Are We (really) Getting Screwed in the Ass? Part II

Are we (really) getting screwed? Part II

Part I Link - http://news-hop.blogspot.com/2008/05/are-we-getting-screwed-httpwww.html

What did they do?

Mr. Phillips' article outlines exactly what the feds have done to the economic indicators. His main argument, which I wholeheartedly agree with, is that this was not a cynical scheme or staged, just a very gradual deception on everyone's part.

There are some reservations however, that this might be just a justification of trying to make this sound like a non-conspiracy theory stuff.... which btw, it isn't.

John Williams, one of the few economists who deal with this deception, and makes his living out of this, produced the following graph of Inflation measures.

Aside from the scary monster, that's a pretty damn scary chart. nearly 8% gap? What, the, fuck?

John Williams calls it the Pollyanna Creep.

The number humping list is as follows.

JFK

- changed unemployment rate by introducing "discouraged workers"

- Orchestrated "unified budget" which effectively combined Social Security with federal outlays.

Nixon

- Tried to get BLS to "better" of two numbers: seasonally adjusted or non-adjusted, but FAILED.

- PRODUCED THE CORE INFLATION RATE

Reagan

- Eliminated housing by coming up with Owner Equivalent Rent. Made it easier to borrow money.

- Reclassified military as "employed" from "outside of labour force"

GHW Bush

- Boskin: stated that inflation was OVERSTATED, brought on measures to actively reduce it.

Clinton

- Excluded people whos been looking for work for more than a year from unemployment rate calc. 4 million adults fell out.

- Reduced sample, effectively leaving out the black and hispanic unemployed.

- Introduced HEDONIC ADJUSTMENT under inflation.

Bush, current

- Got rid of M3

- Came up with C-CPI-U (30 basis points off of previous CPI)

Results?

The result is that people don't believe in government anymore. Faith level is below post-Watergate level, and we might as well be hoarding fat chicks as the saviour of obesity.

UNEMPLOYMENT

There are SIX MISERABLE WAYS to measure employment, ranging from 5.2% to 9%.

U-6 the highest of them all, includes part timers looking for full time employment. You be the judge of whether this is useful or not.

GROSS DOMESTIC PRODUCT

Favorite Fudge Factors include "birth/dath of businesses" euqation and phantom income boosters (i.e. benefits of receiving free chequing accounts.) which accounts for FIFTEEN percent of GDP.

Consequently, we might be saying that the "shallower" recession effect could be mostly coming from GDP FFF effect.

CONSUMER PRICE INDEX

There are so many things wrong with this you can't even keep track of them. Some main things, however. Would be:

Home owner's equivalent rent - shaved off 3-4%

Substitution - if a price of one food item rises, it gets rapidly left out for much cheaper item.

Hedonic Adjustment - Case rested. This is where you blindly guess quality of product going up, but not quality of product going down.

So.....what is up?

Let's get the facts straight. Does this really matter?

For one, there is aboslutely nothing individuals can do about this. Also, what IS the "true" number? That definition itself is in murky waters, which makes this arguing very difficult to have a good footing.

However, we MUST prepare for a time when things do flow the other way. For one, realizing that every president will have self interest in trying to make themselves look like the best president ever should be painfully noted. Also, they have tendancy to want to save money, which means we will most likely be understating it instead of overstating it. No one is an idiot - if things were truly overstated, and they were getting their performances cut, they'd make it known.

Other than federal budget though, understated numbers, especially inflation, matters a lot. If America is growing at 4% a year and inflation is 8%, they really haven't grown... have they.

Note that I'm not arguing that standard of living has gone down - it definitely did not. But what's happening? Contracting economy?

Effect of inflation and currency on commodity prices and especially the big Indices (Dow Jones, SPX, etc) will be coming shortly - but just to say, it doesn't look too pretty.