The numbers behind the lies - how bad is the economy

[FloridaPat]

http://moneycentral.msn.com/content/P146055.asp?Rating=10&PageID=146055#Rating

"Last weekend, the always-terrific Kate Welling published an interview with an economist named John Williams. It will be available on the free portion of her "pay" site via this link starting March 11. This article is the first one that I have seen in which all the flaws in the government data, pertaining to the Consumer Price Index, unemployment, Gross Domestic Product, etc., are disclosed in one piece by someone who's been following the data for a long time.

In fact, reading this article, you will conclude that there's no way out, short of running the printing presses. The problem with that end game: At some point, foreigners will revolt. One can only hope that, somehow, there will be a way out. But without an understanding of the issues, folks will have no way to react as events unfold, and adjust their assets as we get more clues as to how all this will play out.

Williams starts by discussing the headline economic data: "Real unemployment right now -- figured the way that the average person thinks of unemployment, meaning figured the way it was estimated back during the Great Depression -- is running about 12%. Real CPI right now is running at about 8%. And the real GDP probably is in contraction." (By "real," he means calculating the data the way they used to be calculated, not as inflation-adjusted.)"

[AndyA]

1. Bad economic data will doom the Republicans

I think 2006 will be a year of big change in the economy. There are too many things looming out there that can create problems. It doesn't look good for the Repugs, thank GOD!

[noahmijo]

2. I thought it would doom them in '04

Nope their talk during then was mostly of the "The queers cannot be married! Thank You Jesus!!!! Thank You Bush!!! wooooooooo-----hawwwwww!!!!"



That's half our country right there.

[fasttense]

3. I read his article about a week ago but then it turned into

a registered site. It was very informative. One thing he said stands out, "In fact the fiscal 2005 statement shows that the total federal obligations at the end of September were $51 trillion; over four times the level of the GDP." And, "If you were to raise personal income taxes to 100%, take all of everyone's salaries, and put all those funds into a pot against the deficit, you'd still have a deficit."

My head hurts just thinking about what is waiting for us at the end of bush's economic rainbow.

[Cassandra]

6. Interesting that it wasn't registered before.

Keeping the info to themselves?

[Mike03]

4. Thanks for posting this

The estimated inflation figure is particularly interesting. I figured it was, in truth, north of 8 or 9%.

[Cassandra]

5. If I wanted to live in Argentina...

I would move there. EEEEK!
Remember too, that massive hyperinflation helped pave the way for Hitler.

[leftchick]

7. Whoa! Social Security!

<snip>

Another motive? Transfer payments like Social Security are indexed to the CPI, and they would be far higher if the CPI were accurate. In fact, says Williams, if the "same CPI were used today as was used when Jimmy Carter was president, Social Security checks would be 70% higher." That's seven-zero.

Though Williams doesn't get much into hedonics, he does talk about the inflation-understating impact of geometric weighting versus arithmetic weighting in the CPI statistics: "Geometric weighting ... has the 'benefit' that if something goes up in price, it automatically gets a lower weight, and if it goes down in price, it automatically gets a higher weight."

Then for the ticking time bomb: Social Security. The proceeds from withholding do not go into a lockbox or trust fund. They are spent, thereby reducing the size of the stated deficit. More importantly, he notes that the government's accounting for the deficit doesn't include any accruals for Social Security or Medicare liability.

In fact, if that were done and the government used GAAP accounting, the deficits for 2003, 2004, and 2005 would each have been around $3.5 trillion. That's a trillion, not billion. In 2004 alone, the deficit on an accrual basis would have been $11.1 trillion, due to a huge one-time spike for setting up the Medicare drug benefits. In essence, as he points out, we're piling up additional liabilities in an amount roughly equivalent to our total GDP every three years.

:wow: