The Government "Revises" 84 Years Of Economic History This Week

Tsing Tao

Tsing Tao

http://www.ft.com/intl/cms/s/0/24ece6aa-f650-11e2-8388-00144feabdc0.html#axzz2aQtKaqFv

The Ministry of Truth strikes again! What a farce.

Commentary from ZH:

Don't like how high debt-to-GDP figures are? Revise 'em. Unhappy at the post-'recovery' growth rates? Revise 'em. Disappointed at the pace of economic improvement in the last decade or two compared to the rest of the world? Revise 'em. This week "we are essentially rewriting economic history" as the BEA is set to revise GDP data from as far back as 1929. The 'adjustments' to account for intangibles (that best known of micro- accounting fudge factors) and as we noted previously in great detail, will increase GDP by around $500 billion. Of course, these changes are defended aggressively (just as the hedonic adjustments to inflation calculations 'make perfect sense') as GDP will now reflect spending on research, development, and copyrights as investment - and reflect pension deficits for the first time (think of all that potential future GDP from massive pension deficits now). With Q2 GDP growth estimates set for a dismal 1.1%, expectations are for the short-term economic data to be revised upwards (and with any luck the great recession never happened at all).
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<blockquote class="twitter-tweet"><p>Dear Samaras, Watch Wednesday as we here in the U.S. add 1 Greece worth of GDP using excel &amp; some revisions <a href="https://twitter.com/search?q=%23study&amp;src=hash">#study</a></p>&mdash; GreekFire23 (@GreekFire23) <a href="https://twitter.com/GreekFire23/statuses/361831378578456577">July 29, 2013</a></blockquote>
 
But that's just a benchmark revision of smth arnd 2% of total? It's completely irrelevant and it won't affect the commonly reported GDP figures, which are rates of change (YoY, QoQ, etc). Why does it matter? Well, other than to let HeroZedge go on about it (must be a slow month).t
 
Quote from Martinghoul:

But that's just a benchmark revision of smth arnd 2% of total? It's completely irrelevant and it won't affect the commonly reported GDP figures, which are rates of change (YoY, QoQ, etc). Why does it matter? Well, other than to let HeroZedge go on about it (must be a slow month).t
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If it were "completely irrelevant", then why do it? I suppose you also support the hedonics part of the inflation calculation as well?
 
Quote from Tsing Tao:
If it were "completely irrelevant", then why do it? I suppose you also support the hedonics part of the inflation calculation as well?
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They do it routinely, every few years. There are some reasons why the academics whose job it is to study these things feel it's the right thing to do. It's not just done with govt statistics. For example, the largest independent global collection of GDP data, the Penn World Tables, are revised routinely as well.

These revisions are not something that I can feel a lot of outrage about, by default. Obviously, like I always stress, there's no way to exclude the possibility of some sort of govt malfeasance and ulterior motives, but off the top of my head I don't see any evidence of it here.

As to the hedonic adjustments, that's a more complicated subject. I do broadly support the methodology, yes.
 
Quote from Martinghoul:

They do it routinely, every few years. There are some reasons why the academics whose job it is to study these things feel it's the right thing to do. It's not just done with govt statistics. For example, the largest independent global collection of GDP data, the Penn World Tables, are revised routinely as well.

These revisions are not something that I can feel a lot of outrage about, by default. Obviously, like I always stress, there's no way to exclude the possibility of some sort of govt malfeasance and ulterior motives, but off the top of my head I don't see any evidence of it here.

As to the hedonic adjustments, that's a more complicated subject. I do broadly support the methodology, yes.
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Gee, why am i not surprised someone who defends the Fed would take this stance?

The more the government decides to revise statistics to include more "intangible" metrics, the more it gives itself the ability to manipulate data. You say you support the idea of hedonics, for example. That would mean that you, a handful of government supporting economists (Krugman and the like) are the only ones that truly believe the CPI. The rest of us laugh.

When the BLS says that a washing machine is 20% more effective now than it was five years ago, and that counts as a price reduction, you honestly think people who buy washing machines feel like they're cheaper? Bullshit.
 
Quote from Tsing Tao:

Gee, why am i not surprised someone who defends the Fed would take this stance?

The more the government decides to revise statistics to include more "intangible" metrics, the more it gives itself the ability to manipulate data. You say you support the idea of hedonics, for example. That would mean that you, a handful of government supporting economists (Krugman and the like) are the only ones that truly believe the CPI. The rest of us laugh.

When the BLS says that a washing machine is 20% more effective now than it was five years ago, and that counts as a price reduction, you honestly think people who buy washing machines feel like they're cheaper? Bullshit.
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back in the day a washing machine was like a tank, now my son can move it around with one arm.
 
Quote from ElCubano:

back in the day a washing machine was like a tank, now my son can move it around with one arm.
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Remember the first microwaves?
 
Quote from Tsing Tao:

Gee, why am i not surprised someone who defends the Fed would take this stance?

The more the government decides to revise statistics to include more "intangible" metrics, the more it gives itself the ability to manipulate data. You say you support the idea of hedonics, for example. That would mean that you, a handful of government supporting economists (Krugman and the like) are the only ones that truly believe the CPI. The rest of us laugh.

When the BLS says that a washing machine is 20% more effective now than it was five years ago, and that counts as a price reduction, you honestly think people who buy washing machines feel like they're cheaper? Bullshit.
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Correct. While the FED includes hedonics to the upside, they ignore engineered obsolescence (shorter product life) and smaller portion sizes. Go to any restaurant, burgers, fries, steaks, everything is smaller. Washer and dryers, cars, computers - consumer durables that lasted 10-20 years, now last 4-5. Max. That's hugely inflationary. Over the spectrum of a 20 year ownership period, a consumer has to the buy the same item 4 TIMES. While the ticket price is much smaller, the total cost of ownership over a longer time horizon is much more. Does the FED consider that ? No. Food and fuel??? Gimmie a break. Real cpi says gdp has recessed for the past decade. Maybe 2. Everything is biased towards the upside. No reason??? Bullshit. Consumer confidence, ring a bell? 75 percent of the US economy is consumer-driven. Pensions in both the public and private sector key off the CPI, as do wage increases. Nobody has an interest in containing costs and maintaining robust consumption??
 
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