Will The Government Distort Statistics?

That’s not even a real question. It is evident they will whenever it suits their agenda and/or story. Let’s look at a few simple cases.

Inflation will not go away although it might seem to.

How does that work?

There are two ways to evaluate inflation.

  1. How you see prices. Like gas, food, recreation, and many other things you use.
  2. What the government tells you it is

There is only one of those they can influence. Do you think they would do that?

Oh yes, I do.

How do they do that?

The change in consumer price index is based upon a “basket of goods and services” How the price of the basket changes drives the CPI number. Okay, so how does the government win at that game? They change the definition of what’s in the basket. For example if the price of beef rises and people buy less of it, the share in the basket shrinks a little and maybe the share of pork or chicken goes up a little. The basket may reflect what people are buying, but it does not reflect what they want to buy. Inflated prices have changed their behavior.

It’s a measurement issue. A little like the fisherman’s ruler that can stretch to prove a given fish is any length you want it to be.  You can see the outcome at Shadow Government Statistics. Using 1980 methods, inflation is not a bit over 6% as they claim, it is more like15%. If you work somewhere there is a cost of living wage adjustment, which would you prefer they use?

Other distorted things 

Do you really believe unemployment is less than 5%. Again it matters what you count. Suppose you used their statistic U-6 instead of the the one they do use. U-6 is the number of people seeking work, plus the number seeking work because they are underemployed, plus the number of people who have given up looking for work. That seems a more likely evaluation insofar as people think about it. Using Shadow Stats again, unemployment broadly determined, U-6, is 24.8%. That’s almost 20% more than the “official number.”

Jumping back to 1994 we see the spread then was about 8%. Someone is using a different method now.

As with all statistics, don’t see the number only. Big variations usually just point you in the direction of what to study. Maybe both are wrong.

Alternatives

You might like gold. Many do. Others like crypto-currencies and they may be right, but while you are deciding, think about 1933.

The U.S. government outlawed private ownership of gold and bought it all at the old price of $21.67 per ounce. Gold history. Done with printed dollars of course. They then pegged the price at $35 per ounce for purposes of international settlements. They completely abandoned international settlements in gold in 1971.

If owning gold causes them policy grief, I don’t think such action would be impossible now. Do you?

The bit to take away.

In 1928, 93 years ago, George Bernard Shaw in his book “The Intelligent Woman’s Guide to Socialism and Capitalism,” wrote, “You have to choose between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the Government.  And, with due respect for these gentlemen, I advise you, as long as the Capitalist system lasts, to vote for gold.” If you have to risk your future on “the natural stability of gold” or on “the natural stability of the honesty and intelligence of the members of the Government” which will you choose? The same as Shaw I suspect. It is pretty simple until you introduce the integrity of the government as a variable.

Inflation is a bad thing for the image of governments. They will lie and cheat if necessary to protect themselves.

Be vigilant and very careful.


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I build strategy and fact-based estate and income plans. The plans identify alternate ways and alternate timing to achieve both spending and estate distribution goals. In the past I have been a planner with a large insurance, employee benefits, and investment agency, a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business. I have appeared on more than 100 television shows on financial planning, have presented to organizations as varied as the Canadian Bar Association, The Ontario Institute of Chartered Accountants, The Ontario Ministry of Agriculture and Food, Banks – from CIBC to the Business Development Bank.

Be in touch at 705-927-4770 or by email to don@moneyfyi.com

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