US Inflation Numbers Fudged Before Election

US Inflation Numbers Fudged Before Election
-Increasingly large portion of US statistics “garbage”
-Outlying values left in to make inflation look lower

(SEATTLE) 09/10/04 – The last several US inflation reports, including the CPI and PPI reports and others, don’t show the true picture of the US economy, due to outsize subtractions from actual inflation numbers. The subtractions are related to large “price drops” related to US vehicle maker finance programs, rather than the normal economic forces of supply and demand. The price drops are so large, they shouldn’t have been included--one of them comes out to 30 percent annualized. In fact, the US bureau that publishes the statistics normally removes such large values as “outliers,” according to official documentation—but it hasn’t done so this time, before the election. (1)

Moreover, because the vehicle manufacturers also own vehicle and home mortgage financing arms, the artificially low prices reported actually help them to rev up profits through increased financing volumes—unlike other manufacturers making up the rest of the economy. Indeed, recently the finance arm of a vehicle maker reported increased mortgage volumes--shortly after phony vehicle price values were reported via inflation numbers, which in turn, created a false perception regarding overall inflation. (2)

The news comes at a time when other major problems have been found in the inflation numbers related to housing costs—specifically, due to the assignment of a large portion of inflation to “owners equivalent of rent,” much of the reported inflation indices are worthless. In addition, it has recently been discovered that the CPI does not properly account for the employee portion of health care premiums—the index is too low by at least a factor of ten. (3) Finally, US inflation indices are not backwards comparable, since new ways to calculate them yields lower values. Yes--the 1970s weren’t really too different from the 80s and 90s, after all. (4)

Taken together, the problems with the inflation indices help explain current problems with the US economy, where companies lay off and can’t hire due to high costs, and where capital rushes madly into real estate investments. Moreover, bonds may be fundamentally mis-priced as compared to previous periods, since they are priced based on figures assumed to be comparable, which are increasingly not.

(1)“Reflecting increased incentives by some manufacturers, the index for new vehicles declined 0.7 percent in July” (BLS, July CPI); “The light motor trucks index fell 2.5 percent” <30 pct annualized!> (BLS, August PPI). “Outlier”: “Extreme-valued price ratios often occur as a result of deep discounts or free promotional goods or services” (BLS) (2) Ditech, mortgage arm of General Motors. (3) See “Hole Found in US Economy” report, below. (4) Quality-adjusted “hedonic” measurements have been slowly phased in over the last decade to lower current reported values; however, economists commonly compare such values to previous ones, which is an invalid comparison.

[papau]

1. Us does not use EU tech - I wish I could see comparable inflation

calculated under EU methods.

2. The bad part about it--

Much of the talk about "inflation going down" is really just the result of changing the calculations, and the fact that corporate monopolies sell cars, and auto and mortgage loans.

Period.

So much for "improved productivity"

Some bond buyers get it, but most do not, and I suspect a large correction is coming in the bond markets.

3. Lookie Here! Speaking of General Motors Fudging Inflation Numbers!!!

Chief of Bush Staff Andrew H. Card, Jr.

"Prior to being named Chief of Staff for the presidential administration of Governor Bush, Mr. Card was General Motors' Vice President of Government Relations since 1999. Mr. Card directed the company's international, national, state and local government affairs activities and represented GM on matters of public policy before Congress and the Administration."

http://www.whitehouse.gov/government/card-bio.html

4. Thread closed--story updated. eom