Philosophical Musings

Philosophical Musings

Saturday, March 23, 2013

Deceptive Government numbers

We pay the govt to compile statistics, which they are too eager to do, to show us how great they are at managing the economy.  The GDP, or Gross Domestic Product, is one of them.  It is prominently displayed as an indicator of economic growth, but it is a sham.. a deliberate deception to portray a false reality.

They double count taxes, include deficit spending, wars, & disaster relief.

Let's say the citizens of a nation make $1T. They pay 20% in taxes.. ~ $200B. The govt takes that money & passes it around, adding it to the gdp. That should not be added to the 'product' since it was already counted. Next, they borrow another $500B, & pass that around, adding it to the gdp number. So we've gone from a nation that made $1T, to one that made $1.7T without any more actual production. That is why it is a misleading number, & is used to convey a false perception of reality. True production has gone down in the us.. for many years, now. Yet the gdp has stayed high. Look at manufacturing jobs. Look at exports & trade balance. These are better indicators of the health of the economy, not the amount of money that can be printed & shuffled around, with every banker & politician skimming off a bit to add to the gdp.

And, in a circular reasoning or ponzi style of accounting, they use the gdp number they have manipulated to justify printing MORE money. They print money, add it to the gdp, loudly proclaim, 'look how great our gdp is!' & print some more to dump into the number. Of course it would look good. But it is a meaningless number, used only to deceive.. the essence of propaganda.

The GDP is used to deceive, not enlighten. It is not a measure of production, but includes spending by govt. It is too easy to make the gdp numbers look good by number juggling. If you took out all the disaster relief, all the war costs, all the govt expansion.. the actual 'product' of the nation is down. But they parade this number around to prove we're doing great! If i could add $17T to my balance sheet, i could look good too. But they don't include debt.. only spending, which makes it a propaganda tool.

Everyone knows manufacturing is down.. we are exporting our jobs to china. The big banks siphon off a bunch of cash with every QE, & that is included in the gdp! Really?!? Print a bunch of money, toss it into the economy, enriching the big moneyed elite & shady politicians, then add it into the gdp. Then use that gdp 'growth' to justify printing more money & flooding the economy. Rinse. Repeat. It is more like a ponzi scheme, this current monetary policy.

Look how great the economy is doing! Look at all the people getting rich & trickling down their wealth to the rest of us! We've got plenty of basis for our fiat money, all the increase proves it! It is circular accounting reasoning. If a company did this, they would be put in jail or shut down by the sec. Instead, the govt does it, & uses it to prove a false premise.

With the GDP, the govt gives a false view of 'production' by including non production, double counting, & deficit spending. Actual production can decline, & the number won't show it.

Let's put it on a smaller scale to illustrate.

Your town has farmers & some manufacturing in it. They are the main employers. The total income for the town is $1M (small town). That includes the mayor, the police chief, the firemen, the street sweeper.. everything.. even the mayor's baby sitter. The taxes are small, & they have no debt. Let's put the taxes at 10%.. $100,000 was the tax revenue for the town. Taxes are counted twice, since they are taken from those who worked & produced, originally, then they are counted again when paid out to the public sector. The total gdp for the town is $1.1M.

Then one of the farms is sold or traded to the forest service. It becomes unproductive. A business shuts down. The town suffers a 20% loss in income. They are making $800k, now. The people that work at these are laid off, & go on welfare. The town decides to raise taxes to 20%. That puts revenues at $160k, to help support those who lost their jobs. That puts their gdp at $960k.

But the added tax burden causes another business to fail. Now they are at 30% reduction & are making $700k. The city fathers decide they cannot keep raising taxes, so they begin to borrow. Their revenues are at $140k, but there are more people on welfare, & more govt employees are hired. So they borrow $100k to supplement the revenues. That puts their total gdp at $940k.

But this is just feeding a downward spiral. More businesses fold, & more revenue is needed as the town increases it's governmental footprint. They borrow $300k the next year, with revenues of $120k. The private sector is making $600k, now, but the total gdp is at $1M. Productivity is down, but the gdp makes it look the same. It is an illusion, as the downward spiral continues. The state takes more & more, & borrows more & more, yet the producers of the nation are producing less.

The current US govt is borrowing 1/3 of it's budget costs. If true production decreases by 1/3, you would not know by the gdp, because it shows all the deficit spending, borrowing, & expansion of govt as 'production'. Want good gdp numbers? Start a war, or borrow & spend $1T every year, or both!

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