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Part 2 of 2
I had posted this information on this forum in April 2008:
April 30, 2008
SouthAmerica: I was watching CNBC around 8:30 AM when the US Government released the GDP figures for the 1st Q 2008.
I found interesting all the discussions on that television show about such meaningless information.
A few days ago I was talking with a friend of mine that has traveled all over the world and have seen the economy of most countries first hand and he also has a solid knowledge of economics. We were talking about the latest book by Kevin Phillips and also about his article on Harperâs magazine and we both agree that most of the information published by the US government has become completely meaningless including the GDP figures. Today April 30, 2008 the US government has just released the latest GDP figures and the US Government claims that the current-dollar GDP = US$14.2 trillion.
My friend and I believe that after you adjust this fairy tale figure the real GDP of the US economy might be on the range of US$ 9 to US$ 10 trillion â the difference between these figures are all the meanings adjustments that they make to inflate the GDP figures calculated by the US Government to show a better performance and a larger economy than the reality.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=126048
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April 22, 2008
SouthAmerica: â¦The world of illusion has worked well for Wall Street and also for the United States economy for a number of decades and people from around the world also have been rushing with their money and they want to participate on this massive economic illusion; as we can see by foreign lending and investments that continues to come in into the US even when these foreigners start losing their shirt as soon as the money arrives in the US.
Americans should be glad that there are so many naïve suckers around the world who believe on the illusion at hand.
Yesterday I bought a copy of the May issue of Harperâs magazine after reading a terrific article by Kevin Phillips âWhy the economy is worse than we know.â
Here is what Paul Krugman (one of a hand full of economists that I respect) said on his NYT column on April 11, 2008: âHave you seen the awesome article by Kevin Phillips in the latest Harpers: âNumbers Racket â Why the economy is worse than we know. ...â
Here are some excerpts from "Numbers Racket: Why the economy is worse than we know" by Kevin Phillips, from the May 2008 issue of Harperâs Magazine:
ââ¦The effect, over the past twenty-five years, has been to create a false sense of economic achievement and rectitude, allowing us to maintain artificially low interest rates, massive government borrowings, and a dangerous reliance on mortgage and financial debt even as real economic growth has been slower than claimed. If Washingtonâs harping on weapons of mass destruction was essential to buoy public support for the invasion of Iraq, the use of deceptive statistics has played its own vital role in convincing many Americans that the U.S. economy is stronger, fairer, more productive, more dominant, and richer with opportunities than it actually is.
â¦The truth, though it would not exactly set Americans free, would at least open a window to wider economic and political understanding. Readers should ask themselves how much angrier the electorate might be if the media, over the past five years, had been citing 8 percent unemployment (instead of 5 percent), 5 percent inflation (instead of 2 percent), and average annual growth in the 1 percent range (instead of the 3-4 percent range). We might ponder as well who profits from a low-growth US economy hidden under statistical camouflage. Might it be Washington politicos and affluent elites, anxious to mislead voters, coddle the financial markets, and tamp down expensive cost-of-living increases for wages and pensions?
Let me stipulate: the deception arose gradually, at no stage stemming from any concerted or cynical scheme. There was no grand conspiracy, just accumulating opportunisms. As we will see, the political blame for the slow, piecemeal distortion is bipartisan--both Democratic and Republican administrations had a hand in the abetting of political dishonesty, reckless debt, and a casino-like financial sector. To see how, we must revisit forty years of economic and statistical dissembling.
â¦The GDP has been subject to many further fiddles, the most manipulatable of which are the adjustments made for the presumed starting up and ending of businesses (the âbirth/death of businessesâ equation) and the amounts that the Bureau of Economic Analysis âimputesâ to nationwide personal income data (known as phantom income boosters, or imputations; for example, the imputed income from living in oneâs own home, or the benefit one receives from a free checking accountâ¦). During 2007, believe it or not, imputed income accounted for some 15 percent of GDP.
â¦"...if you were to peel back the changes that were made in the Consumer Price Index (the inflation rate) going back to the Carter years, you'd see that the CPI would now be 3.5 to 4 percent higher -- meaning that, because of lost CPI increases, Social Security checks would be 70 percent greater than they currently are.
â¦The real numbers, to most economically minded Americans, would be a face full of cold water. Based the criteria in place a quarter centruy ago, today's U.S. unemployment rate is somewhere between 9 and 12 percent; the inflation rate is as high as 7 or even 10 percent; economic growth since the recession of 2001 has been mediocre, despite a huge surge in the wealth and incomes of the superrich, and we are falling back into recession. If what we have been sold in recent years has been delusional "Pollyanna Creep," what we really need today is a picture of our economy ex-distortion. For what it would reveal is a nation in deep difficulty not just domestically but globally.
Undermeasurement of inflation, in particular, hangs over our heads like a guillotine. To acknowledge it would send interest rates climbing, and thereby would endanger the viability of the massive buildup of public and private debt (from less then $11 trillion in 1987 to $49 trillion last year) that props up the American economy. Moreover, the rising cost of pensions, benefits, borrowing, and interest payments -- all indexed or related to inflation -- could join with the cost of financial bailouts to overwhelm the federal budget. As inflation and interest rates have been kept artificially suppressed, the United States has been indentured to its volatile financial sector, with its predilection for leverage and risky buccaneering.
Arguably, the unraveling has already begun. As Robert Hardaway, a professor at the University at Denver, pointed out last September, the subprime crisis "can be directly traced back to the (1983) Bureau of Labor Statistics decision to exclude the price of housing from the Consumer Price Index...With the illusion of low inflation inducing lenders to offer 6 percent loans, not only speculation run rampant on the expectation of ever-rising home prices, but home buyers by the millions have been tricked into buying homes even though they only qualified for the teaser rates." Were mainstream interest rates to jump into the 7 to 9 percent range -- which could happen if inflation were to spur new concern -- both Washington and Wall Street would be walking in quicksand. The make-believe economy of the past two decades, with its asset bubbles, massive borrowing, and rampant data distortion, would be in serious jeopardy. The U.S. dollar, off more than 40 percent against the euro since 2002, could slip down and even rockier slope.
The credit markets are fearful, and the financial markets are nervous. If gloom continues, our humbugged nation many truly regret losing sight of history, risk, and common sense.â
Source:
http://harpers.org/archive/2008/05/0082023
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