"LIES, DAMNED LIES and STATISTICS"

 

    Our headline quote is often attributed to Mark Twain but he credited it to Benjamin Disraeli, a British Prime Minister of the late 1800's. Twain was observing that "statistics" are often used by unscrupulous people to tell a distorted, if not wholly false story.  Statistics are a legitimate scientific tool in the hands of an honest person. Unfortunately, they are easily subject to manipulation and outright falsification - often to serve political purposes. This can be done either by cherry-picking the data to be included (i.e., eliminating unfavorable data), or by manipulating the data to ostensibly support a misleading or utterly false conclusion.

    In 1955 George Orwell published his famous dystopian novel, 1984. Its pervasive theme is that citizens were subjected to a constant barrage of government propaganda such as "War is Peace, Ignorance is Strength, Freedom is Slavery." Propaganda is defined as "Information, especially of a biased or misleading nature, used to promote a particular political cause or point of view."   Oxford Language Dictionary.

  Those in political power have long believed that if they distort the truth or tell an outright lie and keep repeating it, the ignorant lumpen proletariate (the vast majority of people who lack awareness of their oppression) will come to believe it. Lies and distortions are routinely used by those in government to manipulate public opinion and shield themselves from criticism for their political, economic or military failures.  

    Truth is the enemy of lies. Therefore truth is the enemy of the elite insiders. Once they tell a lie, it becomes their ongoing burden to shield the people from the truth in order to suppress criticism or, worst case, rebellion. Alert citizens can assess the state of their oppression by noting obvious lies streaming from official sources that are uncritically repeated by the main stream media. 

Statistics

    We have previously discussed the lack of candor in many US government data releases such as the Consumer Price Index. The data inputs are routinely "modified" to support the administration's political narrative - that is, "Everything is getting better and better." The data that are included and excluded is noteworthy. The Fed's "Core CPI" excludes the cost of food and energy. "Super Core CPI" also excludes housing costs. Who lives in a world free of such costs? The obvious goal is to be able to report a low "inflation" number for the purpose of gaslighting the public into believing that the costs of goods and services are different from what they are actually experiencing. People will fall for that for a while but will eventually conclude that they have been deceived - and they will not be happy.

    We have previously shown that when components of the CPI index have risen and would necessarily push up the reported rate of inflation, they are either deleted from the computation or manipulated lower through "hedonic adjustments." Once these items are deleted or manipulated, voila, the reported rate of inflation magically goes down. This is not just our subjective belief. In an obscure footnote to its CPI report, the Saint Louis Federal Reserve Bank admits that the items included (and excluded) in its "basket of goods and services" are altered to suit its purpose. 

"Inflation as measured by the consumer price index reflects the annual percentage change in the cost to the average consumer of acquiring a basket of goods and services that may be fixed or changed at specific intervals." (Emphasis added)

    An example of such toying with inputs is that interest expenses - which have risen dramatically due to the Fed's rapid increase in the Federal Funds rate - were eliminated as a "consumer cost." Another example is the government's falsification of housing costs. This is significant because housing is a major portion of most people's monthly expenses. Government officials achieve their manipulation with a confection called "Owners Equivalent Rent." It works like this: homeowners are cold-called and asked, "If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?” Homeowners have no idea what their homes would rent for because they are not in the home rental business. Consequently, they routinely underestimate the rental value of their homes. The government then incorporates this clearly irrelevant information into its CPI calculation. 

    In the chart below, the bottom green line reports the government's fanciful OER housing cost calculation. The top red line reports actual rents paid by actual people, for actual properties as collated by Zillow, an actual rental agency. The disparity is dramatic and shows why living costs incurred by the public are far in excess of those reported in the "official" CPI releases. 

                             

    While the chart at the top of the page appears to show the cost of living moderating, it too is an elegant piece of misdirection.  It is true that the rising rate of inflation is slowing (this is known as "disinflation") but the cost of goods and services continue to rise. The reason is that the effects of price inflation are cumulative as this next chart dramatically shows.

For living expenses to return just to pre-Covid levels (2019), these costs must fall dramatically ("deflation"). That will not happen so long as the Fed remains in charge of the economy. It deems falling prices to be a disaster, fearing that people will put off purchases waiting for lower prices. Thus, taxpayers are locked into ever-increasing prices. So too they will continue to experience an ever-devalued currency as this next chart dramatically reveals.  The falling purchasing power of the dollar (or pound, yen, Euro, peso) means your real wages and savings are being constantly confiscated to support government spending.  

