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Guest Post: Proof That Government Economic Numbers Are Being Manipulated

Tyler Durden's picture




 

Submitted by Michael Snyder of The Economic Collapse blog,

How in the world does the government expect us to trust the economic numbers that they give us anymore?  For a long time, many have suspected that they were being manipulated, and as you will see below we now have stone cold proof that this is indeed the case.  But first, let's talk about the revised GDP number for the first quarter of 2014 that was just released.  Initially, they told us that the U.S. economy only shrank by 0.1 percent in Q1.  Then that was revised down to a 1.0 percent contraction, and now we are being informed that the economy actually contracted by a whopping 2.9 percent during the first quarter.  So what are we actually supposed to believe?  Sometimes I almost get the feeling that government bureaucrats are just throwing darts at a dartboard in order to get these numbers.  Of course that is not actually true, but how do we know that we can actually trust the numbers that they give to us?

Over at shadowstats.com, John Williams publishes alternative economic statistics that he believes are much more realistic than the government numbers.  According to his figures, the U.S. economy has actually been continually contracting since 2005.  That would mean that we have been in a recession for the last nine years.

Could it be possible that he is right and the bureaucrats in Washington D.C. are wrong?

Before you answer that question, read the rest of this article.

It just might change your thinking a bit.

Another number that many have accused of being highly manipulated is the inflation rate.

But we don't have to sit around and wonder if that figure is being manipulated.  The truth is that even those that work inside the Federal Reserve admit that it is being manipulated.

As Robert Wenzel recently pointed out, Mike Bryan, a vice president and senior economist in the Atlanta Fed's research department, has been very open about the fact that the way inflation is calculated has been changed almost every month at times...

The Economist retells a conversation with Stephen Roach, who in the 1970s worked for the Federal Reserve under Chairman Arthur Burns. Roach remembers that when oil prices surged around 1973, Burns asked Federal Reserve Board economists to strip those prices out of the CPI "to get a less distorted measure. When food prices then rose sharply, they stripped those out too—followed by used cars, children's toys, jewellery, housing and so on, until around half of the CPI basket was excluded because it was supposedly 'distorted'" by forces outside the control of the central bank. The story goes on to say that, at least in part because of these actions, the Fed failed to spot the breadth of the inflationary threat of the 1970s.

 

I have a similar story. I remember a morning in 1991 at a meeting of the Federal Reserve Bank of Cleveland's board of directors. I was welcomed to the lectern with, "Now it's time to see what Mike is going to throw out of the CPI this month." It was an uncomfortable moment for me that had a lasting influence. It was my motivation for constructing the Cleveland Fed's median CPI.

 

I am a reasonably skilled reader of a monthly CPI release. And since I approached each monthly report with a pretty clear idea of what the actual rate of inflation was, it was always pretty easy for me to look across the items in the CPI market basket and identify any offending—or "distorted"—price change. Stripping these items from the price statistic revealed the truth—and confirmed that I was right all along about the actual rate of inflation.

Right now, the Federal Reserve tells us that the inflation rate is sitting at about 2 percent.

But according to John Williams, if the inflation rate was calculated the same way that it was in 1990 it would be nearly 6 percent.

And if the inflation rate was calculated the same way that it was in 1980 it would be nearly 10 percent.

So which number are we supposed to believe?

The one that makes us feel the best?

And without a doubt, "2 percent inflation" sounds a whole lot better than "10 percent inflation" does.

But anyone that does any grocery shopping knows that we are definitely not in a low inflation environment.  For much more on this, please see my previous article entitled "Inflation? Only If You Look At Food, Water, Gas, Electricity And Everything Else".

Of course the unemployment rate is being manipulated as well.  Just consider the following excerpt from a recent New York Post article...

In case you are just joining this ongoing drama, the Labor Department pays Census to conduct the monthly Household Survey that produces the national unemployment rate, which despite numerous failings is — inexplicably — still very important to the Federal Reserve and others.

 

One of the problems with the report is that Census field representatives — the folks who knock on doors to conduct the surveys — and their supervisors have, according to my sources, been shortcutting the interview process.

 

Rather than collect fresh data each month as they are supposed to do, Census workers have been filling in the blanks with past months’ data. This helps them meet the strict quota of successful interviews set by Labor.

 

That’s just one of the ways the surveys are falsified.

The Federal Reserve would have us believe that the unemployment rate in the U.S. has fallen from a peak of 10.0 percent during the recession all the way down to 6.3 percent now.

But according to shadowstats.com, the broadest measure of unemployment is well over 20 percent and has kept rising since the end of the last recession.

