The Slipperiness of Statistics - Nov 10
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In the spirit of recent stories in which certain statistics "may" have been played with slightly to make the unvarnished truth a bit more palatable, (and in the spirit of it's what you don't know that can kill ya), I offer the stories below... -KS
The Jobs Doom Loop
Ilargi, The Automatic Earth
The Obama administration claims to have created or saved 640,000 jobs with its stimulus plan to date, out of the stated goal of 3.5 million one year from now.
8 months for 640,000, which leaves 12 months for the remaining 2.85 million. Or 80,000 a month so far, and 215,000 for every month from here.
If you'd know me a little, you'd also know this is about where I’m starting to shift somewhat uncomfortably in my seat. Since, if this is a series that progresses gradually, which seems a reasonable assumption, well over 500,000 jobs would need to be created every month in the second half of 2010. And I don't buy that.
But that in itself is fine, and I'd let it go and have a drink or something if that were all, but it's not. It's just the beginning.
...The Associated Press looked into the records of the jobs the stimulus, according to the administration, created and saved, and found some strange things are happening. Now AP depends for its survival on continued access to the White House, so it frames the conclusions of its research in politically correct and polite terminology. Anyone not constrained by such deliberations would conclude that the White House assertion of 640,000 jobs created or saved is fraudulent.
...And none of this, of course, can't be seen as separate, in any credible shape or fashion, from the October 2009 unemployment numbers issued by the government’s Bureau of Labor Statistics (BLS) on November 6.
Numbers which state that for the first time in 26 years, US unemployment is over 10%. 10.2% to be exact. Then again, looking at how these numbers are arrived at, how exact is exact? The 10.2% stat is just the U3 count, which is very favorable for any incumbent government. It's also very deceptive, since it ignores many people who are not working even if they would like to.
U3 consists of "Total unemployed, as a percent of the civilian labor force."
U6 consists of
+ "Discouraged workers", or those who have stopped looking for work because current economic conditions make them believe that no work is available for them.
+ Other "marginally attached workers", or "loosely attached workers", or those who "would like" and are able to work, but have not looked for work recently.
+ Part time workers who want to work full time, but can't due to economic reasons...
(8 Nov 2009)
Consumer Liquidity Special Report
Shadow Government Statistics
Structural Problems Intensify for U.S. Economy. The structural problems impairing consumer liquidity are getting worse and impose severe constraints on U.S. economic activity. Accordingly, the current economic downturn — already the longest and deepest since the first downleg of the Great Depression in the 1930s — will continue to be particularly protracted and deep, as well as unresponsive to traditional stimuli (see http://www.shadowstats.com/article/depression-special-report).
...Rising Income Dispersion Usually Foreshadows Economic and Financial Market Turmoil. Measures of income dispersion, or variance, indicate how income is distributed within a population. A low level of income dispersion indicates that income tends to be concentrated in the middle, while a high level of dispersion indicates heavier income concentrations in the extremes of low and high income, with less in the middle. The higher the deviation of income is in the graph, the greater the income dispersion.
...Real Household Income Never Recovered Its Pre-2001 Recession Peak. The next two graphs show inflation-adjusted median and mean levels of household income from 1967 through 2008. The median measure is the middle measure of the survey and likely is a better reflection of how the average household is doing. When the income dispersion measure is high, the mean, or average, measure tends to be skewed (in this case to the upside). Nonetheless, both measures showed sharp, inflation-adjusted declines in 2008, and neither series has topped the annual high levels seen before the 2001 recession, with real median and mean household incomes hitting their respective tops in 1999 and 2000.
...Unprecedented Contractions in Consumer Borrowing. The next series of four graphs reflects the history of consumer borrowing in the post World War II period. Household credit market debt (including mortgages) is total consumer debt as reported in the quarterly flow-of-funds analysis published by the Federal Reserve. The first-quarter 2009 showed the first post-war annual contraction in the series. Consumer credit outstanding which includes credit cards, auto loans and other revolving and non-revolving credit (not mortgages) showed its steepest post-war decline in July 2009.
(14 Sept 2009)
Minsky to Bernanke: "Size Matters!"
Mike Whitney, Information Clearing House
Size matters. And it particularly matters when the size of the financial system grossly exceeds the productive capacity of the underlying economy. Then problems arise. Surplus capital flows into paper assets triggering a boom. Then speculators pile in driving asset prices higher. Margins grow, debts balloon, and bubbles emerge. The frenzy finally ends when the debts can no longer be serviced and the bubble begins to unwind, sometimes violently. As gas escapes; credit tightens, businesses are forced to cut back, asset prices plunge and unemployment soars. Deflation spreads to every sector. Eventually, the government steps in to rescue the financial system while the broader economy slumps into a coma.
The crisis that started two years ago, followed this same pattern. A meltdown in subprime mortgages sent the dominoes tumbling; the secondary market collapsed, and stock markets went into freefall. When Lehman Bros flopped, a sharp correction turned into a full-blown panic. Lehman tipped-off investors that that the entire multi-trillion dollar market for securitized loans was built on sand. Without price discovery, via conventional market transactions, no one knew what mortgage-backed securities (MBS) and other exotic debt-instruments were really worth. That sparked a global sell-off. Markets crashed. For a while, it looked like the whole system might collapse.
