When Will They Stop Lying About The Economy?

Everything "we know"about our economy really is wrong.

The U.S. gov't is grossly distorting our country's financial realities to us, via publicized statistical reports, on a regular basis.

At least as far as the Consumer Price Index (i.e.: inflation and cost of living statistics) is concerned,  in a story running in this (Monday) morning's Bloomberg.com confirms this.  A variety of comments from throughout the business community concur that the Consumer Price Index ("CPI") statistics that we hear from our government are little more than fiction.

Walter J. "John" Williams, IMHO, a brilliant analyst and consulting economist (to many Fortune 500 companies during his career), works from his website at:  http://www.shadowstats.com.  Williams has an MBA from Dartmouth's Amos Tuck School of Business Administration, where he was named an Edward Tuck Scholar.

If you've been reading my diaries on this subject, then you know I'm a fan of his.

Williams provides an "Alternative Data Series" to his subscribers, and you may click on the link in this sentence to see it from a basic overview. According to Williams', the current annual U.S. consumer inflation rate  is just under 12%, not around 4%, as most recently reported in Washington. Here's a basic recap of Williams' latest numbers:

(Again, this is all available, with charts, at: http://www.shadowstats.com/alternate_dat a)


Official US Gov't Rate:   5.5%

ShadowStats.com Rate:    14.0%


Official US Gov't Rate:  +2.5%

ShadowStats.com Rate:    -2.2%


Official US Gov't Rate:   4.1%

ShadowStats.com Rate:    11.8%

Williams' general overview/summary as to where things are going is:

There is no question of the economy being in an intensifying inflationary recession. Market fantasies of a bottomed downturn and a banking system on the mend got a jolt of reality last week, and regardless of any further jolts of alternating market pressures, the longer range outlook remains bleak for U.S. equities, bonds and the dollar but remains brilliant for gold.

He has a rather thorough report on the hyperinflationary period we're entering into now. This was also reported on Bloomberg in reference to comments from other experts just a few days ago.

His sense is that there's a very strong possibility we'll be in a hyperinflationary depression in as little as 18 months. His "alternate statistics" do support this contention.

I learned about the existence of Williams' statistics due to multiple references from my readings from leading progressive/liberal bloggers on the economy such as Jerome a Paris, on Daily Kos (and elsewhere), and Ilargi over at The Automatic Earth.

I strongly recommend both of them if you're at all interested in this most basic of information, in terms of the reality that this subject affects all of us, and in a myriad of ways, too.

There are things we can do to avert this, both on a personal level, and as a society. For instance, there's a silver lining, so to speak, in terms of the development of alternative energy. Jerome a Paris provides a great example in one of his diaries from just a few days ago: "Houston, we have a solution."

The writing on the wall--if not from the MSM and our government--is becoming clearer and clearer as to where things are going in the immediate future. Many companies and brands we know today may no longer be in existence soon--in many cases before we even vote in the general election in November: "July 4th Liquidation Sale! Everything Must Go!"

From where I'm standing, this reality will inevitably and adversely affect every citizen in this country, if you're not feeling it already (and, I'm talking about a hell of a lot more than just the escalating price of gasoline). Expect to see plenty of ongoing reminders of just how bad it's getting here and abroad, on a daily basis, as this escalates exponentially,  as well. Just today, over at The Automatic Earth, Ilargi referenced this quote:

Renault CEO Sees Carmaker Consolidation as Stocks Decline

Renault SA Chief Executive Officer Carlos Ghosn said he expects mergers among automakers because car companies' stocks are "undervalued.""When you've got General Motors Inc., the world's biggest carmaker, worth $6 billion, or 3 percent of its revenue, that is about two weeks of revenue, you know very well that something is going to happen," Ghosn said today during the Economic Forum of Aix-en-Provence in southern France.

In this same article, Ilargi goes on to mention how the next planned price hike in gasoline in Great Britain will bring their equivalent dollar-cost-per-gallon in the United Kingdom to a whopping $10.50! (We have it bad; it's going to get a lot worse here, too; but, there are countries elsewhere that are dealing with at least as much hardship, if not worse. And, it will get worse for them, as well.)

Obviously, in the efforts of a few to bring these not-so-obvious realities to the forefront of our dialogue now, many are taking a lot of hits for doing their part to make certain these realities don't continue to get glossed over by the MSM, who are in turn taking their queues from Washington.

Without this being--CONTINUALLY--front and center in our dialogue on these blogs, we are avoiding what may very well be the greatest and most imminent crisis of our generation. (And, perhaps, for generations to come.)

