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wabio
06-21-08, 11:21 PM
http://money.cnn.com/2008/05/13/news/economy/misery/index.htm?postversion=2008051410

Economic 'misery' more widespread
Some experts argue that true inflation and unemployment - the components of the economy's 'Misery Index' - are higher than the government's official figures.

They argue that figures for unemployment and inflation are being understated by the government.

Unemployment and inflation are typically added together to come up with a so-called "Misery Index."

The "Misery Index" was often cited during periods of high unemployment and inflation, such as the mid 1970s and late 1970s to early 1980s.

And some fear the economy may be approaching those levels again.

The official numbers produce a current Misery Index of only 8.9 - inflation of 3.9% plus unemployment of 5%. That's not far from the Misery Index's low of 6.1 seen in 1998.

But using the estimates on CPI and unemployment from economists skeptical of the government numbers, the Misery Index is actually in the teens. Some worry it could even approach the post-World War II record of 20.6 in 1980.

"We're looking at government numbers that are really out of whack," said Kevin Phillips, author of the book "Bad Money."

No inflation if you don't eat or drive
According to the government's most recent Consumer Price Index, a key inflation reading, consumer prices rose 3.9% in the 12 months ending in April, down slightly from the 4% annual inflation rate in March despite record gasoline prices.

But Phillips argues that consumer prices are probably up at least 5% and perhaps more than 10%.

Part of the disconnect may be due to the fact that nondurable goods, such as food and gasoline, makes up only 12% of CPI.

In addition, food and energy prices are eliminated from the so-called core CPI, which many economists tend to focus more closely on because they claim food and gas prices are volatile.

But food and energy costs are a very important part of household budgets. And those prices have been skyrocketing: Gas prices were up about 21% over the 12 months ending in April.

However, due to seasonal adjustments in the CPI, the government reported that gas prices were down 2% in April, even though on a non-adjusted basis, gas prices rose 5.6% from March.

And even that number may be too low. Measures of gasoline prices by AAA and the Department of Energy suggested prices rose as much as 10% in April.

Meanwhile, food prices rose 5.1% over the last 12 months, according to the report. The nearly 1% one-month jump in food prices in April was the biggest spike in 18 years.

To that end, nearly half of the respondents of a recent CNN/Opinion Research Corp. poll said inflation was the biggest problem they face.

CPI missed the housing bubble...and bust
Another problem with the CPI figures, according to skeptics, is that it doesn't accurately reflect what's going on in the housing market. That's significant because the cost of buying a home has twice the impact on CPI as does the prices of all nondurable goods combined.

The CPI showed only an 11% rise in home ownership costs from 2002 through 2006, a time that the National Association of Realtors reported that existing home prices soared 34%.

The reason for the low CPI reading is because the CPI looks at equivalent rents, rather than home prices. So inflation was understated during this period, according to Phillips. He argues this may have helped feed the housing boom since it kept mortgage rates lower than they should have been.

Now that the housing boom has gone bust, the CPI appears to be missing the declines in home prices as well; it estimates that the cost of owning a home posted a 12-month increase of 2.6% in April.

But because the CPI figure was so far behind tracking the increase in home values, the housing component of CPI still is leading to a lower inflation reading than what it should be, Phillips said.

The inflation 'con job'
The unusual way that housing prices are estimated isn't the only peculiarity of the CPI report. Over the past ten years, there have been other changes in the calculations, particularly for big ticket items.

Cuts to estimated prices for items like electronics and cars that are thought to have improvements in quality year-after-year have lowered the overall CPI. In addition, changes in the way certain products, such as food, are tracked by the government, have also contributed to lower readings than otherwise expected.

Bill Gross, the manager of Pimco Total Return, the nation's largest bond fund, refers to the CPI as a "con job" that deliberately understates the price pressures faced by Americans in order to keep Social Security payments and other government costs pegged to the index unduly low.

In a report about the CPI, he noted that some of the adjustments don't accurately reflect how much consumers pay for goods. Pimco estimates that the changes have shaved more than a percentage point off the CPI.

"Did your new model computer come with a 25% discount from last year's price?" Gross wrote. "Probably not. What is likely is that you paid about the same price for memory improvements you'll never use."

Another flaw with the CPI numbers is that the government now assumes that higher prices for one item will lead consumers to buy more of a substitution item. That may be true. But if people buy fewer steaks and more hamburgers, for example, it's unrealistic to say that inflation isn't a problem, skeptics maintain.

