Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19
US China War - Thucydides Trap and gold - 16th June 19
Gold Stocks Bull Upleg Mounting - 16th June 19
Gold Price Seasonal Trend Analysis - Video - 16th June 19
Fethiye Market Fruit, Veg, Spices and Turkish Delight Tourist Shopping - 16th June 19
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19
The Privatization of US Indo-Pacific Vision - Project 2049, Armitage, Budget Ploys and Taiwan Nexus - 12th June 19
Gold Price Breaks to the Upside - 12th June 19
Top Publicly Traded Casino Company Stocks for 2019 - 12th June 19
Silver Investing Trend Analysis - 12th June 19
Why Blue-Chip Dividend Stocks Aren’t as Safe as You Think - 12th June 19
Technical Analysis Shows Aug/Sept Stock Market Top Pattern Should Form - 12th June 19
FTSE 100: A Top European Index - 12th June 19
Gold Surprise! - 11th June 19
How Forex Indicators are Getting Even More Attention in the Market? - 11th June 19
Stock Market Storm Clouds on the Horizon - 11th June 19
Is Your Financial Security Based On A Double Aberration? - 11th June 19
What If Stocks Are Wrong About Interest Rate Cuts? - 11th June 19
US House Prices Yield Curve, Debt, QE4EVER! - 11th June 19
Natural Gas Moves Into Basing Zone - 11th June 19
U.S. Dollar Stall is Good for Commodities - 11th June 19
Fed Running Out of Time and Conventional Weapons - 11th June 19
Trade Wars Propelling Stock Markets to New Highs - 11th June 19
Best Travel Bags for Summer Holidays 2019, Back Sling packs, water proof, money belt, tactical - 11th June 19
Betting on Next British Prime Minister Tory Leadership Betfair Markets Forecast - 10th June 19
How Can Stock Market Go Up When We’re Headed Towards a Recession? - 10th June 19
If You Invest in Dividend Stocks, Do This to Double Your Returns - 10th June 19
Reasons for the Success of the Dating Market - 10th June 19
Gold Price Trend Analysis - Video - 10th June 19
US Stock Markets Rally Hard – Could Another Big Upside Leg Begin? - 10th June 19
Stock Market Huge Cosmic Cluster Ahead: Buckle Up! - 10th June 19
Stock Market Higher To Go? - 10th June 19
The Gold Price Golden Neckline… - 10th June 19
Gold Price Seasonal Trend Analysis - 9th June 19
The Fed Stops Pretending - 9th June 19
Fed Rate Cuts Soon; Bitcoin Enthusiasts Join Wall Street in Bashing Gold - 9th June 19
1990s vs. 2010s - Which Expansion Will be Better for Gold? - 9th June 19
Gold Price Trend Analysis, MACD, Trend Channels, Support / Resistance - 8th June 19
Gold Surges Near Breakout - 8th June 19
Could Gold Rally Above $3750 Before December 2019? - 8th June 19
5 Big Lies About Precious Metals Investing Exposed - 8th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Manipulated Economic Statistics and the Battle for Citizenry Perceptions

Economics / Market Manipulation May 29, 2008 - 09:29 AM GMT

By: John_Browne

Economics

Best Financial Markets Analysis ArticleWith consumer confidence now testing generational lows, our politicians are never the less continuously assuring us that the economy is strong, and that there is no cause for worry.

Although it is standard procedure for governments to soothe their citizenry with placebo politics in order to avoid panic and uprising, there is a line after which such a campaign is counterproductive.  In fact, misleading statements about financial security are potentially dangerous to the country's long term economic well being, and potentially toxic to investors.


Economic and financial statistics are the battleground over which the war of perception is fought.  But as the saying goes: “Figures lie, and liars figure.”  Politicians are masters of the selected use of statistics to lend credibility to their statements.  In reality, the numbers often mask the truth.

A year ago, financial markets hovered near nominal highs, retail sales appeared to be growing and real estate prices were near historic highs.  Wall Street and Washington made the most of these ‘over-the-top' numbers to foster a sense of economic invincibility.  With the national gaze lifted towards sunny skies, few noticed the danger of the mortgage crisis, which lay below like a tiger trap.

But like a poorly dubbed martial arts film, the average American is beginning to notice that the dialogue does not match the on-screen action.  As a result, many people are a developing a deep suspicion of statistics, which over time will greatly diminish the government's credibility. In the coming economic crisis, this loss of credibility may have severe consequences. 

One vital statistic in the perception battle is GDP, which is the total of all spending on goods and services within our economy, and is used as the key measure of national wealth generation.  It may be surprising to some, but GDP includes money spent on clearing up natural disasters that include hurricane relief and pollution control.  How such expenditures, which really only replace what has been lost, increase national wealth, is beyond me.

Unemployment figures are another worry.  Government adjustments for seasonal and population changes are acceptable.  But excluding from the unemployment rolls those who are neither actively seeking jobs nor the ‘long-term' unemployed is not.

Perhaps, the greatest area of concern about statistical manipulation is the measurement of inflation, or Consumer Price Index (CPI).  By manipulating this single statistic the government can miraculously transform rising prices into economic growth.

Today, the Department of Labor sets so-called “core” inflation, excluding food and energy, at 2.2 percent.  Even “headline” inflation, including food and energy, is published officially at only some 4 percent.  The problem is that these figures bear very little relation to the reality of price increases experienced on Main Street, which some estimate to be in excess of 10 percent.

Statisticians assign different weights to the elements comprising the CPI that are often not reflective of the spending habits of ordinary citizens.  For example, housing maintenance (including heating oil), a major expenditure, is given only a small part in the Index's makeup.  In addition, the re-pricing of items such as automobiles to allow for added ‘hedonistic” features such as enhanced “value for money” is wide open to varying judgments.  How these statistical decisions are made is really anyone's guess. But it is absurd to assume that the government's overwhelming interest in reporting low inflation does not influence the final numbers.  

The financial consequences for investors can be severe.  For example, the Dow Jones Industrial Index, against which many investment returns are measured, closed at a nominal high of 14,093 on October 12, 2007.  The media reported it as a sign of good things to come. On May 23, 2008, the Dow closed at 12,480 -- off a bit, but apparently not too bad.  However, the Dow close of 12,480, if adjusted for the official CPI, is worth not 12,480, but only 9,856 when compared with its previous market cycle high, of 11,723, in the year 2000.

Worse still, if adjusted for the more reasonable, but conservative, inflation rate of 8 percent, the recent close of 12,480 becomes the equivalent of only 6,742 in the year 2000.  What looks like a nominal gain of some 757 points or 6.4 percent is, in fact, a real loss of 4,981 points or some 42 percent over those eight years!

One set of statistics that is impossible to distort are currency exchange rates, which have provided a somber report card on America's economic fortunes.  Not able to manipulate these numbers, the authorities instead distort their meaning, and have attempted to convince Americans that a weak dollar is in the national interest.

Those wise enough to ignore the spin, and see the falling dollar for what it is, namely a loss of wealth, have invested in good companies listed on the stock exchanges of producer nations, such as Australia, Canada and Switzerland, with appreciating currencies.  Such moves have greatly enhanced wealth and protected those investors against further dollar erosion.

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read my new book “Crash Proof: How to Profit from the Coming Economic Collapse.” Click here to order a copy today.

By John Browne
Euro Pacific Capital
http://www.europac.net/

More importantly make sure to protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com , download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com , and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp

John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc.  Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with."  A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard.

John_Browne Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules