Numbers used by Feds are imposters... - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 4 April 2013
Numbers used by Feds are imposters... A  A  A

Buenos Aires, Argentina

Gold whacked again...down another $22. Stocks down too - 111 on the Dow index.

Stay tuned!

Meanwhile, Sen. Bernie Sanders is up in arms. He demands that the White House and the House of Representatives say no to benefit cuts for Social Security recipients and disabled vets.

He got the Senate to express itself on the issue too. Not surprisingly, the senators are opposed to any cutbacks that would fall on their voters' heads. No senator dared raise his voice against it.

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What exactly has been proposed?

Simple enough: more fudge.

Anyone who has read our Diary for very long knows that the numbers used by the federal government...and by economists generally...are special numbers. They look like normal numbers. They use the decimal system. You can add them. You can subtract and multiply them. But they are imposters... crooked...bent...perverted. They do not mean the same thing as stand-up normal numbers. They may not mean anything at all.

If you look in a basket of apples you will find a certain number of them. You might have one. You might have six. But whatever number you have, it will be an actual, real number. It will accurately describe what's in the basket.

But what if the feds tell you the unemployment rate is 7.6%? What if they tell you that GDP is growing at 2.5% per year? What if they insist that consumer prices are rising at a 2% rate?

What do you know? Nothing!

These are public numbers, not private numbers. Like public information, generally, they are low-quality numbers...with little real information content...and often negative value. They may have meaning, but it is not the same meaning that you expect from other numbers. Often, they lead you to believe something that isn't true. And never can you trust them.

What got Senator Sanders worked up was the latest attempt to use these scammy numbers to lower US deficits. The idea on the table is a plan that probably originated here in Argentina. It is shifty enough.

The feds propose to change the way they calculate the CPI - a so-called 'chained dollar' inflation rate - so that they will get a lower reading and thereby send less money to the old folks. Heck, the number can be almost anything you want...why not make it convenient for the feds?

On the surface of it, it appears to be the rarest sort of government initiative - the kind we can approve of. After all, the feds spend too much. Cutting back would allow more people to keep more of their money.

But isn't it cheating the graybeards and the cripples?

Yes, of course. They were promised money that does not belong to them. As it turns out, they will get less than they expected. But so what? The politicians promised to adjust payments to the CPI. As we've shown in this Diary, the CPI was fudge from the get-go. It already understates real price increases substantially. According to John Williams, the real CPI - calculated as the feds did in the Carter Administration - is 9.6%, not 2%.

So they're already 'cheating' retirees. Might as well cheat them a little more.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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