And according to the Federal Reserve's own numbers, the percentage of working age Americans with a job has barely increased over the past four years...

Employment Population Ratio 2014

The chart above looks like a long-term employment decline to me.

But that is not the story that the government bureaucrats are selling to us.

So where does the truth lie?

What numbers are we actually supposed to believe?

 

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Thu, 06/26/2014 - 18:25 | 4900020 NEKO
NEKO's picture

Wow, They Lie !!!

Thu, 06/26/2014 - 18:39 | 4900069 The Limerick King
The Limerick King's picture

 

 

Could all of our numbers be fake?

Is national interest at stake?

Are MSM shills

Dispensing blue pills?

Are Oligarchs all on the take?

Thu, 06/26/2014 - 19:03 | 4900125 Ben Ghazi
Ben Ghazi's picture

"The U.S. economy has actually been continually contracting since 2005."

 

So, IT IS all Bush's fault!          Obozo was right after all.

Thu, 06/26/2014 - 19:10 | 4900158 lordylord
lordylord's picture

Government lies, cheats, steals, and murders.  Still, people want MORE government.  WHAT IS WRONG WITH THESE PEOPLE???

Thu, 06/26/2014 - 19:31 | 4900215 Anusocracy
Anusocracy's picture

In the zero sum economic world of our forager ancestors, the alpha-male and the social hierarchy were positive for survival.

So, most people are born with saddles on their backs, and the control freaks are ever so happy to oblige them by riding them.

Fri, 06/27/2014 - 01:50 | 4901227 Oracle 911
Oracle 911's picture

Wrong!

The current education system putting up these saddles.

 

BTW, in society of our forefathers if the "alpha male" screwed up everything and the tribe survived he was droved away.

In our society, well...

Thu, 06/26/2014 - 21:32 | 4900652 newworldorder
newworldorder's picture

They hope to avoid being cheated or murdered. The best of reasons. It explains every tyranny in history.

Thu, 06/26/2014 - 20:44 | 4900477 cynicalskeptic
cynicalskeptic's picture

They started playoing games with numbers big time under Reagan.  After Carter got vilified for the economy, those in DC realized it was far easier to lie than actually improve things - and with nobody questioning the lies, they got bigger and bigger.

BOTH political parties are complicit though the Repubs seem to be far more blatant about it.

If you still believe the kabuki theater playing out - that you have a real choice - you're a fool.  Our politicians are bought and paid for - we're given the illusion of choice and fake arguments over issues that really don't matter.  Everyone's arguing over God and Gays while their income has dropped and costs have skyrocketed.

Thu, 06/26/2014 - 19:01 | 4900131 krispkritter
krispkritter's picture

Yes to All of the Above.

Thu, 06/26/2014 - 21:42 | 4900696 Magooo
Magooo's picture

Hickory Dickory Dock
Some chick was suckin' my cock
The clock struck two
I dropped my goo
I dumped the bitch off on the next block

Thu, 06/26/2014 - 18:25 | 4900021 knukles
knukles's picture

Love Big Brother

Thu, 06/26/2014 - 18:26 | 4900023 Cattender
Cattender's picture

NOOOOO!!!!! It's A FUCKING RECOVERY!!!!! GODDAMN IT!!!!!!

Thu, 06/26/2014 - 18:27 | 4900028 TuPhat
TuPhat's picture

Believe what you want, just make sure you do as they tell you.

Thu, 06/26/2014 - 18:29 | 4900034 krispkritter
krispkritter's picture

 "Never tell a lie.  P.S. Except to keep in practice." - quoted in "Mark Twain's Autograph" 

Thu, 06/26/2014 - 18:30 | 4900039 NOTaREALmerican
NOTaREALmerican's picture

"Sincerity is everything, once you can fake sincerity the world is your oyster"  Groucho Mark,  Jean Giraudoux, or George Burns. 

Thu, 06/26/2014 - 18:47 | 4900095 dumbStruck
dumbStruck's picture

" I'd tell you I never lie but that would be the biggest whopper I've ever told."

...not sure who said it, sounds like twain...

Thu, 06/26/2014 - 18:56 | 4900122 disabledvet
disabledvet's picture

"Ask me no questions I'll tell you no lies."

It's not a question of "the lie" but of the "revision."

All the revisions are the same (growth always looks better than it is...and in fact is not growth but a recession) thus while the data is incorrectly given...it is incorrectly given the same way every time.

In short "a bad lie."

Probably one reason why the equity market is rallying though. "You can game the lie a lot easier than the truth."

