Do you think Walter “John” Williams of Shadow Government Statistics is lying to us about the economy?
The government’s conflict of interest with economic data
For obvious reasons, the government wants to publish low inflation numbers, high employment participation, and elevated economic growth, and if the nation can’t achieve these lofty expectations in reality, the Feds can at least pretend.
The Consumer Price Index (CPI) is tied to the incomes of about 85 million Americans who depend on Social Security, food stamps, housing vouchers, military and federal Civil Service pensions, etc. The higher the CPI, the more money the government needs to spend to keep pace with the cost of living. Thus, the Feds have a strong desire to under-report. Moreover, since 2008, a lower CPI means less exertion is needed by the Fed when managing the yield curve.
The Bureau of Labor Statistics, which releases CPI data, operates under a veil of secrecy. The raw data used to calculate the CPI is not available to the public, so it makes it impossible to audit their findings. Additionally, over the past 40 years, the government has changed the way it calculates inflation more than 20 times. The BLS claims that these ‘methodological improvements’ to the CPI are said to give a more accurate measure of consumer prices. However, these changes could also be a convenient way to include or exclude certain products that give favorably low results.
The CPI doesn’t even meet the government’s definition of inflation. The BLS defines inflation “as a process of continuously rising prices or equivalently, of a continuously falling value of money.” The CPI is not a measurement of rising prices, rather it tracks consumer spending patterns that change as prices change. The CPI doesn’t even touch the falling value of money. If it did the CPI would look much different.
With respect to real (not nominal) GDP growth, if we experience lower levels of reported inflation, published real economic growth data will be higher. If the inflation data come in higher, this will naturally show that real GDP growth will be lower.
So, my readers already know that most of the officially published economic, employment, and price data do not paint an accurate picture of reality. With respect to Shadow Stats, I think it does a fine job measuring these alternative government data points in light of this reality. I do not question the results of its data gathering. According to its website, “John Williams’ Shadow Government Statistics is an electronic newsletter service that exposes and analyzes flaws in current U.S. government economic data and reporting, as well as in certain private-sector numbers, and provides an assessment of underlying economic and financial conditions, net of financial-market and political hype.”
That may sound noble, but my real concern with Shadow Stats lies with their assessments of economic conditions and financial markets after their data is gathered. Their predictive accuracy has been seriously wanting.
Those who cannot grasp the conspiracy need to be heavily discounted
Here is a sobering question to ask about Shadow Stats; In a centrally managed economy does all this analysis really matter anymore?
I am familiar with the work of John Williams from his interviews and commentary from the second half of last decade. During the time when gold rose from about $600 to $1,800, I took what he said seriously, and his bio on the Shadow Stats web site demonstrates his impressive background. I don’t question his credentials.
What I heavily discount is his ostensible inability to recognize the larger picture. While Mr. Williams’ analysis will certainly portray the economic data in a more accurate light, I have disagreed with his opinions and take on this data since early in the decade.
Take a look at his October 21st flash update from his website. It could be an edit from any other alt-financial commentary.
• Dangerous Times for the U.S. Dollar; Intensifying Flight to Precious Metals Likely
• Domestic Systemic Liquidity Issues Appear Serious: Third-Quarter 2019 Velocity of Money (M3) Is on Track for Its Sharpest Quarterly Drop Since the Depths of the Great Recession
• Liquidity Crisis Intensifies, Reflecting Deepening Financial-System Instabilities
• Used by Some at the Fed to Minimize FOMC Accommodation, Overly Optimistic Economic Assumptions Are Falling Apart
• Latest Headline Reporting, Revisions and Corrective Benchmarkings Increasingly Put the Lie to Current Federal Reserve Presumptions of Stable and Positive Economic Growth
• A Deepening Economic Downturn and Flummoxed Fed Suggest Intensified FOMC Accommodation at the October 29/30 Meeting, Reflected Partially in the October 11th Inter-Meeting Liquidity-Infusion Program
Shadowstats.com, October 21st
So, to answer your question, is John Williams lying to us about the economy? No, I doubt that Mr. Williams is lying. I believe he truly believes what he says. But that does not mean I should rely on his advice and opinions. I believe that Mr. Williams’ data analysis is much more accurate of reality, but so what? We are in the new world order and fact is fiction. The economy is managed in a similar fashion to that of a communist country; it only has the veneer of a free-market economy.
We can’t hold our breath waiting for a reversion and an exposure of the truth. People like the lie and you and I are few indeed. We need to move forward and adjust.