"The government can claim there's no inflation but all they're measuring is a reduced standard of living," argues Peter Schiff, president of Euro Pacific Capital, an investment firm specializing in overseas investments.

With all this in mind, California economist John Williams argues that CPI is understating inflation by at least 3 percentage points and perhaps as much as 7 percentage points. So instead of an annual inflation rate of 4%, the true number could be between 7% and 11%.

Unemployed, but not counted
Finally, there's the unemployment rate. It was at a relatively low 5% in April. But according to Williams' Web site, ShadowStats.com, the actual rate may be between 8% and 12% if you use a more accurate reading of those out of work.

Even the government's own numbers show there are many unemployed people not showing up in the unemployment rate. The official reading does not include 4.8 million people who want to work but haven't found a job, for example.

Many of these people are dropped from the official calculation because they have become so discouraged from looking without success that they haven't looked in the previous four weeks. Simply adding those people to the number of unemployed takes the current unemployment rate to 7.8%.

The Bureau of Labor Statistics, which produces both the CPI and unemployment readings, says changes in both measures were made to more accurately reflect the real world. The BLS also says the changes have resulted in changes of less than 1% for each measure.

Still, the Labor Department's own broadest measure of unemployment, which includes as jobless those working part-time jobs because they can't find full-time positions as well as some discouraged job seekers, puts the unemployment rate at 9.2% in April, the highest level for that reading in more than three years.

So if you take that number and add that to the 7% that Williams thinks is a more likely annual inflation rate, you're looking at a "Misery Index" of 16.2, much worse than the 8.9 you get from the official numbers.

And while that may seem a bit high, it's probably a more accurate gauge of how bad the economy is for many Americans

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Although there is no statistical proof behind the article.....I tend to agree with their assessments. Simply put, there is NO substitute for a properly cooked 16oz. Prime Rib. :drool:

DVD Polizei
06-22-08, 12:22 AM
Totally agree. The government has been fudging on statistics for several years. If a particular segment of society gives you negative numbers, you simply shift to a micro-sector, create a new definition for it, then publish it and say it represents the larger majority of society.

The last two administrations have aggressively enforced the notion if you tell society things are just great, they will stay great, and the people who aren't doing well will be considered the exception.

classicman2
06-22-08, 07:49 AM
People on this forum need to start listening to the voice of reason - me! :)

Bill Gross, the manager of Pimco Total Return, the nation's largest bond fund, refers to the CPI as a "con job" that deliberately understates the price pressures faced by Americans in order to keep Social Security payments and other government costs pegged to the index unduly low.

:up:

al_bundy
06-22-08, 09:11 AM
all you have to do is eat flat screen TV's and you won't see any inflation

classicman2
06-22-08, 09:39 AM
Another example of phony statistics to make the government look better - the deficit number.

Of course if the real number was revealed, a mass revolt of the people might occur. ;)

4KRG
06-22-08, 11:30 AM
They argue that figures for unemployment and inflation are being understated by the government.



Well no shit, I have been saying inflation is understated for at least a year now. Anyone that regularly purchases the same items (any american family) and keeps track of what is being spent month after month has noticed a 10% or higher increase in those bills in the last 12-18 months or so.

Helicopter Ben feels that inflation is a temporary condition that will correct itself over time and he is not concerned - more proof that he failed Econ 101.

I also agree with classicman on the deficit number, more smoke and mirors.

The cost of Iraq war is far more than what is actually stated too and this is adding to the problem.

What we have seen so far is just the begining, things are going to get much worse in this country before they have any chance of getting better.

I have NO confidence that either Mcain or Obama have even the slightest chance of correcting the problem either :(

classicman2
06-22-08, 11:48 AM
I'm basically an opitimist; however, I'm beginning to believe that things are going to get much worse in this country.

And, like 4KRG, I have no illusion that either Obama or McCain is going to do anything that measurably changes that.

The cost of Iraq war is far more than what is actually stated too and this is adding to the problem.

Absolutely!!!

JasonF
06-22-08, 12:22 PM
I think ending the war in Iraq (and, more importantly, ending the bleed of money going to the war in Iraq) could help things, although it's definitely not a panacea.

kmac2878
06-23-08, 08:27 AM
http://i305.photobucket.com/albums/nn226/kmac2878/directtv01-1.jpg

orangecrush
06-23-08, 08:55 AM
I find it funny that the article basically makes the argument that our misery index should be higher today do to under-estimation of its components. It then compares our ‘real’ misery index to historical numbers that, by the articles own logic, are lower than they should be.

VinVega
06-23-08, 11:37 AM
I think ending the war in Iraq (and, more importantly, ending the bleed of money going to the war in Iraq) could help things, although it's definitely not a panacea.
:up: We financially can't afford this war anymore.

classicman2
06-23-08, 11:57 AM
:up: We financially can't afford this war anymore.

I wonder if they said that in the great World War II - 'we can't afford this war anymore?; :)

VinVega
06-23-08, 12:00 PM
I wonder if they said that in the great World War II - 'we can't afford this war anymore?; :)
You don't have that luxury when it's not a war of choice.

al_bundy
06-23-08, 12:12 PM
WW2 was a war of choice as well, FDR did everything he could to provoke a war with Japan and Germany

he would have got the US into it in 1939 or 1940, but ethnic germans and the NAZI party were very powerful political forces in the US at that time

VinVega
06-23-08, 12:34 PM
WW2 was a war of choice as well, FDR did everything he could to provoke a war with Japan and Germany

he would have got the US into it in 1939 or 1940, but ethnic germans and the NAZI party were very powerful political forces in the US at that time
We don't know what would have happened if we weren't attacked, but we were in fact attacked.

classicman2
06-23-08, 03:42 PM
We were attacked on 9/11.

Our dear President, George W. Bush, is merely responding to that attack. :)

Yes - I'm pulling you leg just a little. ;)

Th0r S1mpson
06-23-08, 04:02 PM
Hey, I have an idea... with our government so good at running these numbers, let's put them in charge of the health care system too! :up:

classicman2
06-24-08, 09:16 AM
If I could wave a magic wand and get rid of only one thing in the federal government - it would be the unified budget concept.

wendersfan
06-24-08, 01:02 PM
Hey, I have an idea... with our government so good at running these numbers, let's put them in charge of the health care system too! :up:Thor, go to the store forum, open just about any thread, and then ask yourself, if big companies fuck up and screw over their customers that much, do we want them in charge of the health care system? I'm not advocating for either system, but instead I'm just pointing out that human error and maliciousness is pervasive and universal, in both the private and public sectors.

X
06-24-08, 01:14 PM
Thor, go to the store forum, open just about any thread, and then ask yourself, if big companies fuck up and screw over their customers that much, do we want them in charge of the health care system? I'm not advocating for either system, but instead I'm just pointing out that human error and maliciousness is pervasive and universal, in both the private and public sectors.But at least with private companies there's recourse when they screw up and alternative places to shop. And, as a last recourse, the government is there to look into it if their screwups get systemic or big enough.

wendersfan
06-24-08, 01:18 PM
But at least with private companies there's recourse when they screw up and alternative places to shop. And, as a last recourse, the government is there to look into it if their screwups get systemic or big enough.Most people don't have the option of alternatives. Yes, they can switch physicians, but they can't switch health care providers, except maybe once a year.

X
06-24-08, 01:24 PM
Most people don't have the option of alternatives. Yes, they can switch physicians, but they can't switch health care providers, except maybe once a year.That beats once a lifetime.

Th0r S1mpson
06-24-08, 01:32 PM
Who will step in when the government screws up health care?

The minority party, in an election year.

What will they propose?

Spending more money. Which will be a no-brainer for everyone, since we can't have a screwed up health care system, right? What else are you going to do... cut costs?

We'll have a battle over who wants to spend the most to have the spiffiest health care system that the other party will not endorse, because Party X hates people with brain cancer and wants to let them die.

classicman2
06-24-08, 02:31 PM
You're making the assumption that government will screw up health care.

I don't buy that at all.

Despite the problems with Medicare & Medicaid, they have been (overall) successful.

DVD Polizei
06-24-08, 07:40 PM
Don't worry, Cman. Thor is just being serious. He isn't his normal self today.

Th0r S1mpson
06-24-08, 07:44 PM
You're making the assumption that government will screw up health care.

I don't buy that at all.

Despite the problems with Medicare & Medicaid, they have been (overall) successful.

Okay, take out the words "screw up" and replace them with "manage." (I don't know if this is pulling a McCotter, but I am not talking about the Democrats, rather the US Government at large)

I'm simply making the assumption that government will continue to operate in the same way and that the politicizing of the issue along with government spending habits will be quite costly to our nation and the taxpayer.

I am also alleging (in line with this thread) that the "government statistics" as to the cost of national healthcare, by those proposing such a system, are drastically underestimating the true cost and ignoring the financial effects of government on such a system once it is handed over.

What will be done to keep costs down... and who will benefit or be hurt by such action? Conflicts arise.


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