Thu, 06/26/2014 - 19:04 | 4900136 krispkritter
krispkritter's picture

Figures often beguile me, particularly when I have the arranging of them myself; in which case the remark attributed to Disraeli would often apply with justice and force: "There are three kinds of lies: lies, damned lies and statistics."

- Autobiography of Mark Twain

Thu, 06/26/2014 - 18:37 | 4900035 NOTaREALmerican
NOTaREALmerican's picture

I guess the inflation rate depends where you are on the Elysium / Trash Class scale.      The Trash Class would feel inflation when purchasing their (near) food.   The Elysium Class would feel the inflation on the 1st Class tickets to Yerp - I don't think the Elysium Class minds spending more on holistic grass-fed happy beef.

Survival of the fittest, bitchez!!!

Thu, 06/26/2014 - 18:29 | 4900038 Bemused Observer
Bemused Observer's picture

You're right, none of it can be trusted anymore. These people are batshit crazy! I don't even bother trying to make sense of it, I just withdraw as much as possible, try not to get their attention.
It's like being in a subway car when some guy starts pacing back and forth and quoting scripture in a loud, booming voice. You avoid eye contact, and slowly make your way to the exit farthest away from the lunatic.
At this point, Yellen might as well start quoting scripture.

Thu, 06/26/2014 - 18:33 | 4900046 Pareto
Pareto's picture

"Truth.....you can't handle the truth."

Thu, 06/26/2014 - 18:33 | 4900050 Tale2cities
Tale2cities's picture

"Hard Choices"

Thu, 06/26/2014 - 18:44 | 4900082 alexanderstollznow
alexanderstollznow's picture

Well, gosh and golly.... "stone cold proof".

so what do we have?

*i single blogger making up his own numbers

*two anecdotes from the 40 and 20+ years ago referring to adjusting (note: that is different to 'manipulation') the way CPI is measured.*some halfwit who cant understand that "the widest measure of unemployment" is not actually 'unemployment' as understood by all economists across all countries.

*the astounding revelation that there are narrower and broader ways of measuring "unemployment" and at least one of them is broader than THE definition used by all statistical bodies across all countries.

the best thing about ZeroHedge is that when i see that some particular person has ever contributed to this site, i know that i can immediately dismiss any other work by them, without even reading it.  thanks guys, for saving me valuable time.

Thu, 06/26/2014 - 19:21 | 4900190 homiegot
homiegot's picture

Someone pissed in your Wheaties this morning. Sorry, dude.

Thu, 06/26/2014 - 20:48 | 4900492 cynicalskeptic
cynicalskeptic's picture

He's paid 5 cents a word as part of the gov's effort to make everyone believe things are better.  In 50 years he may be able to afford to leave his parent's basement.

MOPE - management/manipulation of perception economics.   Convince people that things are better/improving, that they can believe in government.   You've got the media reporting the official line on the economy and hired trolls to rebut any questioning of the official reality.

Thu, 06/26/2014 - 19:25 | 4900205 Winston Churchill
Winston Churchill's picture

Don't let the door hit your arse on the way out, troll.

Thu, 06/26/2014 - 19:35 | 4900232 Spigot
Spigot's picture

Your mother must be ashamed that she bore such a foolish child. Does she weep on your birthday?

Thu, 06/26/2014 - 20:03 | 4900331 NemoDeNovo
NemoDeNovo's picture

One of my fave jokes......

 

"Why are Polish mothers so STRONG?"

 

"They are always raising Dumbells!!""

 

BTW I am half polish 

Thu, 06/26/2014 - 20:15 | 4900364 Stoploss
Stoploss's picture

Here, let me save you some more time.

The monetization can never stop. (If they taper, they blow their own leg off) Monetization = 2%, it's how they get the number, after being forced to strip out any thing that jeopardizes the 2% number. Anything.

Rates will never go up. Ben said so.

A seven year old knows this is all bullshit...

And why have you not signed up for Barrycare yet?

Thu, 06/26/2014 - 21:34 | 4900635 skillyhog
skillyhog's picture

(@ alex) .... C'mon dude, you're not even a troll. You're an anti-troll, some guy who wants to give trolls a bad name to gin up support for our side. Not necessary.  Nice try though, you almost had me until the "understood by all economists across all countries" line,  knowing full well how  that and "THE definition used by all statistical bodies across all countries" are viewed around here.  Hell, you're giving anti-trolls a bad name.... 

(I will admit though, Snyder is like the Potsy of our bloggers:  he's in the gang and we love him, but man he just begs for the abuse with 19 reasons for this and 47 reasons for that, always with pictures of Detroit as reason #7....)

Thu, 06/26/2014 - 21:43 | 4900700 Magooo
Magooo's picture

Gov troll is better than dumpster diving I guess?

