The real economic facts are hidden beneath the hype

 

More and more, the powers that be are relying on obfuscation, confusion and "smoke and mirrors" to conceal just how bad our economy really is.  I'd like to provide a couple of examples.

First, inflation.  We've heard it loudly trumpeted that the rate of inflation is coming down, dropping from somewhere in the 8-9% range to the 6-7% range.  That's an improvement, right?  Not so fast.  First, remember that the official rate of inflation bears about as much resemblance to the real rate of inflation as I do to Mata Hari.  (Hint:  there's no resemblance whatsoever.)  The price of fuel is not included in the "official" CPI calculation:  neither is the cost of food.  The cost of housing is deliberately understated through various convoluted "owner equivalent" numbers.  By leaving out several of our biggest single expenses every month, the bureaucrats can blithely claim that inflation really isn't that bad.  The reality is, it's much worse.

Next, consumer spending.  There's much talk that spending is about the same as last year:  some claim slightly higher, some concede that it might be a percent or two lower.  Both perspectives avoid confronting the real issue.  Consider this:

• If, last year, 100 people each bought one widget at $10, the total consumption of widgets that year would have been $1,000.
• If, this year, the price of each widget increased to $15, and if 100 people still bought one apiece, the total consumption of widgets in dollar terms would rise to $1,500 - a 50% increase this year.
• However, if 25 people could not afford to pay $15 for a widget, and only 75 bought one, the total consumption of widgets in dollar terms would now be $1,125 this year.
• In the second case, cheerleaders will gleefully proclaim that the economy is doing very well.  After all, we've just experienced a 12.5% rise in the consumption of widgets!  Look at the dollar numbers!
• However, those more in tune with reality will point out that we've actually bought (consumed) 25% fewer widgets this year than we did last year.  That means the raw materials that would have been bought to make the additional widgets (that we haven't made or sold), the people needed to make them, those who shipped and distributed and sold them... all that economic activity is now missing.  Even though the retail (dollar) figures suggest that the widget economy is booming, in fact it isn't.  On the contrary, it's in trouble.  Furthermore, what about those people who might really need a widget, but now can't afford to buy one?  If they would have used it to produce useful output that our economy needs, what will happen to that output?  Can it be replaced from other sources, or will its loss further damage our economy?

Get the idea?  If one looks only at the dollar figures, one might say that the economy is doing just fine.  However, beneath that blissful surface, things are a whole lot worse than they seem.  We're seeing inflated prices mask the reality of our economy, by hiding reductions in actual manufacturing and sales.

It's not just employment or economic production.  To see one very recent example of lies, damned lies and statistics, see how the "official" employment figures were "massaged" to give a total more than a million jobs higher than the actual number.  If that's not official, blatant, in-your-face lying by our government, what is?

Be very, very cautious about believing or trusting any official figures about the economy.  That sort of falsification and/or incomplete information is rampant at present.  Always look for the bigger picture, and dig deeper to uncover the reality that hides beneath the hype.  It frequently portrays a very different scenario than the one the powers that be would prefer us to believe.

Peter