    Another example of US government misinformation is its employment statistics. The Bureau of Labor Statistics (a part of the Department of Labor) issues monthly employment reports of "non-farm payroll" based on small samples adjusted by its mathematical model that guesses at the number of new businesses that opened and closed during the reporting period in question (their "birth/death" estimate). ADP, a Fortune 500 company with over 60,000 employees, provides payroll services to many thousands of businesses. It too, issues a monthly employment report based on its knowledge of actual new hires and fires. It regularly reports lower employment numbers than does the DOL. 

    ADP also distinguishes between full and part time jobs that the DOL's headline report does not. This is important because many people hold multiple part time jobs or take a part time job to supplement a full time job. Thus, a higher "new jobs" number does not mean a commensurately growing number of people in the work force - but it is designed to imply that is the case. Another source of misdirection is that the DOL's "headline" number of "new jobs" (say 200,000-300,000) that is widely reported in the press is often revised downward the following month - by tens of thousands to as many as one hundred thousand jobs. These downward revisions are rarely reported by the media.

Lies

    In addition to slanted government reports, citizens are regularly treated to misdirections and  outright falsifications by political leaders. One example is President Biden's oft-repeated assertion that he has created "millions of jobs" during his presidency. The fact is that millions of jobs were lost when the government improvidently shut down the entire economy during Covid. Over time, employers rehired millions of those laid-off employees. Biden did not "create" those jobs; employers simply re-filled pre-existing, but vacated, positions. 

Similarly, Trump claims that the economy thrived during his presidency. He neglects to mention that $7 trillion were added to the national debt during his term in office and that debt promises to inflict much future pain on taxpayers (together with the $7 trillion added by Biden). 

    One quickly concludes that whenever a politician speaks he or she is probably conveying misinformation. During Covid, President Biden exhorted citizens to get the experimental "vaccine" that had not gone through the normal FDA testing and approval process (there were no "double blind studies" done or meaningful assessments of adverse effects). He asserted that "If you get the vaccine you will not get Covid and will not be able to pass it on to others." Both of those statements were utterly false. Many thousands of "vaccinated" people came down with the illness and passed it on to others. He has been "double vaxed" and "double boosted" and has come down with Covid three times. Lesson? Never take medical advice from politicians.  

Damn Lies

    For at least the last two years, White House staff, Democratic leadership and Vice President Kamala Harris have insisted that Joe Biden was "sharp as a tack" and had the stamina of a young man. They claimed that video clips of him stumbling and appearing to be disoriented, incoherent and frozen-in-place were Republican "deep fakes." The main stream media - including the so-called "newspapers of record" (New York Times and the Washington Post) - dutifully repeated these falsehoods. NYT and WP reporters who regularly covered Biden's public appearances and news conferences claimed to be utterly unaware of his dramatically failing condition. However, once Biden's obvious decay was starkly revealed to the world during the Presidential debate, the same media claimed that they were "shocked, shocked!" to learn of his infirmities. After its multi-year deception was disclosed to the world, the NYT, in a desperate volte face, abruptly called for Biden's withdrawal from the race. A quote correctly attributed to Mark Twain is, "If you don't read the newspaper you're uninformed; if you do read it you're misinformed." Bryon King tartly observed,  

U.S. presidents – all of them – encounter hundreds of people every day, many in close proximity. An American president crosses paths with aides, secretaries and staff, Secret Service and military support, and innumerable visitors, including press, who walk through the White House doors. With Biden, there can be no doubt that they saw what was going on. They all have eyes and ears, and it’s fair to say that people who rise to a position high enough in life to enter the White House tend not to be totally stupid. Yet for several years, and in an ongoing fairytale, the public was told that President Joe Biden was el supremo. He was a man in charge, a voracious reader and detail-oriented guy who ran circles around his staff. Biden was, allegedly, a visionary leader, or so went the thread of his tapestry. 

    It has been suggested that democracy only works in compact areas made up of largely homogeneous people who share a common belief system. In a small community, it is easy for the average voter to keep abreast of what the political insiders are doing and take them to task when they overstep their authority. That is not possible when the nation is very large in geography and population. What the insiders are doing in Washington DC (or any other capitol) is largely hidden from view. Your elected representatives who vote in favor of 1000 page bills rarely - if ever - read them. They do not even draft them. They are largely drafted by unelected political contributors, lobbyists, administrative agencies, and special interest groups (labor, corporate, green, ethnic, etc). Citizens have totally lost control of the political process to the insider elite and those currying favor with them. 

    Democrats loudly claim that the election of Trump would "destroy our democracy". Recall that Biden was nominated by millions of Democratic voters in primary contests across the country to be their presidential candidate on the Democratic ticket. Once his hidden infirmities were suddenly revealed, he was forced to step aside - by elite party insiders.  They then selected Harris to be the party's candidate. The millions of Democrats who voted in the primaries were completely excluded from the selection process. Would they have preferred someone else? We will never know as they were not given a seat at the table.

