http://dailycapitalist.com/2011/10/30/q3-gdp-is-a-head-fake/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheDailyCapitalist+%28The+Daily+Capitalist%29
Who would lie about the Economy ??? The Government ???
Lastly these numbers are what are called “real”, or inflation-adjusted numbers. This gives rise to the question of what is the actual rate of price inflation. They don’t use the CPI ratio put out by the Census Bureau. They use what is called a “chained” price deflator from the GDP report which means they take prices as they were in 2005 and figure how much they have gone up since then. Then they adjust the gross spending numbers by this (“deflator”). This is good for the government because it is lower than what we believe to be the actual price inflation rate and makes GDP look better than it really is. Let’s face it, 2005 isn’t very long ago and if you go back farther in time this inflation indicator would make GDP look worse. Why not 1995 or 1985 or 1975?
Also, they keep changing their calculation methodologies. My preferred price inflation source is Shadowstats which uses methodologies the government used in 1990 or from 1980. Their 1980 chart is showing price inflation at about 12%. The BEA (which puts out the GDP report) is using a 2.5% rate of price inflation. In other words, if you adjusted current GDP by the 1980 deflator GDP would be in the negative. And, if that were the case, which I believe it is, we would be seeing flat to declining growth and high unemployment, which we are.
Who would lie about the Economy ??? The Government ???
Lastly these numbers are what are called “real”, or inflation-adjusted numbers. This gives rise to the question of what is the actual rate of price inflation. They don’t use the CPI ratio put out by the Census Bureau. They use what is called a “chained” price deflator from the GDP report which means they take prices as they were in 2005 and figure how much they have gone up since then. Then they adjust the gross spending numbers by this (“deflator”). This is good for the government because it is lower than what we believe to be the actual price inflation rate and makes GDP look better than it really is. Let’s face it, 2005 isn’t very long ago and if you go back farther in time this inflation indicator would make GDP look worse. Why not 1995 or 1985 or 1975?
Also, they keep changing their calculation methodologies. My preferred price inflation source is Shadowstats which uses methodologies the government used in 1990 or from 1980. Their 1980 chart is showing price inflation at about 12%. The BEA (which puts out the GDP report) is using a 2.5% rate of price inflation. In other words, if you adjusted current GDP by the 1980 deflator GDP would be in the negative. And, if that were the case, which I believe it is, we would be seeing flat to declining growth and high unemployment, which we are.
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