Thu, 06/26/2014 - 18:47 | 4900090 Spastica Rex
Spastica Rex's picture

And if the inflation rate was calculated the same way that it was in 1980 it would be nearly 10 percent.

So which number are we supposed to believe?

The one that makes us feel the best?

 

Just go buy a new smart phone; you'll see - they're amazing!

Thu, 06/26/2014 - 18:52 | 4900105 RiverRoad
RiverRoad's picture

   "To Foxhall Gardens in heaps they run.....some to undo and some to be undone!"

Ya gotta love 'em.   And credit to "Tom Jones".

Thu, 06/26/2014 - 21:37 | 4900670 skillyhog
skillyhog's picture

I know you don't know me, but you are my main man, Rex.  Still laughing.

Thu, 06/26/2014 - 19:05 | 4900143 Max Cynical
Max Cynical's picture

Thanks Captain Obvious...

Thu, 06/26/2014 - 19:06 | 4900149 ThisIsBob
ThisIsBob's picture

Consider also that the Government is obliged to keep Civil Service, Military and Social Security retiremements in line with inflation.  Save a lot of money  if there isn't much.

Thu, 06/26/2014 - 19:08 | 4900152 Max Cynical
Max Cynical's picture

Nothing that comes from this gov has any relationship to the truth.

Thu, 06/26/2014 - 19:14 | 4900171 JayKitsap
JayKitsap's picture

Well I recall that GDP growth is connected to inflation, so when they said it was a 0.1 quarter, that was with a 2% inflation rate, well as they kept fudging the numbers, it dropping to almost -4% that means inflation is probably 6%.

My business is designing buildings, previously when the local unemployment rate was under 7%, my phone was always ringing with new work.  It is ringing like there is 10% unemployment.

Thu, 06/26/2014 - 19:32 | 4900225 Spigot
Spigot's picture

I believe your phone ringer more than any number the government produces.

Thu, 06/26/2014 - 21:24 | 4900618 newworldorder
newworldorder's picture

Your posting results are anecdotal. Where are the real statistics that any economist can spout off, to back up your experiential theory? - sarc -

Thu, 06/26/2014 - 19:28 | 4900216 The Blank Stare
The Blank Stare's picture

CPI = Control People Indefinitely?

Thu, 06/26/2014 - 20:51 | 4900503 cynicalskeptic
cynicalskeptic's picture

I think you mean 'conning' people in this context - though 'control' is clearly a goal as well.

Thu, 06/26/2014 - 19:40 | 4900250 logicalman
logicalman's picture

Well, fuck me backwards with a barge pole.

I'd never have figured this out without this article.

Thu, 06/26/2014 - 19:57 | 4900312 DOGGONE
DOGGONE's picture

I urge you to give decisive visibility to these massive deceptions by omission, which do great harm in our democracy.

Intro
http://www.showrealhist.com/yTRIAL.html

The Public Be Suckered
http://patrick.net/forum/?p=1230886

Thu, 06/26/2014 - 20:04 | 4900334 navy62802
navy62802's picture

No offense, but I don't need proof. It is obvious enough without "proof." All I have to do is go to the grocery store.

Thu, 06/26/2014 - 21:09 | 4900565 venturen
venturen's picture

"Remain Calm,..All is Well...ALL IS WELL...Remain Calm!"

Thu, 06/26/2014 - 21:20 | 4900604 newworldorder
newworldorder's picture

Right you are. - All financial institutions, whether government or private - are all in. The Faith in the System must be maintained at all costs, therefore everything has to be controlled so that the average person can maintain their illusion.

Once the emperor is shown to be naked, then we will have total collapse. We are a long way from that. Those in control, will do anything, and commit any crime, in order to maintain the illusion.

Fri, 06/27/2014 - 00:05 | 4900938 honestann
honestann's picture

Where does the truth lie?

That's a softball question!

Think about it.  Roughly 40 years ago, Americans had modest debt.  In fact, credit cards haven't existed for much more than 40 years, and ditto for endless new forms of credit and debt.

The point is this... debt has been rising continuously for 40 years.  Why?  Because no force existed to slow or stop the banksters from offering more and more debt.  Specifically, the 1971 end of the tie to gold ended the last bit of restraint on unlimited creation of fiat, fake, fraud, fiction, fantasy, fractional-reserve DEBT.

And so, the debt has been rising continuously for 40 years.

Now... for the most completely obvious part.  What is the relationship of debt to economy?

Duh.  Very obvious.  When people spend all they earn PLUS all the money they borrow, that creates greater demand for products (by the amount of debt added).

