"Lies, damned lies, and statistics," the comment attributed to Mark Twain and Benjamin Disraeli, is typified by today's government economic stats. Some people are shocked when I tell them that the government's “core inflation rate” (also known as the CPI) doesn't include food or energy. And that our economy isn't as good as the government says it is. But such is the case. I'm not being a doom-and-gloomer; there are always opportunities to profit in and successfully navigate any market, if you know how to do it. But this government understatement of inflation overstates our country's GDP, and hence misrepresents current economic conditions. It's also an overlooked reason why Democrats and Republicans have basement-low polling numbers, and why Republicans lost badly in 2006.
Voters don't believe what Washington pols tell them about immigration, Iraq, inflation – and pretty much everything else. GOP candidates who did the best in '06 were the ones with (or perceived to have) the most consistency and credibility on the issues: Namely Tancredo, Coffman, and Hillman (even though he lost by a nose in the state treasurer's race).
Here are a few of my favorite economic whoppers:
Economic Lie #1: “The dollar decline isn't that bad, because it only affects our purchases of imported goods.”
Even if this were true (and it's not), most of the products we buy are imported. We really don't produce or manufacture much in America today. Except for agricultural commodities, YouTube videos, and hot air from so-called business 'gurus' on HeeHaw (CNBC) and Fox Business News.
The declining dollar affects the cost of all products and services. Companies face increased costs for oil and gas, utilities, and other commodities, so they have to pass them along to the end consumer. Gasoline has tripled in the last 5-6 years. Crude oil has quadrupled to almost $100/barrel. Part of this is due to stagnating supplies and increased demand from China and India, along with the increase in monetary inflation.
Economic Lie #2: “You just need consistency with the inflation numbers, not accuracy.”
Huh? This is like fixing the gas gauge on your car to show a full tank, even though it's almost empty. You feel better about it, but doesn't change the reality of your situation. Even though the Fed says the CPI is acceptable, it's not in the 'comfort zone' of American consumers and businesses who have to absorb these costs. Excluding food and energy from inflation numbers is absolutely insane.
Wall Street folks can say that plasma-screen TVs and computers are going down in price, but you only buy these items every one to three years. Americans consume food and energy on a daily basis.
Economic Lie #3: “We want inflation in small doses, it's good for our economy. Deflation gives you scenarios like the Great Depression of the 1930's” (see video here, at the 6:20 mark).
Small doses of inflation eventually turn into big declines in purchasing power, as we've seen over the past few decades. It hits savers and seniors especially hard, who live on a fixed income or rely on their life savings during retirement. Pat Powell has been smoking the Wall Street funny weed, and Peter Schiff delivers a powerful rebuttal to this load of intellectual horse apples.
I'll wrap this up, and resume my Thanksgiving weekend escape out here on the Great Plains with family. Best wishes to you and yours for a happy holiday.