Putting it mildly, things are not good; and by not acknowledging the potential and imminent severity and catastrophic nature of this situation--to the point where it is IMHO perhaps our greatest priority as a society--is to all but insure that our greatest fears about "gloom and doom" become reality.

Tags: Blogosphere, Economy (all tags)



Tips for talking here about solutions. n/t

by bobswern 2008-07-06 11:57PM | 0 recs
He's really helping with unemployment in Iowa

At least 20 employees of the Iowa Democratic Party have been demoted or fired and a coordinated state-wide campaign was essentially disbanded, replaced by a focus on the presidential bid of Sen. Barack Obama.
Details are sketchy, but the changes could have an impact on November's legislative races, with field staff that was previously working for down-ticket races now being placed on the payroll of Obama's presidential campaign and working almost entirely on its behalf.

www.iowaindependent.com/showDiary.do?dia ryld=2556

by suzieg 2008-07-07 03:46AM | 0 recs
Re: He's really helping with unemployment in Iowa

The link is broken.  Could you fix it?

Where do you find this stuff, by the way?  Is there like a clearinghouse or something?  Or do you do all this research in your free time?  If so, wow!  That's some dedication to your cause!

by grassrootsorganizer 2008-07-07 04:23AM | 0 recs
A trend I am beginning to fear -

it's about him, not the party and not the country.  

As to this diary - thank you Bob - a good read and much food for breakfast this am.  A personal financial tip:  oatmeal is cheap and it's so darn good for you.  So what if it tastes like cardboard - Get over it - as we keep hearing!


by Xanthe 2008-07-07 04:09AM | 0 recs
Re: When Will They Stop Lying About The Economy?
For thirty years I've taken doom and gloom forecasts with a grain of salt and I've yet to see one come true.  But this is different.  I'm having a hard time imagining how we dig out of this mess before millions more working people and their families are profoundly hurt.
Blame Saint Reagan for rewriting all the indicators to "cure" inflation.  Cool trick.  And note how, contrary to GOP talking points for decades, higher wages (ie union wages) are not driving this inflationary cycle.  
by grassrootsorganizer 2008-07-07 04:21AM | 0 recs
surprised you use the term "Saint" in

regard to Reagan.  After all, hasn't Obama praised Reagan - and of course, dissed President Clinton in the mix.

I agree with your assessment that Reagan's deregulation policies have lived on to haunt the country.  

by Xanthe 2008-07-07 05:48AM | 0 recs
Bless Clinton too

don't troll rate me, i got enough last week!

(also bless gwb and ghwb).

Fuckers can't stop fucking lying, and Obama ain't gonna change that, I'm pretty damn sure.

by RisingTide 2008-07-07 06:20AM | 0 recs
Rec this diary!!! n/t

by bobswern 2008-07-07 06:39AM | 0 recs
So, ingnore shadowstats...but....

...what about:

Barclay's Bank, UBS (Warburg), the Bank of International Settlements, Royal Bank of Scotland, Bloomberg, and everyone else? They're all talking gloom and doom, and the numbers we're getting from the government do NOT reflect what many other respected economic opinion leaders are seeing, not to even mention the dramatically increased prices that you and I are paying for commodities (gas, food, etc.) now.

The cost of living is going through the roof! According to the government, everything's just wonderful. What's wrong with this picture?

by bobswern 2008-07-07 09:16AM | 0 recs
Here is the question

Why should I believe the numbers produced by shadowstats? While I think everybody knows that there are problems with the basic government indicators, there appears to be a lot of skepticism about the shadowstats numbers from macroeconomists, including many to the left of center.

by Fuzzy Dunlop 2008-07-07 04:33AM | 0 recs
Please provide me with links...

...to support your comments.

by bobswern 2008-07-07 05:15AM | 0 recs
Re: Please provide me with links...

Every article I have ever read about this guy has been filled with economists casting doubt about his claims.

Just using google for a few seconds, I can see that both angry bear (http://angrybear.blogspot.com/2008/05/at -least-theyre-consistent.html) and Mark Thoma (http://economistsview.typepad.com/econom istsview/2008/05/numbers-racket.html) are deeply skeptical about these kinds of arguments.

So please answer my original question.  Why should I give much credence to this guy, who doesn't even have an econ PhD and runs his website out of his living room?

by Fuzzy Dunlop 2008-07-07 06:11AM | 0 recs
I know people who work for wallstreet

they make a killing redoing the M3. They say that everything the gov't says is bunk.

It is quite possible to disagree with something, on the basis of "you don't have all the facts" (the fed reserve has EVERYTHING. knows EVERYTHING).

