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Shadowy stats/ great article

judge wopner

TRIBE Member
Shadow Statistics
Chris Mayer
Apr 17, 2006


"Listen," I interrupted, "what nationality are you?"
"I'm English," she replied. "That is, I was born in Poland, but my father is Irish."
"That makes you English?"
"Yes," she said...

- Henry Miller, Tropic of Cancer


Ben Bernanke, Fed chairman, recently delivered an upbeat view of the U.S. economy. It was cheerful, optimistic...and delusional.

The official government statistics hide many warts on the face of the U.S economy. Like makeup dabbed on an aging film star, they are an attempt to cover the wrinkles and present a veneer of youth. To most people, this is no revelation. Like plastic surgery and tummy tucks, it is what stars do to keep up appearances.

However, few know the extent of the deceit. What if you learned that inflation were closer to 7% than to the official 3%? What if unemployment were closer to 12%, rather than the official 5%? What if the economy were actually contracting, as opposed to growing?

What follows is a partial peek at the economy - sans makeup. And, more importantly, what it means for you and your hard-earned dough.

It was the genius of writer George Orwell that he chose to build his dystopia on the foundations of language and information - how it is used to deceive, manipulate and control. His chilling novel 1984 stands out precisely because it is only a distortion of things that are happening now and that have always happened. Orwell's dystopia is a mirror in a funhouse, as you see enough of your own world in this disturbing reflection.

Thankfully, there are still some people doing the important work of getting at the truth behind the official statistics - piercing the veil of Newspeak, sweeping away the cobwebs of sham. John Williams is an economist dedicated to doing just that. His Shadow Government Statistics reveals the extensive rot under the floorboards of the U.S. economy.

Let's take the official inflation rate, tracked using the consumer price index, or CPI. The idea behind the CPI is to have a fixed basket of goods and track how the prices of these things change from year to year. It only gained prominence after World War II, as a way to adjust autoworkers' labor contracts, a practice that soon spread.

Over time, its importance grew and more people looked to it as a gauge of general price inflation - and, hence, to get a feel for the health of the economy.

The thing is, the way the CPI is calculated changed dramatically over the years. Politicians have figured out that these statistics are useful in winning elections. Ergo, nearly every administration has altered the calculation. And always, the changes made the CPI lower. Every effort to change the CPI, by design, aims to make the economy look "better" than it looked before the changes.

The accumulation of these changes creates a huge difference over time. It's like making a series of small changes to a ship's course in the midst of a long voyage. Soon, you wind up way off course, miles and miles from where you think you are. The rate of inflation using only the pre-Clinton era CPI is closer to 7%!

The "Experimental C-CPI-U" is another innovation, introduced by the Bush administration to lower the CPI yet again, once again to paint a kinder portrait of the old hag known as the U.S. economy.

But it's about more than just making the economy look better. For example, since increases in Social Security payments link to the CPI, a lower CPI also saves the government money. According to Williams, if you used the CPI when Jimmy Carter was president, you'd get Social Security checks 70% higher than today's levels. Yes, 70% higher.

The manipulation of the CPI explains the great disconnect between what the man in the street feels when he pays his bills and what the confident, well-dressed Fed chiefs and politicians try to tell him. The cost of living is rising a lot more than they want you to believe. At a 7% annual rate of inflation, the cost of living would double in about 10 years. Looked at differently, the purchasing power of your dollar will fall in half.

What about unemployment? The government, since the time of the Kennedy administration, has been changing the definition of "unemployed." Again, many small changes over time lead to dramatic end results. According to Williams, if you back out the changes, you get an unemployment number closer to 12%!

Let's look at the federal deficit - basically, the amount of money the government is losing every year. The official deficit for 2005 was $319 billion. However, this excludes unfunded Social Security and Medicare obligations. Throw them into the mix and calculate the deficit the way a business does in its financial statements - and you get an annual deficit around $3.5 trillion.

That's more than 10 times the so-called "official" deficit. By Williams' calculations, you could raise the tax rate to 100% - dump everyone's salaries into the U.S. Treasury - and still have a deficit.

Years of such deficits have created a mountain of obligations for the U.S. government. As Williams says, "The fiscal 2005 statement shows that total federal obligations at the end of September were $51 trillion; over four times the level of GDP." These debts are unsustainable. The bills must go unpaid. If the U.S. government were a private corporation, its bankruptcy would be beyond dispute.

