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Author
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Topic: US Cooking Books on Inflation AND Unemployment
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DrConway
rabble-rouser
Babbler # 490
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posted 25 November 2007 12:41 PM
Economists are suspiciously silent, for the most part, on the cooking of books by the US Government regarding how the inflation rate and unemployment rate are measured. Why this is, I'm not sure, unless there's a built-in ideological bias they tend to absorb which makes them overlook statistical deficiencies which inaccurately portray the US as better than it really is.Wouldn't want the poor dears to wake up and realize that interventionist policies might actually accomplish some good! As far as I can tell the profession seems to regard Keynesianism as some kind of unwanted aberration they're doing the best they can to ignore and cast doubts on, never mind the very real benefits it yielded for the average worker and the vistas it opened for a new economic and social order based on fairness instead of unfairness. Price index sleight of hand haunts in credit crisis quote:
In 1983 the Bureau of Labor Statistics was faced with an awkward dilemma. If it continued to include the cost of housing in the Consumer Price Index, the CPI would reflect an inflation rate of 15 percent, thereby making the country's economy look like a banana republic. Worse, since investors and bond traders have historically demanded a 2 percent real return after inflation, that would mean that bond and money market yields could climb as high as 17 percent.The BLS solution was as simple as it was shocking: Exclude the cost of housing as a component in the CPI, and substitute a so-called "Owner Equivalent Rent" component based on what a homeowner might rent his house for.
Creating an imaginary index as a way to subtract out the cost of housing has got to be the biggest example of chutzpah in statistics manipulation. Even Boskin, under Congressional direction to further manipulate inflation by playing up the substitution effect in his 'hedonic calculus' would seem to pale compared to effectively removing mortgage payments from the cost of keeping oneself reasonably sheltered. It has long since been established that the BLS plays similar games with unemployment, by not accounting for the distortions that the military and prison populations introduce to the 'real' unemployment rate. They also play games with who is counted as unemployed by being selective with their criteria, as evidenced here.
From: You shall not side with the great against the powerless. | Registered: May 2001
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Abdul_Maria
rabble-rouser
Babbler # 11105
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posted 26 November 2007 04:39 AM
quote:
US Cooking Books on Inflation AND Unemployment
yes. not just cooking. the books are so cooked, the neighbors would normally be calling the fire department, with smoke pouring out the window (but it's just a metaphor.) in 2006 the SEC passed a rule stating that companies doing business with the government are exempt from Generally Accepted Accounting Principles (GAAP) if they are doing business with the federal government, for "national security" reasons. that creates a huge incentive for a business to become part of the Fascist state - get that government contract and they can lie to the shareholders. Woo Hoo !!! real inflation -
5 pound bag of sugar 2000 $1 / 2007 $3
studio apartment in SF 1989 $450 / 2005 $1100 etc. the government's inflation figures only apply if you are a total computer enthusiast. as far as their unemployment numbers - multiply by 2.5.
From: San Fran | Registered: Nov 2005
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DrConway
rabble-rouser
Babbler # 490
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posted 26 November 2007 06:42 PM
Another great website is http://www.shadowstats.com/ - someone mentioned it on here before but I wanted to let people know about it.  They keep track of what the "true" inflation rate is, by using the older methods from before this hedonic calculus crap got put into the weights, and also from before this miracle of turning mortgage payments into thin air was put in. quote:
Yet, as oil prices began their current uptrend, substitution-based inflation reporting still was not low enough for the former Fed Chairman, as he began embracing the concept of "core" inflation, inflation net of food and energy price changes. Eliminating bothersome price increases in energy and food products -- such as seen with oil at present -- would make the Fed's job of containing reported inflation all the easier.
The irony of all this is that this lying to yourself with bad statistics hocus-pocus effectively builds an inflationary bias into monetary policy, because it allows central bankers to set interest rates based on the "massaged" inflation numbers while the real inflation rate is much higher. In effect they get the best of both worlds: nobody's screaming about inflation, and they can give up silly ideas like John Crow's idiotic notion that you can go to zero inflation, so as to allow output and employment to continue smartly without encountering a Phillips-Curve-like scenario. Alan Greenspan even tacitly admitted this when he effectively ignored the NAIRU and shoved the pedal to the metal for the US economy, driving unemployment down to 3.8% by 1999/2000. Interestingly, the 2000s-era graph shows a similar picture to the 1970s inflation rates, with a sharp surge in 1973, followed by a sustained rise from 1975's trough to 1979/1980 when another surge hit from Iran's revolution. Note how there's a sharp surge in 2001/02, a fall-back, and then a sustained rise through to now, where we're seeing inflation running, effectively, at 10% per year in the USA. I predicted, along this model, that there would be an inflationary surge in perhaps 2002 and then again in 2007, so I guess I wasn't that far off. The 1940s showed a similar situation, with a sharp blast of inflation in 1942, followed not by an induced recession but by wage and price controls, and then when the controls came off, another blast hit in 1947. [ 26 November 2007: Message edited by: DrConway ]
From: You shall not side with the great against the powerless. | Registered: May 2001
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