What is the State of the Economy?

    To begin, neither the US nor any other economy can be neatly summarized. It consists of hundreds of thousands of businesses and many millions of people. Each is acting independently. They work or do not work, save or do not save, plan for the future or do not do so and most are highly susceptible to influence by the those who vie for their votes with promises of ever more "benefits" - to be paid for by someone else. 

    However, one can gain glimpses into the health a nation by looking at data points that are not readily subject to falsification. In the US, one such fact is "household debt", now reaching $18 trillion. This debt is growing faster than wages ensuring future pain for both the debtors and their creditors. Credit card debt alone is up nearly 50% just since Q1 2021,

Next up is corporate debt (nearing $14 trillion) that must be serviced and rolled over at maturity at much higher rates of interest. Many businesses will crumble under the weight of their debt burden. Their creditors (banks and bondholders) and shareholders will suffer the consequences.

    One must also account for the elephant in the room, federal government debt level.  We have repeatedly stressed the growing danger of the US national debt - now over $35 trillion.  The Congressional Budget Office calculates that it is heading for $50 trillion.  It is increasing $6.4 billion per day and $196 billion per month. We are reminded of the aphorism, "That which cannot go on forever will not go on forever."

    The irrefutable fact is this government debt will never be repaid in honest money because it cannot be repaid. The government spends trillions more dollars than it takes in each year. This will lead to a crisis at some point - history provides endless examples. That crisis will likely arrive suddenly to the great shock and dismay of both the public and the government. The latter is certain to address that crisis aggressively in ways that will have large, negative effects on both the economy and your personal well-being,  It will do so because the desperate insider elite will do desperate things to stay in power. Evans-Pritchard at the Telegraph warns,

America is already running a budget deficit of 6.2pc of GDP at a stage of the cycle when it should be in balance, leaving the US Treasury with little fire-power for countercyclical stimulus. When Warren Buffett starts selling, it's time to sit up and take notice. Over the last quarter, the Sage of Omaha has dumped more than $75bn of stocks, according to reports, including half his holding of Apple. What happens if the US economy tips into recession with deficit and debt ratios already stretched to extreme levels? You don’t want to find out.   

    GDP is regularly discussed by politicians and the news media, almost always suggesting that a rising GDP proves that the economy is "healthy" and "growing". Many believe that GDP stands for the combined value of all goods and services produce by the nation's businesses. That is partially correct. Here is the formula: C+ I + G + NX = GDP. The "C" represents "consumption", the "I" tallies business "investment", the "G" is "government spending" and the "NX" is the net of "exports less imports".  A large boost of any of these inputs will appear to "improve" the GDP. But not all inputs are equal in value. 

    If government spending were to double, GDP would rise dramatically. But government spending is not an unalloyed positive. Governments lose money to fraud (billions of dollars in Covid "paycheck protection" fraud), they give billions more away in foreign aid, buy billions of dollars of military supplies and blow them up - or simply abandon them on the battle field as was done by the US in Afghanistan. Here is a chart showing the growth of US federal debt and as a percentage of GDP. The red line is the soaring national debt (left margin in dollars - $135T of them), the black line is the debt as a percent of GDP (right margin showing 123%). Both the IMF and Jay Powell have warned that these numbers as "unsustainable". Yet no one in politics is discussing, or will likely discuss, what to do about it because that means either raising taxes significantly or reducing expenditures significantly, both of which are politically toxic subjects going into a national election.

        

    It is not just the federal government that is consuming an ever-larger portion of the economy. State and local governments add to the problem (see below). As total government spending rises uncontrollably, taxpayers are seen by politicians as the geese that must continue to lay the golden egg to support them and their spending. Jean-Baptiste Colbert observed long ago that "the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing." It is clear that the taxpaying geese of the world are quickly reaching the point of much hissing - and then pecking. What then? The insiders remaining gimmick is to fund government spending through dollar/euro/pound/peso/etc. printing. That always results in price inflation that may then be followed by wage and price controls ensuring shortages of goods and services - and a very angry public. Consequently, this may be the perfect time to let the "other guy" win the election so he or she can suffer the abuse that is sure to be heaped upon them (as the UK's new Prime Minister Keir Starmer has discovered).

 

  

 

Important Message: The foregoing is not a recommendation to purchase or sell any security or asset, or to employ any particular investment strategy.  Only you, in consultation with your trusted investment advisor, can select the strategy that meets your unique circumstances, investment objectives and risk tolerance.  © All rights reserved 2024

 

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