This is why Social Security and Medicare are not going to exist in the not-too-distant future. As Williams says, "There is no way the government can pay the Social Security or Medicare it has committed to."

Williams believes GDP is contracting now. The government reported only a 1.1% increase in the fourth quarter. Even in an election year, and despite the government's best efforts to paint a pretty face, all it could muster was a measly 1.1%. More likely, the economy actually contracted 2% in the fourth quarter. This means we are in a recession NOW.

This is not conspiracy-theory stuff. As Williams points out, it's all disclosed in the footnotes in the government's reports. All he is doing is backing out many of the changes to more realistically compare these numbers with the numbers of the past.

Williams' work reinforces several things we've already covered in past letters. To wit:

Trying to pin down the economy in precise numbers is futile anyway. It's too big, too complex. All macro statistics are severely flawed. This is why I seldom write about them. Investing using macro statistics is like trying to find the nearest post office with a globe. They are so vague as to be useless.

The basic idea I want to leave you with is this: The economy is far weaker than generally portrayed. Most investors ignore the rat's nest of risks and invest indiscriminately in stocks - without proper due diligence. As investors, we need to stick to our fundamentals more carefully than ever.


www.321gold.com
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Ditto Much

TRIBE Member
If you stopped looking for a job you are no longer unemployed in Canada or the USA. If you are homeless you are not employed in either Canada or the USA, if you are unable to work or a student you cannot be unemployed in Canada or the USA.

I've argued that we are hiding the true unemployment numbers (both sides of the border) for ages. It doesn't help us to actually make real improvements is we fudge the numbers constantly and it only forces us to fudge more and more over time.
 

SellyCat

TRIBE Member
The famous economic JK Galbraith wrote a short, short little book called "The Economics of Innocent Fraud" (Penguin Paperback) and he talked about exactly the same things. He has experience from having been the president of the American Economic Council, economics prof at Harvard and various other high-level policy advisory positions. He says very explicitly that economists CANNOT predict economic behavior; it's simply far too complex, and anybody who claims to have such abilities is a fraud.

It's so important for people to understand that things like the CPI are SPECIFICALLY intended to remain UNCHANGED--that's the whole point of FIXING a basket. The more you look at US information practices, the more obviously like the Soviet Union it is. The fundamental difference is that in America the machinery of deception is diffuse, private and entirely voluntary. There is no monolithic source of the disinformation, which makes it appear as though it would be impossible--in the ostensible spirit of competition--to perpetrate a consistently false picture. But alas, bullshit abounds and people won't realise how effing screwed they are until it's far too late. And even then, they won't know who to blame, chaos will ensue and the Republic will "be forced to impose order".

Canada also has this very rosy economic picture--I wonder to what extent we are being deceived like the Americans.
 

judge wopner

TRIBE Member
ive always found it confusing how stats will be trumpeted like:

"economic forcasts were better than expected in the month of february"
things may have slowed down or performed poorly but if it performed less poorly than 'estimates' its spun as good news.

who gives these estimates and why is it that economists can be akin to weathermen yet not be held to their numbers.

all the big banks have been forecasting targets for the Canadian dollar, the TSX and gold and have been repeatedly wrong, and simply "revise"their forecasts month to month. nice.

i think this ties into other issues being brought up on this board and in general about wage rates and such, typically the supressed wage rates are used to justify minimal increases in people's wages over the years, giving the impression min. wage in the 70's wasnt much different than min. wage now in real inflation adjusted terms, yet in real terms a dollar buys less and less actual goods.

inflation may be a monetary issue or a supply issue as different economists contend, but i find it funny that despite the debate at the end of the day we use money to buy things or to pay off debts, when the same thing begins to cost more money, is it simply supply and demand of the good or supply and demand of the money in circulation (M3 data as per US fed calculations, which oddly enough they have discontinued)
 

SellyCat

TRIBE Member
Here's the basic set of facts that need to be plastered across every billboard in North America:

Since the late 1970s, wages have fallen by 20%
Worker productiving has risen steadily
Worker hours have risen steadily
Corporate prfits have risen EXPONENTIALLY.

This means that people are being paid way less for doing more and better work, while their employers make massive amounts of profits. (When you plot this onto a time graph, it's DISGUSTING! to see how the profit line spikes WAAAAY above everything else) It's a very simple, naked case of exploitation of the population.

