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Lies, Damned Lies and Government Statistics
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[Editor's note: the following post is by Jim Karger, TDV Legal Correspondent]
My grandmother grew up in the backwoods of Arkansas. She had a fourth grade education and worked in the fields. When she was 12 years old she threw down her cotton sack and took a train to Texas to live with an aunt she had never met. She lived a hard life, never had much of a chance, and yet she was one of the wisest people I have ever known.
She taught me many life lessons that have served me well, one of which went like this: "Jimmy," she would say as she waved her finger in my face, "most folks will lie even when the truth works better."
Not a particularly rosy view of humanity, but it was, and is, deadly accurate.
Nowhere is the truth of her admonition better seen than when man is collectivized and given authority. Whether government, corporate or union, the simple fact is that most people are liars. Liars lie. Good liars rise to the top. And when good liars are collectivized they lie more frequently and more effectively. When they have control of the numbers, it makes their deceit more difficult to discover. When they can make up the numbers, it can make unwinding them a near impossibility.
Take the recent unemployment numbers that took the U.S. stock market to fresh three month highs. According to the U.S. Department of Labor, 163,000 new jobs were created in July, 2012.
Sounds good enough, but like most numbers, even if it is accurate, which it is not, it creates an intended deceit.
Looking at the Bureau of Labor Statistics own tables reveals the following startling fact: The U.S. actually lost 1,204,000 jobs in the month of July, 2012. Don't believe it? Take a look at the actual unadjusted data from the Bureau of Labor Statistics.
During July, 2012, the private sector added a net 27,000 jobs which represented an added 76,000 goods-producing jobs less 49,000 jobs lost in the service sector. The other million plus were lost in the public sector. The 163,000 represents a number that has nothing to do with reality, but rather represents a model that supposedly takes into account the seasonality of certain jobs.
In short, the BLS report showing 163,000 added jobs is statistical wizardry by bureaucrats with calculators following the demands of liars who want the numbers spun.
If you give it some thought, it makes no sense that employment is expanding.
GDP is falling, in part because fewer people are working, which might also explain why tax receipts per employee are also falling. A contracting, not expanding, workforce might also explain these numbers from the ISM’s July Manufacturing Purchasing Manager's Index (PMI) report. The PMI registered 49.8 percent, which was a contraction in the manufacturing sector for the second consecutive month, following 34 consecutive months of expansion. And, the New Orders Index registered 48 percent, indicating contraction in new orders for the second consecutive month.
A rising number of unemployed might also be consistent with:
- ISM’s New Orders Index of 48 percent in July, represented a contraction in new orders for the second time since April, 2009.
- The Inventories Index registered 49 percent in July, 5 percentage points higher than the 44 percent reported in June. ISM’s Employment Index registered 52 percent in July, 4.6 percentage points lower than the 56.6 percent reported in June.
- ISM’s New Export Orders Index registered 46.5 percent in July, 1 percentage point lower than the 47.5 percent reported in June, and represents the second month of contraction in the index since June, 2009.
- ISM’s Imports Index registered 50.5 percent in July, 3 percentage points lower than the 53.5 percent reported in June.
The employment numbers are even belied by garbage, not just the government's garbage, but real garbage. A recent ZeroHedge blog interpreted Bloomberg numbers on the number of carloads of trash being hauled by U.S. railroads. "As Bloomberg explains: 'One closely watched economic indicator is the rail car loads of waste and scrap materials.' Logically, 'The more we demand, the more waste is generated by that production.'
As the chart of the day, courtesy of Bloomberg Brief, demonstrates, if garbage is the benchmark, the US economy is now contracting faster than it has at any one point in the past 3 years and is on pace to recreate the economic collapse last seen after the Lehman bankruptcy.
Perhaps another reason why central planners have latched on to stock markets and will just not let go.
In the big picture, the numbers still don't add up. The “civilian labor force participation rate” is now at 63.7% of the total workforce. The total employment to population rate is 58.4%. This puts these rates back to about 1982 (see where blue and red lines intersect the black line).
