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epanzella

Jobs, Growth, and Inflation

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If you're wondering why the economy seems so bad while the govt says its so good, it's just because they're lying.


From the New York Post Business Section;


Here’s what a Wall Street hedge fund mogul, Paul Singer, head of Elliott Management Corp., told his clients the other day:



“Nobody can predict how long governments can get away with fake growth, fake money, fake jobs, fake financial stability, fake inflation numbers and fake income growth,” Singer wrote. “When confidence is lost, that loss can be severe, sudden and simultaneous across a number of markets and sectors.”



I’m glad someone is reading my column.



But it’s not like Singer — whom I don’t know — was willing to say that out loud so that everyone could understand. He wrote that in his newsletter to his clients.



So, shhhhh! It’s a secret. Don’t tell Americans that the economy isn’t doing so well. (Oh, that’s right, they’ve already caught on.)



I won’t get into the year-long investigation I have been conducting into the Census Bureau’s faulty economic data. Now that the Republicans control both houses of Congress, I’m sure what is going on at Census will be looked at very carefully.



But fabrication of data isn’t the only problem. Put enough academics and statisticians in a room and they can turn any statistic into something it isn’t. Let’s use Singer’s list.




  • Fake growth: The US economy is growing moderately. That’s pretty much certain — but it’s not growing as fast as the government would have you believe. The Commerce Department recently pegged third-quarter growth at a 3.5 percent annual rate — but earlier this week, some real numbers came out. Our exports declined in the third quarter and construction spending was weak. So that 3.5 percent guess will probably be revised down to a 2.9 percent annual rate on those numbers alone. But Singer is probably also referring to the artificially low inflation number that Commerce uses in its GDP calculations. If inflation were measured correctly, GDP growth for all years might be 30 percent lower than reported.
  • Fake money: Singer is referring to the $4 trillion in dough the Federal Reserve printed under quantitative easing that has resulted in millions of regular folks not getting much interest income and, therefore, they’re cutting back spending. That’s why the economy is weak.
  • Fake jobs: The Labor Department adds hundreds of thousands of jobs a year to its count for positions it thinks, but can’t prove, are being created by new companies. This practice, which has gone on for decades, needs to be investigated. On Friday, Labor is expected to report job growth of 230,000 for October. That figure will be boosted by another heaping serving of job guesstimates.
  • Fake financial stability: The artificially low interest rates are not only propping up banks and Wall Street profits but also making the US government’s financial position look better than reality. If Washington had to pay market rates for the money it borrows, the US budget deficit and debt levels — already excessive — would be worse.
  • Fake inflation numbers: Commerce doesn’t only play tricks with the inflation number used to calculate the GDP. It also tamps down the consumer price index — and cheats Social Security recipients and others — through academically approved methods like geometric weighting and hedonics.


And that, Mr. Harwood, is why people are so nervous.


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That was only part of his message.

 

"Among the worst consequences of the delegation of responsibility from political leaders to central bankers has been the increasing arrogance of the latter group and their inability to understand the rapidly evolving nature of the world’s major financial institutions. Prior to the crisis, central bankers were unable to understand the risks that were building up in the global financial system and the economy. They did not see the 2008 collapse coming, nor did they perceive how fragile the system had become, or that the major financial institutions had become the largest and most leveraged hedge funds on earth.

 

This lapse was a catastrophic error, not just of execution but also of theory and structure. During the 2008 crisis, the central bankers (rightly) applied standard (more or less) responses to financial collapse (flooding the system with liquidity and reducing interest rates), which of course truncated the crisis and stabilized the system. But their inability to understand the financial system, or to take responsibility for their massive failures in causing/allowing the crisis to occur, has resulted in a seriously deficient economic recovery phase. Central bankers do not understand that it was their tinkering, manipulation, bailouts and false confidence that encouraged and enabled the insanity that led to the fragility and collapse. Partially as a result of that misunderstanding, the developed world has doubled down on the same policies, feeding the central bankers’ supreme self-confidence. Political leaders have been content to stand aside and watch the central bankers do their seemingly magical and magnificent work."

 

Makes me wonder why he would be such a big GOP supporter/donor. Obviously been around long enough to know neither party has done squat to mitigate the risk of the financial system or take up legislation that would have replaced the Fed printing machine. They didn't see it coming on Bush's watch and have done nothing to prevent another financial crisis during Obama's term.

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