But what happens after people accumulate more and more debt... to the point they can't borrow more, because they can barely even make payments on previous debt?

Duh... Very obvious.  Now people can't even spend as much money as they earn, because much of their earnings is handed over to the banks to repay principle and interest on all their previous borrowings (40 years of borrowing in some cases).

This is a classic instance of gross distortion of the economy by artificially pulling forward demand and buying.  But... when you "pull forward" demand to the "now", that demand is REMOVED from the future.

Which means, any stimulation of demand and economic activity in the short run inherently causes depression of demand and economic activity later.  You can spend your money now, or you can spend your money later, but you can't spend the same money twice (now and later).

But the situation is even worse than that, because people not only have to repay the principle they borrowed, they must also pay back interest.  Which means, the demand in the future is reduced in two ways, one of which simply enriches banksters.

And so, after 40 odd years of ever-rising gluttonous borrow and spend on the part of individuals and government...

DEPRESSION IS UNAVOIDABLE.

The economy has been recession since 2001, and depression since 2008.  Since the predators-that-be have no intention to allow a debt-holiday (since they are the predators the fiat debt is supposedly "owed" to), depression is now locked in as the permanent state of mankind... as long as the predators-DBA-banksters and predators-DBA-government rule.

All the propaganda about economic growth is transparently absurd... to anyone who can see fundamentals.  After 40 years of borrow and spend binge, no other outcome was possible.  However, the depression could have lasted only 1 year if the predators-that-be did not rig the system.

The big financial companies would have gone bankrupt, and huge swaths of debt would have been properly wiped away.  And those who rule the earth would be broke, as they should be.  For they created the disaster with full knowledge of what they were doing.

-----

LATER:  Ha!  Maybe 15 minutes after I posted this, a new ZH article appears explaining how lenders are aggressively offering huge credit lines to people with terrible credit ratings.  So we see, they've stretched this "improve the economy by borrow and spend" technique past the breaking point (2008)... yet all they can think of to generate new business is... lend to people who will not repay.  Genius!

Fri, 06/27/2014 - 01:30 | 4901210 AdvancingTime
AdvancingTime's picture

The term "the new normal" has not been used much as of late, but going forward it may be about to return. Many investors and the public at large may be about to realize that central banks can only do so much through printing money and lowering interest rates. Both these actions carry with them some very strong and nasty side effects.

Markets have become very distorted as money has flowed into risky assets in search of higher yields. It could be we are about to see the markets morph into a "realizing market", one that grinds slowly downward. Another possibility is that at some point the wisdom of buying every pullback changes and the market simply drops like a stone. More on what the future might hold in the article below.

http://brucewilds.blogspot.com/2013/06/realistic-expectations-for-econom...

Fri, 06/27/2014 - 01:24 | 4901202 AdvancingTime
AdvancingTime's picture

We may soon be forced to face our economic Armageddon. The forces that have driven stock markets ever-higher and upward may be beginning to wane. Many markets became distorted years ago when QE and super low interest rates hit the economy in an effort to lessen many of the missteps of recent years.

This has been more helpful in holding up the underlying value of assets and derivatives it now appears than helping to repair a wounded economy. QE has up to now stopped an implosion of derivatives including the resulting contagion and shock that would have spread throughout the financial system. Unfortunately the economy has not fared as well as these asset prices and in many ways these policies have harmed Main Street. More on this subject in the article below.

http://brucewilds.blogspot.com/2014/05/facing-our-economic-armageddon.ht...

 

Fri, 06/27/2014 - 09:18 | 4901821 paint it red ca...
paint it red call it hell's picture

A Big Lie??? Which Big Lie? The entirety of reality presented during my adult life has turned out to be A Big Lie.

Assassinations of the 60's; A Big Lie

Vietnam; A Big Lie

Nixon administration; A Big Lie

Gerald Ford; A Big Joke of a Lie

Carter administration; A Big not as incompetent as presented Lie

Reagan administration; A Big frontman Lie with devious scum behind him

Sadam and Kuwait; A Big Lie

Bush/Clinton/Bush/Obama; A Big conspiratorial Lie

Newt's Contract on America; A Big Lie told by an obviously lying liar

Every military action for the last 60 years; A Big Lie

Basis for 1990's deregulation of everything; A Big Lie

Repeal of Glass/Steagall for the economic good; A Big Lie

Representative government; A Big Lie

No child left behind/CommonCore; A Big Lie

Obama's identity for God's sake; A Big huge Lie

Food and drug safety; A Big Lie

Corporate Media; The Biggest Liars, lying loudest and longest for all the lying liars....

shall I go on????????

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