12 Aug 2009

New Inflation Numbers Coming, But the Orwellians Are Working

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It’s almost crunch time! By early next week the new PPI and CPI numbers for July will be out.

I have been warning for months that actual prices are rising much more quickly than you would realize, had you simply relied on the official reports coming out of the BLS. I explained that after last month’s numbers came out (for June-over-May price increases), the grace period is over. Since the BLS has “seasonally adjusted” the actual CPI increases down every month from January through June, now they will have to bump up the actual numbers, when giving the headlines to CNBC.

Because I’m very suspicious of the government, I predicted that they will revise the prior adjustments, in effect shifting some of the price inflation back onto the earlier months of 2009, so that they don’t have to catch up so much in the 3rd and 4th quarters.

It’s not the same thing, but here Jeff Hummel describes a massive revision that the BEA just undertook to the GDP figures going back to 1929. Here’s an excerpt from Hummel:

Using new input-output analysis, the BEA has just completed a comprehensive revision of all the numbers in the National Income and Product Accounts going way back to 1929. Consider the slight difference this can make in the story of the current recession, which the National Bureau of Economic Research (NBER) dates as beginning in December 2007. The old estimates reported that real GDP fell by 0.2 percent in the fourth quarter of 2007, whereas the new estimates report that it rose by 2.1 percent. For the first quarter of 2008, the old estimate is a 0.9 percent rise; the new estimate is 0.7 percent fall.

And to show just how ridiculous these revisions can be, Hummel goes on to explain:

Richard K. Vedder and Lowell E. Gallaway caught probably the most egregious instance in their neglected Out of Work: Unemployment and Government in Twentieth-Century America (1993). The 1960 estimates of real Gross National Product (this was when the preferred aggregate was still GNP rather than GDP), using a 1929 base year, reported that output rose by 30 percent during World War II (1941-1944) and then fell by a modest 5 percent to 1948. In contrast, the 1990 estimates, using 1982 as a base year, had output rising by 50 percent during World War II and then falling by a massive 30 percent from 1944 to 1948.

In other words, the 1990 estimates discovered a massive post-World War II recession in the U.S. that absolutely nobody was aware of at the time and that failed to show up at all in the unemployment numbers. Yet most macro texts over the last decade have graphs that mindlessly depict this imaginary depression by statistical artifact. [Bold in original]

I can’t believe I am actually anxious for a BLS report to come out. And yet here we are.

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