Economy

Peter Schiff on the nature of government and how it applies to government description of the economy.

"Don Draper, Mad Men's master advertiser likes to say "when you don't like what they are saying, change the conversation." When it comes to the current economic weakness, which was confirmed again today by the release of lower than expected GDP data, Washington would love do just that. Fortunately for them, they consistently outdo the master minds of Madison Avenue when it comes to misdirection. If the government doesn't like what people are saying, they don't bother just to change the conversation, they change the meaning of the words. "

Mad Men wish they had that power.

"The latest example of this was revealed earlier this week when the Bureau of Economic Analysis (BEA) announced new methods of calculating Gross Domestic Product (GDP) that will immediately make the economy "bigger' than it used to be. The changes focus heavily on how money spent on research and development (R&D) and the production of "intangible" assets like movies, music, and television programs will be accounted for. Declaring such expenditures to be "investments" will immediately increase U.S. GDP by about three percent. Such an upgrade would immediately increase the theoretic size of the U.S economy and may well lead to the perception of faster growth. In reality these smoke and mirror alterations are no different from changes made to the inflation and unemployment yardsticks that for years have convinced Americans that the economy is better than it actually is. "

Power corrupts.

"The bottom line is that now certain private sector salaries (in R&D and entertainment) will be counted twice and public pension contributions will be counted even if they aren't made. The economy will not actually be any larger or grow any faster, but the statistics will claim otherwise. With the stroke of a pen, our debt to GDP ratio will come down. Will this soothe the fears of our creditors? Will critics of big government take comfort that spending as a share of GDP may be lower? My guess is that the government is confident that its trick will work, and that distracting attention with a statistical illusion is the sole motivation for the change. "

This great analysis reminds us that all government statistics including GDP are bogus. They're all corrupted to make government look better.