Saturday, August 1, 2009

Chris Martenson - Believe the GDP report at your peril…

Chris, who is an outstanding communicator, just wrote two columns on yesterday’s GDP report. BOTH are excellent.

The first I really like as he lays out a map of believability when it comes to government reports, I excerpt it below the link… please take the time to follow the links, though, and understand all of Chris’s points:

GDP Report is Just Plain Wrong

As I tell people in my seminars, I divide my data (or facts) into three buckets: good, murky, and unreliable.
Into the good bucket I put all sources of data fitting the following important criteria: The data itself is not statistically massaged before release, it is not 'sampled' but rather tallied up in its entirety, and it squares up nicely with other good sources of data.

Good Data

• Sales tax data
• Income tax data
• Truck tonnage moved
• Port shipping container traffic
• Air transport
• UPS, FedEx, and other major shippers' volume
• Corporate Revenues (just added to list)

Into a bucket of lesser importance goes the murky data. This data is based on sampling, usually conducted by self-interested parties (National Association of Realtors data for example), or is seasonally or statistically adjusted, and/or does not square up with other, better data.

Murky Data
• NAR home sales data
• Continuing claims
• Retail sales data
• Trade deficit reports
• Corporate Income (just added to list)

Into the final bucket goes the utterly unreliable 'data,' so bad that I need to use quotes around it. This 'data' is modeled or otherwise manufactured out of thin air with no accountability, does not square up (at all) with good sources of data, has massive errors in methodology that have never been explained, consists of survey data for reasons covered in an earlier Martenson Report (Survey Says...), is self-referential (e.g. LEI or 'leading indicator' data), and/or has been proven repeatedly in the past to be consistently biased for political or self-serving gain.

Unreliable Data
• New home sales data
• Employment data (due to the Birth-Death model)
• All survey data
• Leading indicator data
• GDP (just added to list)
This is a terrific way of thinking about the data and I agree completely with Chris’s categories. I would add, however, the big one – INFLATION DATA – which definitely belongs in the Unreliable Data Category! Also, all data pertaining to derivatives is in a category I would classify as UNKNOWABLE because of the total opacity.

Chris’s second article is also excellent. Below is a link and his summary, it’s also a great read if detailed information on the GDP report interests you, and I hope it does. The manipulation and lies reside there:
Believe the GDP report at your peril

So here again I will ask, how is it possible for business revenues to be down by some 15% while PCE is down by 2%? As I stated before the answer lies in the extrapolated and guesstimated portions of the GDP report where a consistent and non-random positive bias lurks, unnoticed and unquestioned, in dozens of nooks and crannies.

Because of this, basing large scale, long-term investment decisions off of the GDP report is done at your peril.

Fleetwood Mac-Little Lies:

Once again, here's my slightly more dramatic Smileys overall summary of government statistics (except for tax collections, note that none of the GOOD DATA above comes from the government!):

The BEA, the BLS, in fact ALL government reports are suspect. All reporting of government statistics should be scrapped. The Fed should be abolished, The central banks and bankers should be removed – as in gone, a new money system should be put in place, there should be a Constitutional Amendment dictating the SEPARATION OF CORPORATIONS AND THEIR MONEY FROM STATE, and finally, there should be a new government agency responsible for collecting and reporting economic statistics and that agency should have a mandate to develop data collection methods that cannot be changed over time and there should also be a mandate to release RAW DATA with every report, there should be absolute transparency in that all the calculations and all collection methods should be easily viewable by anyone. Oh, and NO ONE, not even the President should have access to the information before the public!