The Fed's emergency intervention pulled the system back from the brink, but at great cost. Even now, the true value of the so-called toxic assets remains unknown. The Fed and Treasury have derailed attempts to create a public auction facility--like the Resolution Trust Corporation (RTC)--where prices can be determined and assets can be sold. Billions in toxic waste now clog the Fed's balance sheet. Ultimately, the losses will be passed on to the taxpayer.
Now that the economy is no longer on steroids, the financial system needs to be downsized. The housing/equities bubble was generated by over-consumption that required high levels of debt-spending. That model requires cheap money and easy access to credit, conditions no longer exist. The economy has reset at a lower level of economic activity, so changes need to be made. The financial system needs to shrink.
...Few people seem to believe in the much-ballyhooed economic recovery. And even though the media triumphantly announced the "end of the recession" last week (when GDP came in at 3.5 percent) a closer look at the data, leaves room for doubt. Goldman Sachs analysts put it like this:
"How much of the rebound in real GDP was due to the fiscal stimulus, and where do we stand in terms of the effects of stimulus thus far? Although precise answers are impossible at this juncture, several aspects of the report are consistent with our estimates that the fiscal package enacted in mid-February as the American Recovery and Reinvestment Act (ARRA) would have accounted for virtually all of the growth reported for the third quarter." ( http://www.zerohedge.com/article/hedging-their-bets )
Positive growth is an illusion created by government spending. In fact, the economy is still flat on its back. Consumer spending and credit are in sharp decline. Unemployment is steadily rising (although at a slower pace) and wages are flatlining with a chance of falling for the first time in 30 years. Deflationary pressures are building. The talk of a "jobless recovery" is intentionally misleading. Jobs ARE recovery; therefore a jobless recovery merely points to asset-inflation brought on by erratic monetary policy. Surging stocks shouldn't be confused with a real recovery...
(3 Nov 2009)
Bailouts for dummies
Dave Pollard, how to save the world blog
Lately I've been reading more about economics, in self-defence against all the corporatist-government thievery and lies going on out there.
I'm aware that most people find what is happening in our economy and financial systems unfathomable, so I thought I'd try to simplify the complex. I confess up front this is a substantial over-simplification, and I'm not a professional economist. Recent events really boil down to governments doing what they're told to do because their self-serving advisors have made them so terrified of the consequences of not doing so, that they feel they have no alternative. It's not so much "too big to fail" as "failure is not an option".
Our modern economic system is founded on a false premise -- that unregulated 'free' markets are the most efficient (free of waste) and effective (they will produce better 'collective' outcomes than markets that government manages or intervenes in). This has been repeatedly shown to be false, but it still governs mainstream economic, and conservative, thought. In most countries (other than the US and struggling nations) experience with the failures of the 'free' enterprise market system -- laissez faire capitalism -- has led governments to play a significant, if not dominant, role in economic regulation and decision-making. These are what are called "balanced economies", where governments intervene to limit the excesses of self-serving private interests and to provide goods and services (like health care and education) that the majority believe should be available to all, regardless of wealth or income.
Where there is no balance, as in struggling nations where the government is weak or hopelessly corrupt, the result is a hegemony (total dominance) by a wealthy elite that effectively owns and dictates policy to politicians, regulators and judges. This near-monopoly of consolidated power is variously called corpocracy, corporatism, or fascism. Many right-wing ideologues like Mussolini believed such a hegemony was the much-sought "benign dictatorship" that would act in the collective interest more knowledgeably and efficiently than any democracy. There is a second school of right-wing libertarian ideologues, especially in the US, who believe that the 'market' is able to act in this fashion, and that any government intervention will necessarily worsen every situation.
...Over the last 50 years, this system has been ratcheted up tighter and tighter, because if any of these four growth factors dries up, growth ends, the stock market collapses, housing prices collapse, corporations collapse, and the global economy plunges into depression. Bad for corporations, bad for incumbent governments -- we can't have that. To keep this whole thing going, governments began, in the Reagan years, to lie to their citizens. They 'recalibrated' how unemployment and inflation are calculated, so that both 'official' numbers were much lower than the more honest numbers that had been reported up until then. If they reported honest inflation numbers, people would panic and demand higher wages and indexing of pensions and social security benefits. If they reported honest unemployment numbers, people would riot. So, while the 'reported' average rate of inflation in this decade has been about 2%, the true average rate of inflation (as anyone who manages the family finances intuitively knows) has been, until recently, about 10% -- a doubling of the cost of living every 7 years (see first chart above). And the true US unemployment rate is not 10%, but 21% (see 2nd chart above), and has averaged 12%, not 5%, this decade. If you're not feeling 'better off' as a result of all the reported GDP growth over the last few decades, that's why...
(28 Oct 2009)
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