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If the Data Doesn't Look Good... Just Massage It Until It Does! That's How You Get a Recovery!
This whole exercise is getting old.
The biggest problem with the financial system is that of bad measurement. Without accurate data, no analyst can make sound investment judgments.
Unfortunately for all of us, the data is gimmicked to the point that nothing is valid any longer. GDP is gimmicked using a phony deflator. Unemployment is gimmicked by not counting those who stop looking for work. Inflation is gimmicked by ignoring food and energy prices. Employment is gimmicked by adjusting the work week to make the the economic equivalent of the loss of hundreds of thousands of job look like employment gains.
And on and on.
This is how those at the top of the economic-political food chain think: if the data is bad, change how you measure it until it looks good. And that equals growth!
If only we could apply a similar idea to issues like personal weight, home values, and the like. If we could do that, we’d all be six foot tall, multi-millionaires living in mansions with six-pack abs.
I realize that last example is ridiculous, but I use it to illustrate a key point with the “data” being promoted by the Feds today: that it’s a mirage. Changing the way in which you measure something doesn’t change its actual reality. You cannot create economic growth by altering how you measure GDP growth anymore than I can change my height by adjusting the “inch” measurements on a ruler to be smaller.
Unfortunately for economists, there is a thing called reality. And the ugly underlying economic realities of this “recovery” will eventually emerge, no matter how many accounting gimmicks are used.
When this happens, the move will be fast. Consider Italy and Spain. Both were considered rock solid members of the EU for years. Then in the span of a few weeks they nearly imploded and the ECB had to pump hundreds of billions into the system. Ditto for Cyprus, Enron, the subprime housing bubble and any other accounting fraud that people ignored when making investment decisions.
It always ends the same way: the truth comes to light and the losses are enormous.
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Best Regard,
Graham Summers
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HAHA I love the title! - The method would work for your girlfriend, but definitely not economics. hehehe. ;)
"It always ends the same way: the truth comes to light and the losses are enormous."
That which goes up on the basis of financial fraud, crashes on the basis of financial truth.
My pension plan has been 80% funded for several years. But now, thanks to a new, magical government accounting law (MAP-21), it is suddenly 99.6% funded . Thanks be to the wizards of accounting. We are all saved.
"As a result, your employer may contribute less money to the Plan at a time when market interest rates are at or near historical lows." WTF?
Replace may contribute less, with will contribute less.
When the investment bankers got leverage waivers because they may have wanted to increase leverage, they all doubled down on leverage.
The financial fraud just never ends. Imagine what is going to happen when the CURRENT financial frauds come to the light of day.
Perception is all-important in a world of 100 to 1 leverage. Telling the truth is just way too risky.
Our educational institutions train people in the art of deception. They will only be successful if they do not rock the boat. Quality of data is gone. Replaced with statistics, throwing out the out liars (sic) and using "fuzzy logic" in the programming. From medical degrees to auto mechanics all is bs just meant to sell and forget.
Reading Joseph Conrad's - The Secret Agent and I begin to see, but not agree, with the buildup of un-explainable anxiety that resulted in the catastrophy in Boston. keep watching for old women knitting.
WOW, We have been talking about this for two years.
Nice to see that you are catching up, Graham.
Shadowstats currently publishes a broad unemployment rate in the US, using past government methodology,of 23%. Cause for celebratiom?
The US massages and manipulates its data to suit its interests. In an economic war, the truth must be protected by an army of lies. One such technique is hedonic adjustments.
The US uses hedonic adjustments to its Consumer Price Index (CPI) and with you can massage data to produce whatever outcome you desire. For example, if computer speeds increase 50% a year, and the computer price stays the same, the US assumes that you are getting 50% more computer for your money. So even if the sales of computers remain the same in dollar terms, the GDP portion of computers has gone by 50%, And inflation rate for computers is -33%. Such is the miracle of hedonic adjustments.
This hedonic adjustment is applied to everything produced in the US economy. If prices go up for cars by say 10%, the US can assume that 7% of that increase was caused by quality improvements and the real inflation is only 3%. From 1967 to 1999, the price of a car in the US increased by 6.42 times. But the US BLS (Bureau of Labor Statistics) reported an increase of 2.83 times. So 56% of the increase in the price of a car was hedonically adjusted away.
These adjustments are far more egregious for computers and they contribute to at least 25% of the growth of the GDP. As a rule of thumb, US inflation is understated by about 4%. So US growth is overstated by 4%. So instead of 0.4% growth in the last quarter of 2012, the economy was shrinking at 3.6%.
If you correct the US economy for these adjustments over the last 10 years, US GDP is only about $10 trillion instead of the conventionally assumed $15.5 trillion now. And the economy is now in recession, shrinking instead of growing at rates that makes Europe envious of the miracle of US growth. In July, USA GDP will grow by $500 billion (3%) because $500 billion of intangibles will be added to the US GDP.
There are damned lies, statistics and statistics generated by the US BLS. But everyone seems to report US economic numbers as if they were gospel. The truth is so hideous that it must be protected by a phalanx of adjustments.
You can't talk your way out of a sunburn.. At least the lower 99% can't.
Fed pumped rally underway. All free money. Till they spring the trap door on equities.
That trap door can be sprung by the Fed declaring that they will only buy $84.99B per month instead of $85B as "promised", and the info sent to the special early-bird list of Fed pet institutions (not including PIMCO apparently).
Forget us. Australia's data relative to China's is the biggest disconnect in HISTORY. Personally, i am leaning towards believing the Aussies...!!
"This whole exercise is getting old."
The only thing getting old is how you are constantly wrong on every prediction... There is no accountability for your predictions. You have been wrong on Europe, wrong on the stock market, wrong on everything and yet you continue to write this trash as if you were some kind of authority...
Relying on two wrongs make a right, right?
Unfortunately you're as vague at specifically identifying their past misses as they are at providing specific examples of the calculation changes. Reviewing the article and the comments unfortunately took 10 minutes of my life that I'll never get back. On to something else that might be of some use. (We should all probably just STFU.)
Not familiar with his predictions. Please do tell.
Don't tell Kruggy.
Isn't that the same reason every FIAT system blows up?
So the Obowel Movement is lying to us and fudging numbers??????
BRILLIANT!!!!!!!!!!
i tried to make the same argument to the girl at the coffee shop but she was as unreceptive to me as i am to the holographic market
Next time instead of fudging the data by 5% and telling her it is 6 inches, convert to centimeters and say it is 15.2 centimeters.
You mean you massaged her data?