but to buy the current model at the current price, I do not save any money. My “felt” inflation rate is higher. People that cannot afford new computers or cars to begin with would feel the rate that mainly applies to basic items like food and energy. Focusing on the “core” rate excluding those two has some merit during periods of fluctuation. During periods where food and energy keep going up in price for years the felt inflation rate also exceeds the core rate.

This divergence has real consequences. From 2002 to 2006 the U.S. Energy Information Administration reported the following annualized rises in residential consumer prices for the following products:

• Electricity 3.9%.
• Natural gas 7.4%.
• Gasoline 12.1%

The annualized increase of the CPI for all Urban Consumers was 2.3%. Social security recipients and others who receive pay increases based on the CPI thus got less than their increases in energy inflation for five years running. The situation looks similar for many food and medical items. Understandably, the felt inflation rate for many people is much higher.

Rippling Through the System

The problems continue. Many numbers such as GDP are adjusted for inflation. From 2002 to 2006 the U.S. Bureau of Economic Analysis reports a respectable average GDP increase of 4.7%. If the new calculations understate inflation significantly economic, growth could actually drop below that of Germany’s 1.6%. An ironic thought, since Americans like to deride the German economy for its sluggish growth. It underscores how incorrect numbers can easily distort perception from reality. Not to say, though, that European statistics are immune to this. The problems are not as well documented, but there is anecdotal evidence. For instance, Germany introduced government-subsidized jobs. These allow employers to hire people at very low wages. Even though these earners cost the government almost as much as an unemployed persons, they are not counted in the unemployment statistics. This is similar to the U.S. Bureau of Labor Statistics discounting discouraged workers.

All the conspiracy theories notwithstanding, many problems with the numbers may have simpler causes. Imagine collecting employment statistics in a country with 300 million inhabitants and 50 state bureaucracies like the USA. Even Germany with its registration requirements and a fairly well-organized administration estimates that as much as 20% of GDP goes unreported due to “black labor,” i.e. work done without documentation to evade taxes.

As BusinessWeek discussed, government statisticians may not even know how to correctly calculate such complex numbers as GDP.

Bad Boy Media

Interestingly, journalists get blame from both sides. One group chastises them for ignoring the problems with the numbers and focusing on the “feel-good” ones like core-inflation. Understandably, media organizations whose revenue depends on people feeling good about the stock market have a vested interest in emphasizing the positive. Conversely, people like Wesbury blame them for spreading pessimism. Certainly, sensationalist headlines help sell news for others.

Obviously, the bad headlines alone could drive the people to confusion and despair. Just like there is no one economic number for everyone, there is no one headline for everyone, either. Most likely, a combination of the above factors causes many, many people to feel bad about the economic outlook. As the reasons differ, it will require many different changes for people to feel better, no matter what the economic numbers suggest.