It ain't too hard to do CPI -- I know a program that could give you real time info on thermometer and antacid prices (it's used for epidemiological purposes).

by RisingTide 2008-07-07 06:22AM | 0 recs
How fast are those fucking subs moving?

I'm sorry, but one of your articles are saying PROFESSIONALS DON"T BREAK THINGS.


NOAA is bitching to high heaven that the military is making up statistics (as opposed to using credible peer reviewed research - aka if the military claims that the birth rate goes up, voila it has, no evidence needed to be shown).

There are plenty of ways for the gov't to break its own damn rules.

And until the economists can best the psychologists while playing the stock market, why does that degree they've got matter again?

by RisingTide 2008-07-07 06:27AM | 0 recs
Okay, well ignore him. Still a massive problem.

Are you in denial?

Will you ignore the Royal Bank of Scotland, Barclay's Bank, UBS, and the Bank of International Settlements ("BIS") in their 78th Annual Report issued a week ago?

Here's links to the first three...you can Google the last one if you'd like.

Barclays:"Barclays warns of a financial storm as Federal Reserve's credibility crumbles."

Royal Bank of Scotland: "RBS issues global stock and credit crash alert." (Note: RBS was a few days ahead of most.)

Bank of International Settlements:
78th Annual Report, issued 6/30/08.

Then there's a diarist on another blog with whom I  am in agreement who makes the following observations (from "TKH" at Daily Kos):

'The diarist (from the other diary)...' says that SS is not currently in trouble, but its his optomistic outlook that I believe is incorrect. In order to understand the problem with SS, you have to look at our overall nations economy. SS does not exist in a vaccuum.

There are many factors that make his senerio implausible:

(1) We owe $9.5 Trillion in national debt
(2) We are borrowing $1.65 Billion/DAY to prop up the general fund. That's ove $600 Billion/year
(3) We are paying $400 Billion a year in interest.

These numbers are escalating at an ever increasing rate, just to keep our economy going now. There are no plans on how to stop this borrowing. It will continue.

The excess funds each year, gotten from SS, have been raided by congress for the past 50 years and replaced with IOUs. THERE IS NO SS TRUST FUND. It exists in name only.

77 million baby boomers began retiring this year. The number of retirees will increase each year until approx 2050. Each retiree requiring Medicare, Medicaid, and SS.

Not only that but after 2014, the number of retires will begin increasing drastically. In 1950 there was approx. 10 workers to pay for 1 retiree, soon that number will have decreased to 2 workers for 1 retiree.

Therefore, each year the amount of excess SS funds has decreased. In approx 2014, the SS fund will be at parity. The same amount going in as coming out. There will be not excess funds to add to the nations general fund to help prop it up.

After 2014 the nation's general fund will have to raided each year to cash in the IOUs congress has been replacing actual money with, just to pay benifits to the increased number of retires.

Bottom line: When you add the ever increasing debt being borrowed, and the interest we have to pay for it, along with the decrease in the general fund because money is being extacted for SS, MEDICAID, and MEDICARE, you get one hell of a big problem.

Denying this is a freight train coming at us does nobody any good.

Ignore stat's. Believe the "don't-worry-be-happy" MSM at your own risk.

When was the last time you went grocery shopping or filled your gas tank?

by bobswern 2008-07-07 06:28AM | 0 recs
Re: Okay, well ignore him. Still a massive problem

hey bob,

no need to attack me.  i'm not in denial about the overall state of our economic problems.  i just want specific reasons or evidence to believe in the numbers computed at shadowstats.  what is his methodology and why is it superior?  are there testimonials from reputable economists who have compared his methodology with that of the government?

these are reasonable questions.

by Fuzzy Dunlop 2008-07-07 08:06AM | 0 recs
I've got your testimonials right here!

personal interviews, so don't ask me to cite sources.

and not the pedigreed, I have papers, blueblood type.

The type of person who with under 20k invested in quad-leveraged stocks, has still managed to not wipe out in the past year of trading.

Made a pretty penny, too.

And that's all been run on the macroeconomic stuff (i.e. not running single companies, but running on indices). and NOT using the gov't statistics.

by RisingTide 2008-07-07 08:30AM | 0 recs
CPI drives government expenditure

on social security and gov't paychecks, amongst other things.

your non-angry-bear cite seems to utterly ignore this, which makes me quite suspicious.

the shadowstat contention is that the statistics have been consistently "rosiefied" -- something that the cite only wants to say "probably not" rather than provide any hard numbers. Find better sources.

by RisingTide 2008-07-07 06:29AM | 0 recs
See below (?) for my full answer. n/t

by bobswern 2008-07-07 06:31AM | 0 recs
Papers have been written

about the tampering. about the substitution of hamburger for steak (if steak inflates), etc.

