THE BASICS.
Like many, I've been writing a lot lately about what's happening with our economy.

It's bad; and it's about to become catastrophically worse.

IMHO, if you can't afford to eat, work, pay your rent or mortgage, travel,  maintain your health, take care of yourself and/or your family, obtain an education or support the infrastructure of your community and the fabric of your society, it pretty much trumps everything else we discuss (I'm being kind using the word, "discuss," in terms of how it describes our communications on these blogs) .

REALITY.
IMHO, and in the opinion of scores of respected and much more knowledgeable and credible folks than yours truly, over the past 96 hours, many things have been published that underscore the reality that we're heading  quite rapidly into what appears to be looking much more like a Depression than a Recession right now.

What's happening before us is much more than a "bear market." It's much more than a Recession. Don't take my word for it, read about it from:

-The U.S. auto industry may very well be history before we elect a President in November. NOTE: The story behind this link was written before the close of the NY Stock Exchange on Tuesday, wherein GM's stock fell to its lowest point in 54 years. On Wednesday (yesterday) it fell another 15%.

- Barclay's Bank,

- Fortis (the Dutch financial services conglomerate),

- the Royal Bank of Scotland,

-one of the leading U.S. mortgage blogs

- one of the leading, progressive/left-leaning European think tanks, Leap 2020's, and perhaps most importantly...

- the Bank of International Settlements (the "BIS"), in their 78th Annual Report, issued less than 48 hours ago...

- or, my personal favorite, Ilargi, over at The Automatic Earth: 'The calm before the storm.'

DENIAL.
Naysayers and basic deniers now seek false comfort by pointing to the "classic definitions" of these types of economic events, when  the truth is that the very definition of a Depression will be (is, essentially) rewritten every time one occurs.

EVERYTHING YOU KNOW IS WRONG. PART II.
Basic concept here is this:  historical information is parsed to the masses in small packets under the guise of talking points, such as: "The stock market crash of October, 1929 brought on the Great Depression."  Truth is, there was a lot more to it than that. Someone didn't just wave a wand one day and say, "Shit, it looks real bad. Let's have a Depression and pull the rug out from under all of this." (George Carlin, we could really use you now, more than ever! R.I.P.) The Depression in the first-half of the 20th century occurred due to a confluence of events. We just point to that day in October of 1929 to simplify it for discussion purposes.

So, moving forward 79 years to 2008, we now have automated trading controls in place in the major markets to forestall these drastic, one-day market swings. By definition, the theory behind the implementation of these trading controls was to insure that what happened in 1929 couldn't happen again.

Wrong.  Market crashes--like the one we're experiencing now--just take a lot longer.

If you haven't heard it over the past 48 hours, the stock markets in the United States experienced their worst June (this past month) since the Depression. But, the truth is, what happens in our inherently erratic equities, bond, commodities and currency markets has much less to do with reality, because the markets are reacting primarily to....of all things...news!

Uh oh?!?!? "News?" Guess what? "News" is just a four-letter word for another widely used four-letter word these days: "Spin." You're reading this blog; therefore--I know it's a bit of a stretch but what the hell--it would follow that, when it comes to our economy, the prices for everything are set by the SPIN that affects them (and the rumors and inside info about the spin, perhaps, having more of an effect on markets than reality, itself).

As always, what we hear from the government are statistics and numbers. The gist of this government information--and all those that reference it with credence--these days, is, "Well, look at these numbers. They don't lie. Don't worry."

But, what happens when we eventually and collectively realize that all of these numbers are nothing but spin?

WHAT TO DO? WHAT TO DO!
What are we supposed to think and do when it's brought to our attention that virtually everything we hear from Uncle Sam, statistically and otherwise, is nothing but a lie?

Worse yet, what will all the people currently telling us not to worry say--once it becomes accepted fact that all the statistics they're using to support their comments are nothing but bullshit--to defend their mantra: "Things will work out. Everything will be fine just as it always has?"

What happens then?

Well, this IS exactly what has happened in the past few months.

In the May edition of Harper's Magazine there's a cover story by political analyst Kevin Phillips on how the government has been systematically distorting our economic numbers.

"Almost four decades have passed since the United States scrapped its last currency ties to precious metals. Our copper and nickel coinage still retains some metallic value, but not nearly enough for the purpose of currency tampering--the historic temptation of inflation-plagued or otherwise wayward governments, including, at times, our own. Instead, since the 1960s, Washington has been forced to gull its citizens and creditors by debasing official statistics: the vital instruments with which the vigor and muscle of the American economy are measured. The effect, over the past twenty-five years, has been to create a false sense of economic achievement and rectitude, allowing us to maintain artificially low interest rates, massive government borrowing, and a dangerous reliance on mortgage and financial debt even as real economic growth has been slower than claimed. If Washington's harping on weapons of mass destruction was essential to buoy public support for the invasion of Iraq, the use of deceptive statistics has played its own vital role in convincing many Americans that the U.S. economy is stronger, fairer, more productive, more dominant, and richer with opportunity than it actually is."

According to Phillips, this misinformation campaign began under LBJ, continued under Reagan, took off under Clinton, and was refined by Bush. So the enterprise is bi-partisan. And it's not just one statistic. Our leaders lie about unemployment, inflation, growth and the deficit.  Because Social Security payments are indexed to inflation, government statisticians suppress reported inflation, and thus their need to increase monthly SS checks, by arbitrarily eliminating from their calculations products that are rising too quickly in price. If they were adjusted for the true cost of living, today's Social Security checks would be 70% higher and the Federal deficit would be exploding. (Questions for seniors: Why haven't you burned down the White House? Are you waiting for the Baby Boomers to do it?)

Since the true level of unemployment would upset voters in crucial swing states, the government simply eliminates whole categories of people from the statistical workforce so they don't show up as unemployed. To make GDP look better Washington "imputes" (i.e. makes up) new income sources and credits them to homeowners and others. When the money supply starts growing to fast to effectively hide, the Fed just stops reporting measures like M3. And the lies, like our accumulated debts, keep getting bigger. If Washington suddenly decided to tell the truth, America's vital statistics would look like this:

  Inflation: 12%
   Unemployment: 12%
   Economic Growth: Negative
   National Debt: $60 Trillion

The really cool thing about Phillips' article is that he cites as his main source none other than John Williams of Shadow Government statistics. Williams is already a folk hero in sound money circles, where his numbers are seen as far more trustworthy than anything coming out of the Fed or Treasury. To see him given this much respect in Harper's means the idea that we're being conned on a vast scale is no longer the paranoid fantasy of a few lonely gold bugs. Now it's the conventional wisdom.

Bold-type emphasis is from me.

KNOWING THE PROBLEM IS HALF THE SOLUTION
For more new and improved conventional wisdom for 2008, simply go to: http://www.shadowstats.com.

Like many trite one-liners, the old line: "Knowing the problem is half the solution" bears repetition.

How can we, as Americans, even begin to solve this most overwhelming of massive nightmares if we aren't even being told there's a massive problem?

Time to change the CW.  That starts with understanding that most of "what you know" and what you're being told is just plain wrong.

Right now, the CW is nothing but spin.

Right now, our "conventional wisdom" is nothing more than conventional misinformation.

It has nothing to do with our reality. Nothing.