Thursday, May 01, 2008

Numbers Racket

Harper's Magazine has an article this month from Kevin Phillips about government manipulation of economic statistics. I have commented several times about the distortions of the inflation statistics but Phillips takes a look at other manipulations. The bottom line is that the government is manipulating the public's perception of the economy:

The real numbers, to most economically minded Americans, would be a face full of cold water. Based on the criteria in place a quarter century ago, today's U.S. unemployment rate is somewhere between 9 percent and 12 percent; the inflation rate is as high as 7 percent or even 10 percent; economic growth since the recession of 2001 has been mediocre, despite a huge surge in the wealth and incomes of the superrich, and we are falling back into recession.

The mismanagement of the Federal Reserve during that time is to some degree a result of the manipulation of the official statistics. Low inflation numbers gave the Fed cover to keep interest rates lower than they should have been and the mountain of public and private debt is the result. But the problem here is not the statistics per se. The real problem is the role of the Federal Reserve. If we continue to allow the Fed to manipulate money markets for the benefit of the government and the banks (and make no mistake, that is who they work for) eventually even the government will not be able to manipulate the statistics enough to prevent the public from seeing the truth.

Read the entire article by clicking on the title of this post. It's a real eye opener.

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