The incredibly high rate of corporate profiteering also relates to the cost of living increases--THEY choose the prices...not some "invisibile hand," it's simply an official decision. When things cost more in a consumer society--in the face of overwhelming psychological pressure to consume--people become more dependent on their jobs. In other words, the job market is more competitive, which means that people are willing to work harder for less money. Factor into this the growing population and the fact that the current generation of "young adults" is truly the first to have equal opportunities for men and women--that increases competition, which worsens conditions.

Edit: Furthermore, when you see that GAP/Banana Republic make BILLIONS in profits, you MUST question the relationship between their costs and prices. It HAS to mean that they are paying a tiny sum to the workers, while grossly over-charging the consumer.

Logically, this means that they are stealing from BOTH consumers and workers. Hence the overwhelming rate of profit. You know, clothing is EASY to make...we've been doing it for hundreds of years. There does NOT need to be a correlation between price and quality for mainstream fashion items. (I'm not talking about ultra chic, hand made, custom fashionista stuff)
 
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atbell

TRIBE Member
SellyCat said:
The incredibly high rate of corporate profiteering also relates to the cost of living increases--THEY choose the prices...not some "invisibile hand," it's simply an official decision. When things cost more in a consumer society--in the face of overwhelming psychological pressure to consume--people become more dependent on their jobs. In other words, the job market is more competitive, which means that people are willing to work harder for less money. Factor into this the growing population and the fact that the current generation of "young adults" is truly the first to have equal opportunities for men and women--that increases competition, which worsens conditions.

Hum, invisibile hand debates are always fun. I like your point about how rising costs of living create a presure to work harder. Must think more on that one.


SellyCat said:
Edit: Furthermore, when you see that GAP/Banana Republic make BILLIONS in profits, you MUST question the relationship between their costs and prices. It HAS to mean that they are paying a tiny sum to the workers, while grossly over-charging the consumer.

Logically, this means that they are stealing from BOTH consumers and workers. Hence the overwhelming rate of profit. You know, clothing is EASY to make...we've been doing it for hundreds of years. There does NOT need to be a correlation between price and quality for mainstream fashion items. (I'm not talking about ultra chic, hand made, custom fashionista stuff)

The problem with this is that, talking for some guy who wrote a text book, you can neither steal from the consumer nor the worker through wages or through prices. It is the choice of the worker to get up in the morning and go in to work, the same way it is the choice of the worker to get up and find a new job, or (my personal favorite) to get up and make a job for yourself. As for the consumer, it is thier choice to pay for thier product. No one makes them go to store x, y, or z. There is hardly a lack of options for places to buy clothing.

I read once that the real power in capitalisim is not choosing where to spend but is in being able to choose not to spend.

That's what I have read, not what I beleive.

I don't like the theoretical side about the workers, as for the consumers, I think there are enough options, especially in clothing, that a retailer should be able to set thier prices as high as they want -- what was it a fool and his money did together again?

Getting back to worker related issues. I have once again heard talk about "labour shortages" in Vancouver. Now is a great time to test pure economics which would say that the shortages should drive wages up to encourage locals switching secotrs to those in need, to draw people off unemployment, and to attract immigration. The construction industry is quite worried, I have heard they would hire 10% more people if they could find people with the right skills. The shortages in construction mean that contracters here are turning down work because they don't have the people.

The unions tell a slightly different story (I've only scaned it, so no coments on that yet)
 

SellyCat

TRIBE Member
atbell said:
It is the choice of the worker to get up in the morning and go in to work, the same way it is the choice of the worker to get up and find a new job, or (my personal favorite) to get up and make a job for yourself.

Do you really think the wage-slave Chinese or Indonesian sweatshop worker has the "choice" to go and find a new job? Do you beleive that he can simply opt for a higher paying one--wouldn't there be no such thing as a sweatshop if that were true? Nobody chooses to work in a sweatshop in the presence of a better alternative. Their existance testifies to the fact that there is no such "choice". If they were paid more out of the totally inappropriate profit margins, their lives would be better...and then you can speak of "choice."


atbell said:
I don't like the theoretical side about the workers, as for the consumers, I think there are enough options, especially in clothing, that a retailer should be able to set thier prices as high as they want -- what was it a fool and his money did together again?

