For God, Family and Republic

The Numbers Behind the Lies
According to a recent article The Numbers Behind the Lies on MSN Money, "economist John Williams says ‘real’ unemployment and inflation numbers — figured the old-fashioned way — may be two or three times what the government admits. Here’s why, and what it means for Social Security." The article further notes,

Corporate America likes to play that game, the better to boost stock prices. Folks might be surprised to learn that "Governmental" America also plays the game in its compilation of macroeconomic data. Beneath the surface are undesirable, sobering consequences for us all.

For this reason, I cannot help but to get incredibly ticked at those hypocrites in Congress on the House floor running their mouth about Enron and the evils of corporate America. They have a serious case of foot-in-mouth disease. The Congressional Budget Office has used shady accounting tricks for years, and cover up the staggering size of budget deficits, by omitting special supplemental funding from the published U.S. budget as well as looting the so called Social Security Trust Fund, thus expediting the insolvency of the abysmmal government pension system. As economist John Williams notes,

The bad boys of Corporate America, though, still were subject to significant regulatory oversights and the application of GAAP accounting to their books. In contrast, the government's operations and economic reporting have been subject to oversight solely by Congress, America's only "distinctly native criminal class." [quote attributable to Mark Twain]

But should any of this be a surprise?

The Republican Congress shows its indifference to curtailing the growth of federal spending, and annual federal budget deficits are almost $400 billion now. In fact, Vice President Dick Cheney sardonically surmises, "deficits don't matter..." We shall see Mr. Vice President. As a Reaganite in the 1990s, I confess I find that supply-side economics do not work in practice, for the simple reason that the Congress fails to control spending. Supply-side monetarism was simply a reaction to Keynesian economics, and in practice, the advocates of supply-side economics seem to think that the central bank can prime-pump the economy in perpetuity. Their achilles' heel is that they think and act just like Keynesians, they just favor lower taxes. Just as the phenemonon of stagflation disproved Keynesianism, the steady decline shall prove the folly of our heavy indebtedness and inflation.

Besides ill economic discipline by our government, personal and corporate debt, as well as bankruptcies remain staggering. Former Fed Chairman Alan Greenspan earned the reputation as an inflation-fighter when in reality all he did was continiously prime-pump the economy with steady inflation, and now we're feeling the shockwave of the Greenspan economy.

Related Articles
The End of Dollar Hegemony by Rep. Ron Paul

The discontinuation of the M3 Money Supply Measure
To further, their economic manipulation, the Federal Reserve discretely announced that they will no longer compile M3 money supply statistics. The official release was uneventful and without much explanation.

While the official recorded estimates for last decade are suspect, the discontinuation of this important economic indicator is indicative of the Federal Reserve's capacity to conceal the consequences of its monetary manipulation and inflation. The Consumer Price Index official statistics are being increasingly questioned by economists. Since the 1990s, the accuracy of government economic statistics is ever more questionable, particularly as they relate to unemployment, GDP growth, and the monetary supply.

Jim Jubak, senior markets editor for MSN Money, noted in a recent article:

The Fed wants you to think it's fighting inflation. So why did it kill an important measure of the money-supply boom that feeds rising prices?

The U.S. Federal Reserve made big news at the end of March. And almost nobody noticed. Here's the headline you didn't see:

Fed kills M3, decides money supply doesn't count
Move raises risk of higher long-term inflation and new asset bubble

I'm obviously not talking about the March 28 decision to raise short-term interest rates one more time to 4.75%. That got headlines all right, and most of them portrayed the Federal Reserve as a tough fighter against inflation.

For economic laity, the M1 money supply includes all physical money like coins and currency, as well as demand deposits in banks. The M2 money supply is simply the M1 in addition to short-term time deposits. The M3 money supply is M2 in addition to long-term institutional long-term time deposits, money-market funds, short-term repurchase agreements, along with other larger liquid assets. The M3 is a helpful indicator.

Related Articles
Fed kills a key inflation gauge

Other inaccurate government statistics
It should not come as any surprise that the GDP, real economic growth, unemployment, monetary supply figures, and other key economic indicators are manipulated by the government. Figures produced by the Bureau of Economic Analysis, Bureau of Labor Statistics, and the Federal Reserve are increasingly suspect. The political class and the sitting administration have a vested interest in making things appear better than they seem. But as John Williams asks, "Have you ever wondered why the CPI, GDP and employment numbers run counter to your personal and business experiences?" Williams' Shadow Government Statistics: Analysis Behind and Beyond Government Economic Reporting and his subscription-based service is an eye-opener to the machinations and manipulations of government. He elucidates why the budget deficit is underestimated, and how accounting practices misrepresent government spending, government deficits, and the true extent of government liabilities. The U.S. federal government is one of the most horribly mismanaged institutions in the country. Economist John Williams explains,

The Pollyannas on Wall Street like to play games with the CPI, too. The concept of looking at the "core" rate of inflation-net of food and energy-was developed as a way of removing short-term (as in a month or two) volatility from inflation when energy and/or food prices turned volatile. Since food and energy account for about 23% of consumer spending (as weighted in the CPI), however, related inflation cannot be ignored for long. Nonetheless, it is common to hear financial pundits cite annual "core" inflation as a way of showing how contained inflation is. Such comments are moronic and such commentators are due the appropriate respect.

In conclusion, we should expect more economic turbulence in the years ahead. "The U.S. economy is not growing, it is shrinking, notes Walter Williams. Bill Bonner says we should prepare for a 'hyperinflationary depression.'

As I mentioned before, because of the U.S. Dollar's unique status in the world as the reserve currency for many central banks in the Second and Third World, as well as its status as an OPEC reserve currency, more than 65-70% of U.S. Dollars are in circulation abroad. An economic collapse could send those dollars flying home with foreigners buying up U.S. assets.

Related Articles
The Hyperinflationary Depression by Bill Bonner
Poor Ben Bernanke by Bill Bonner
Shadow Government Statistics: Analysis Behind and Beyond Government Economic Reporting by John Williams