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“There are three kinds of lies: lies, damned lies, and statistics” Twain/Disraeli/Other

I’ve been wanting to write about this website for a while now, and the surrounding socioeconomic as well as political repercussions which arise. Firstly, a disclaimer; I would like to state that I am naturally dubious of political centralization, the overexpansion of governmental capacities/duties, and their ability to distort information so as to impose their political agendas. Now, without further ado let’s hop into today’s Daily Dose:

Shadow Government Statistics

shadow government statistics

This website offers their version of statistical analysis which contradicts the official publications by the United States government [We are Being Lied To and Manipulated]. They publish alternate data for indicators, such as: Inflation, Money Supply, GDP, Unemployment and the Dollar. I am not claiming that ShadowStats is the truth, and that the US’s public information is a complete hoax… far from it. However, I am arguing that certain governments have enough centralized control [maybe not the United States] to be able to “cook their books” and in so doing perpetuate their positions of political control. And as the old adage goes: “Knowledge is power” Sir Francis Bacon, 1597

Additionally, these economic indicators are not entirely indicative of the economy as a whole. Firstly, the way in which they are mathematically calculated allows for a large degree of governmental manipulation, for example: 5 Ways GDP Gets it Totally Wrong. Plus, since GDP can be measured through an increase in Aggregate Demand (AD) whose formula is the following:

Consumer Spending + Government Spending + Investment + (Exports – Imports)

It is clear that a government that drastically increases spending would boost GDP (and thus, increase their “worth” prior to a re-election), but the question remains: Are these governmental expenditures efficient/sound investments? What about saving within an economy, which improves long-run economic performance? These are clear shortcomings of the way in which GDP is measured since it favors the Keynesian School and allows for statistical manipulation. Nonetheless, a government which actively pursues inflation, through increasing either its spending or the money supply, can increase its indebtedness (at least in the short-run). Debt is wiped out by inflation, as the value of the currency diminishes. So, by publishing lower inflationary levels, a government could get away with increasing its spending and gain political points to retain their status.  

Furthermore, if the Alternate Data on ShadowStats is closer to the truth, it certainly paints a catastrophic image of the US economy which is currently undergoing one of its most successful periods ever! My objective today was to unveil some of the falsehoods behind the economic indicators, how one must always be dubious of publicly available information, to understand the high incentive for manipulation of these statistics and that one must always know the underlying framework of data sets (How they are calculated? What are their limitations?). 

I will be uploading a fascinating longer article on the differences between the Austrian School and the Keynesian School, and their fundamental analysis of the economy. They differ substantially on the factors which truly affect economic performance and links quite well with today’s Daily Dose. See you in the comments below!

May the ECON be with you