You may brush this aside as utopian, but wouldn't it benefit everyone if the prices were lower and the wages were heigher? Why do they need to make BILLIONS in profits while their workers are treated as slaves? That's immoral. To say that working in a sweatshop is BETTER than having no income at all--and is therefore the preferable "option"--strikes me as facile and deliberately inconsiderate of ethical considerations.


atbell said:
Getting back to worker related issues. I have once again heard talk about "labour shortages" in Vancouver. Now is a great time to test pure economics which would say that the shortages should drive wages up to encourage locals switching secotrs to those in need, to draw people off unemployment, and to attract immigration.

The fundamental problem with this is that people need food, shelter, heating and hygene in order to survive. The "pure" economic model is laughably inconsistent with reality in this regard. Large employers are in the overwhelmingly powerful position of being able to endure inifinitely longer than the individual human organism which is prone to suffering when faced with destitution. This is the very essance of wage slavery and the extremely cynical argument--not made by you--that people are "free to be poor if they so choose."
 
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judge wopner

TRIBE Member
the labour shortage is more a skills shortage.

my dad has been in construction his whole career, he works with PCL one of the largest contractors in canada, they ahve for the past decade said there is a shortage of skilled tradesmen who can do what their credentials say they can.

equally there is a shortage of manual labourers who make failry decent money but must endure the elements and a physically demanding job. sadly our goverment programs have sunk billions into retraining and education to make thousands of computer programmers, Network engineers and medical technologists (note all the ads in the paper for these schools, funded in part by HRDC).

why spend so much to retrain someone to do a $15 job in an overflooded market when you can just send a guy to do labour for better money and no retraining? because blue collar work is not fashionalbe among the left leaning-intellectuals who dominate the policy landscape in such matters. asking people to use their legs insteadof their brains for a job is suddenly demeaning and impossible to expect of epople, instead we should send them to lenghty retraining programs.

end rant..

w/ respect to wage increases this is difficult because unions and employers have set wages, a lack of any particular trade doesnt yeild a sudden wage increase at all. couple that with a lack of skilled trademen, more money and time is spent to do the same job that an otherwise knowledgable veteran may have finished quicker. alot of great carpenters are retired doig cash jobs for hot wages on construction sites where other legal union carpenters are unable to match skill wise.

its a tough situatio for workers and for employers.
 

atbell

TRIBE Member
SellyCat said:
Do you really think the wage-slave Chinese or Indonesian sweatshop worker has the "choice" to go and find a new job? Do you beleive that he can simply opt for a higher paying one--wouldn't there be no such thing as a sweatshop if that were true? Nobody chooses to work in a sweatshop in the presence of a better alternative. Their existance testifies to the fact that there is no such "choice". If they were paid more out of the totally inappropriate profit margins, their lives would be better...and then you can speak of "choice."

Sorry, I was unclear. I essentially agree with your comments about wage slavery but I haven't put it to any kind of mental test on my own to see how it fares against what the text books like to say.

From personal experience, I had to turn down a job paying decent wages, because I knew that it would take up all of my time and make it impossible for me to find something else. The result was I went thousands of dollars in debt while hitting the pavement in search of something that I wanted.

Of course the problem is evident. I was able to do this because of my credit, something most people don't have. The thing that really choked me was while making the decision to stay in a "comfortable" job or to take a risk, I realized that I would be unable to save any money at the stable job. In other words, if I didn't have debt available I would have been almost forced to stay in the job.

This is why I don't like how employers are working. By keeping wages at a low enough level employees have not way to save money and no time to search for a new job.

But then, how many people in North America are wage slaves of their own choosing? I have seen more people become stuck in their job because of their lifestyle choices then I have seen stuck in their jobs because of low wages. Clearly I don't know many sweat shop workers, but I think the point is good for North America.

I think I would like to see wages determined by using a budget of what an average persons consumption should be. How much would it be in Toronto? Say 700 / month rent, 100 utilities / phone, 400 food, 100 transportation, 20 for savings... 1320/month? I'm bad a figuring these things out. That has no clothing allowance, no car, no entertainment, and is after tax.

I like profit sharing myself. But in big companies that starts to fall apart as getting 5$ a year extra isn't much for an individual.
 

blahblah

TRIBE Member
Ahh the famous raising the baseline. Me too I go into convulsions when I hear the media reporting the latest hype about how the unemployment rate has finally come back to 70s levels. Hahaha they are so stoooopid.

http://www.napo-onap.ca/en/index.html
Make the Minimum Wage a Living Wage and all kinds of other real stuff.
 
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