30 Sep, 2006
Ganging Up On Bum Stats
Lots of folks are starting to get louder about their suspicions about
However, some folks are starting to catch up.
From the construction industry, there’s “Government Inflation Statistics Don’t Reflect Reality” – the 9/25 editorial in Engineering News-Record (online here, if it’s still available free). In the conclusion, ENR combined the ridiculously understated consumer price index numbers with the coming worker shortage:
“And the most startling changes may yet be coming. Construction craft and other project labor has been a sleeping giant for much of the past decade. But that giant is stirring, and for good reason. Because the real cost of living in the
“When it comes time for workers to assess compensation in relation to the demand for their skills and how much it really costs to live, decisions will reflect reality, not a statistic. Some employers already are in shock and many more will be in the future.”
You perhaps have not heard of Caroline Baum, but you know about the Bloomberg financial service and Bloomberg.com. Baum writes a bond-market column, available free online, 3x/week. Her 9/15 offering: “ U.S. Inflation Measure May Be Rotten at the Core” (click here to see it). Here’s a bit from Baum:
“Let's go to the video tape. The consumer price index was running at about 2 percent year-over-year during the deflation scare in the middle of 2003. Crude oil prices were hovering near $30 a barrel.
“Three years later, with crude oil prices hitting a record $78.40 in July, the CPI was rising 4.1 percent. In all that time, the price of something else should have fallen to offset the higher oil prices. The fact that it didn't means our friendly central bank was accommodating the oil-price increase, printing enough money to prevent that from happening.
“For the record, the core inflation rate has almost doubled to 2.7 percent in July from 1.5 percent three years earlier."
Additionally, a guy named Martin Weiss calls the number-manipulating in D.C. “the greatest scam of all time” (follow this link). Here’s a piece of his contention:
“Almost every number coming out of
“This is not a conspiracy. It just happens naturally. But that doesn't diminish the potential impact on your money. It's easily the greatest scam of all time.”
And then there’s Barry Ritholtz, a guy I am reading more and more of these days. He calls his blog “The Big Picture” – and here’s something out of a recent entry, “What Is Wealth II” (see the whole thing here):
“Let's all agree on two things: First, Human progress is inevitable, with each generation benefiting from improvements in medical are, technology, etc.; Second, there is a systemic bias built into the government reporting machinery that understates the declining purchasing power of the US dollar.
“The more the Fed prints, the less its worth -- that's basic law of supply and demand at work. That's something I would hope ‘one of the country’s leading macroeconomists’ would understand.”
It’s been “Case Closed” for me on REAL inflation for a long time. Fleckenstein, who is my investing guru, considers all government data to be humorous! I’m glad to now see more attention paid to this by people closer to the mainstream.
Consider: It’s not what you make, it’s what you keep – and the value of that! No matter how much you save, or how successfully you invest (unless your Buffet or Soros), your wealth and earnings BOTH lose value due to inflation. Think about it.