trust me, this has all been done relatively in the open.

by RisingTide 2008-07-07 06:33AM | 0 recs
Re: Papers have been written

there are certainly problems with cpi.  if you think about it, the whole concept of these economic statistics is to measure things that are very difficult to assess.  and of course there is room for manipulation.

but that doesnt mean that shadowstat's numbers are believable either, or that they are close to the truth than the government's numbers.  so instead of just saying, "oh you're a fool for believing the government" why don't you give me some concrete reasons to believe in the shadowstat numbers?  tell me about his methodology and why it is trustworthy.  that is all i am asking.

by Fuzzy Dunlop 2008-07-07 08:08AM | 0 recs
He's basically using Carter's old methodology

... that should be reasonably well documented on places that aren't his website (don't expect a mathematician to explain an integral to a n00b. he's busy making some approximation or another, and integrals are old news!)

I get that you're asking me "why should I trust these numbers?". And it's a reasonable question to ask.

On one of those blogs you linked to, there was considerable discussion about the main changes in the CPI, in the comments.

I give you the concrete reasons that I have, which include the smartest person I know thinks that the gov't statistics are shitty (and he works for wall street running statistics, so he's experienced in da field). I haven't, and won't ask him about shadowstat's numbers (because for all I know, he runs the damn site, and if he doesn't, he runs his own numbers and distributes them to Wall Street for a profit).

I will allow you to draw your own conclusions, but I would personally advise against trusting the gov't's statistics more than a private citizen's, purely on the basis that they are the gov't statistics.

I can provide compelling reasoning as to why every president since Carter has dicked with the numbers. That's motive, methodology is covered other places.

Put simply, we have a smoking gun here.

I'm not trying to say that shadowstats is god. it's not, that's for sure!

by RisingTide 2008-07-07 08:28AM | 0 recs
Skeevy logic

a lot of this is explained on shadowstat's page (see faq, i believe).

But hedonistic adjustments are really dumb. your tv costs a lot more than a black and white one, yet they would adjust it so that it doesn't, because you get "more for your money". I don't know about you, but if I want to watch tv, I don't particularly care if it is HD, flatscreen, widescreen, whatever.

Likewise, a car with airbags (or ac) is considered a better product.

So whatever bells and whistles they put on things, reduce inflation by that much.

Stupid, isn't it?

Let alone measuring the price of survival (which is what a shifting basket of goods does), instead of a fixed basket of goods.

Greenspan and company laid out their methodology, and it's skeevy as hell.

shadowstat doesn't need to lay it's out, because it is simple and straightforward. fixed basket of goods, find prices, average based on weighting. done.

has cpi?

by RisingTide 2008-07-07 08:40AM | 0 recs
Academics speaking out against Greenspan

One who spoke (& quite well) was CEPR's Dean Baker, but he didn't have the clout of noted CEPR heavyweights Solow & Stiglitz.
Second, Kathryn Abraham, highly respected head of the BLS at the time, testified that yes, one could argue for a full point reduction to the CPI, BUT one could also argue just as persuasively for a full point increase. She was great but was talking to politicians who could smell the fresh money to spend & who had the broad wings of the still respected AG (it was '97 I believe) to hide under.
Why the debate now? Only because inflation is rampant & people who weren't paying attention then, don't believe it now. Look for BB to restore the independence of the Fed.

-- just from a comment, and I was young at the time, but look them up? send them an e-mail?

by RisingTide 2008-07-07 08:42AM | 0 recs
Re: Academics speaking out against Greenspan


thank you for all your responses.  these are really tricky issues.


by Fuzzy Dunlop 2008-07-07 10:12AM | 0 recs
They say that acknowledging the problem...

...is half the solution.

Right now, the government's not acknowledging the extent of the problem.

They ARE very tricky issues, I agree.

Arguing about the finer points does little, other than raising questions about whether or not the problem even exists.

IMHO, there IS a problem. Acknowledging there is a problem is the first step towards solving it.

Current government statistics, and those that support their validity, do little in terms of addressing what is perceived (by others, apparently) to be a clearcut set of very serious problems afflicting our society right now.

Person #1: "I smell smoke in the house and the fire detector's ringing. I'm calling the fire department. And, letting everyone else in the house know so they seek safety."

Person #2: "I might smell smoke, too, but I don't think there's a fire and I'm not calling the fire department. Prove to me that there's a fire first. And, as for everyone you tell to get out of the house, I'm going to tell them that you don't know what you're talking about. And, oh yeah, and as for that fire detector, I think it's just useless."

by bobswern 2008-07-07 11:49AM | 0 recs


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