See "The Employment Charade Or Ignore The Headlines" by Jeff Harding at The Daily Capitalist. If participation keeps falling precipitously, does it make sense that jobs are being added and filled?
From employment to GDP, government skews the numbers to the favor of, well, government. Obama does it, Bush did it, and the next up in the liar's list of America's so-called 'leaders,' will do it, too, and for the same reasons: to keep the Sheeple calm, or at least, less-violent.
And, while it appears government is lying to its advantage, in fact it is lying when the truth would work better. Why? The lies upon lies will soon become incredible. The Sheeple will look around and see that more, not less, of the people they know -- their neighbors and their friends -- are unemployed, and one day the published numbers will mean nothing anymore and the civil disobedience will begin. No doubt the truth would be taken hard today, but the truth would provide a foundation for solutions that make sense. Relentless denial is rarely, if ever, the answer to any problem.
A good starting point for anyone interested in parsing government numbers is to assume that any number publicized by government is a lie. The first question to be asked is, "to whose advantage?" The second question, "Where is the raw data?" Then, combining common sense with a little research you may still not get to the real number, but you will get closer than the lies being fed to the willing by the liars who lie even when the truth would work better.
Jim Karger is a lawyer, and frequent contributor to The Dollar Vigilante, who has represented American businesses against incursions by government and labor unions for 30 years. In 2001, he left Dallas and moved to San Miguel de Allende in the high desert of central Mexico where he sought and found a freer and simpler life for he and his wife, Kelly, and their 10 dogs. Karger's website is www.crediblyconnect.com.
Jim mentioned only briefly the first big lying economic number: GDP itself. I have a very intense personal dislike of the concept of GDP. Please allow me to expound...
GDP of course is equal to consumption (C) plus investments (I) plus government spending (G) plus exports (x) minus imports (i). GDP = C + I + G + (x -i)
It is a purely Keynesian concept that measures only the output of final goods. In fact, GDP was created by Simon Kuznets during World War II to quantify final aggregate demand for the sake of Keynesian economic measurement.
Focusing on just final output makes consumer spending seem more important than capital investment. Also, including government spending means that any increase in government spending -- no matter how boneheaded and wasteful -- "increases GDP". War increases GDP dramatically, as example!
Plus consumer and government spending can both be fueled by debt... and that's just fine according to GDP. In fact, GDP would make it seem like less government spending is a bad thing. After all, that would "shrink GDP". The heavens would fall.
Bad enough that GDP doesn't count early stages of production on the claim that that would be "double counting". But this measure also excuses destructive government growth that enslaves the unborn with the bill. (And that's precisely what government debt does; Future generations -- your children and grandchildren -- will have to work to pay off the current government's excesses.)
So GDP leaves out essential economic activity and information but shows government deficit spending as a gift from the economic gods. GDP is worse than meaningless. It's a deliberate misdirection. It's a con, like the bogus economic theory it serves. So it's pretty safe to ignore GDP numbers and anything derived from them. Anyone basing conclusions on GDP is starting from a very bad premise.
Pravda ("Truth" in Russian) was the news organization of the Communist Party while Izvestiya ("News") was the news organization of the Soviet government. The miserable subjects in the old Soviet Union would says, "Pravda nyet izvestia; izvestia neyt pravda." "Truth isn't news; news isn't truth." It's probably your best bet to ignore most of the economic numbers and news coming out of the USSA today. Instead just try to get positioned in things like physical gold.
Also have a signficant portion of your assets outside of the western financial system. Do this before the rest of the slaves catch on and realize that not only is there no growth, but we are in the early stages of the Greater Depression and headed for a currency collapse. We personally don't even want to be around when they come to this realization. It isn't going to be pretty.
On that note, join many of us from The Dollar Vigilante at the Global Escape Hatch conference in Panama this September where we'll be talking about ways to avoid the coming crisis. The $400 discount on the conference (enter discount code "VIGILANTE" when you register here) ends on August 10th... after that it will only be $200... plus it is selling out quickly, there are only a few availabilities left at the conference and at the hotel.
Editor, The Dollar Vigilante