March 13, 2012 at 11:01 pm #8590
Detroit Publishing Co. Beantown 1906 “Boston, Washington Street. On your left: National Fireworks” A universal strategy of large institutions i
[See the full post at: Juking the Stats: Our Culture of Manipulation]March 14, 2012 at 12:58 am #1642
I don’t know, I think those assumptions are pretty severe (consider than in the aftermath of the 2008 crisis unemployment increased from 5% to 10%, which is comparable to if it were now to increase from 8% to 13%, and we can all agree the 2008 crisis and its fallout were severe). That said, it can and probably will be a lot worse next time. And I agree with you completely that the stress tests can’t suitably account for the losses which would occur even under their own scenario, and are not really intended to anyway since they’re just PR work. Nice article! I often find myself thinking about Obama that everything he says and every policy decision he makes has as its primary purpose ‘perception management’.March 14, 2012 at 3:46 am #1643
The Fed is reportedly “Juking” the stock market to “manage” consumer optimism…..I believe that is true. What troubles me is Stoneleigh has said that the equities markets topped out on May 7. But now the major indices have moved above the May 7 “top”. Does this alter her economic prognosis? Does she still consider this to be a sucker’s rally?March 14, 2012 at 5:26 am #1645
Of course it’s a sucker’s rally. What’s the alternative: some kind of economic renaissance involving China, Angry Birds, and cold fusion? There’s no question the stock market–and pretty much everything else–is going down, the only question is how long until the next leg down. But maybe not everyone would agree. 😉March 14, 2012 at 7:03 am #1647
The stock market rally could be seen as people fleeing non yielding savings instruments into something with a higher yield and perceived inflation protection. Especially with the spin doctors screaming higher employment and happy days are here again. Would seem doubtful that it has long term economic meaning behind it; but it could take on a life of its own and we start hearing the wealth effect song again. ???March 14, 2012 at 12:58 pm #1650
One of the more egregious manipulations is the accounting for Social Security. The surplus FICA and SECA taxes were supposed to be invested in nonmarketable Treasury securities, dedicated exclusively for Social Security beneficiaries. Instead of being a store of wealth, these real dollars were borrowed by the Treasury to pay real current expenses, and lower the deficits.
All that remains is a hollowed artifact of wealth, collateral due by the full faith and credit of the U.S. Government.
The actuary of the SS trust fund, Stephen Goss, implies in a recent trustees report that all is well until the trust fund is exhausted. Long before that occurs, we are already seeing the trust fund interest being used to make up for the cash shortfalls. This has the same financial effect when the trust fund is exhausted: the use of general revenues to pay for the trust fund interest, the same way we pay all government expenses, either from a trust fund or from a general appropriation.
Don LevitMarch 14, 2012 at 1:09 pm #1651
YesMaybe wrote: I don’t know, I think those assumptions are pretty severe (consider than in the aftermath of the 2008 crisis unemployment increased from 5% to 10%, which is comparable to if it were now to increase from 8% to 13%, and we can all agree the 2008 crisis and its fallout were severe)
The equity price decline is pretty severe, housing as well – although nothing close to what would have happened without massive intervention in 2008-09. And $540bn in losses along with 4 banks going under is something to write home about. I’d say the real unemployment rate when factoring in the true size of the labor force is closer to 11-12% right now, and when including under-employment were are talking closer to 20%. How the Fed decides to apply these assumptions to calculate losses across the banks (especially the unemployment increase) is another story.
The fact that markets rallied on the back of these results just indicates to me that, even now, some investors are more than willing to be manipulated, as long as they get a measure of statistical certainty about the future that is really impossible to have. Although, all of these people and robots are only in it for very short-term profits. Whatever medium to long-term suckers are still left will be squeezed out shortly. I don’t think any of the big players are actually buying into the story of a global or U.S.-decoupled recovery.March 14, 2012 at 2:04 pm #1652
If everyone underwater on his mortgage decided to leave the property, most banks in the U.S. would go belly up. Maybe the stress tests should include more assumptions.March 14, 2012 at 3:17 pm #1654
Good point: U-6 rose from a low of 8% to a high of 17.2%, 4% more than the 5.5% change in U-3.March 14, 2012 at 4:12 pm #1656
One thing that U-6 or even Shadowstats adjusted U-6 doesn’t include is the wages and salaries of new employment. According to the Bureau of Lying Statistics, losing a 50,000 a year UAW job and picking up a $15,000 Micky D job is a push (in Vegas jargon).March 14, 2012 at 5:14 pm #1660
Speaking of Vegas e g the handle on the strip has been rising rather impressively of late. One of the more reliable statistics IMHO since the states tax revenue is dependent on it. I suppose it could be foreigners, but something is fishy about an improving Vegas handle and the unemployment picture.March 14, 2012 at 6:38 pm #1665
Probably the Boyz behind the supercomputers at the NY Fed looking for new markets 🙂March 15, 2012 at 12:25 am #1681
Must be required reading for the Lords and Ladies of high finance and low national politics: https://www.amazon.com/How-Lie-Statistics-Darrell-Huff/dp/0393310728
As Kevin Phillips and Shadowstats have pointed out, tweaking some calculations can have a huge effect on how reality is percieved by the masses. Inflation calculations are foremost among the “juked” stats. Hide the real (higher) rate of inflation and you cover a multitude of sins: cost-of-living adjustments, rates of median wage growth, GDP, some really important ways we deal with spending, budgets and the measures by which we judge the health and fairness of our economy.
But there are also those data points that hide the truth in plain sight such as labor participation rate (and who know’s how much this one is “juked”). When falls in the rate of unemployment are matched by falls in the labor participation rate, that doesn’t exactly qualify as good news, though you wouldn’t know it from listening to the MSM blather on about “job growth”.
The music is bound to stop again soon and lots of people are going to be surprised to find that the chair they thought they had has been snatched up by JPMorgan.March 15, 2012 at 9:40 am #1694
The stress tests most certainly COULD HAVE included sovereign defaults in them, but didn’t. Yet another triumph of clever test construction, the only casualty being truth.
An MSM article from a few months back makes this point:
By next month, 31 banks must show the Federal Reserve plans for how they would withstand some pretty dire economic scenarios. They include: an 8% contraction in GDP, the Dow Jones Industrial Average collapsing to 5,700 points by the middle of next year, and an unemployment rate rising from the current 9.1% to 13% by 2013.
But it seems the test isn’t factoring in one of investors’ biggest worries: Debt defaults in the euro zone.March 15, 2012 at 2:51 pm #1697
Prices paid by manufacturers in NY has done a complete 180 from those paid in Philly and soared by record amounts, while the latter plummeted into a deflationary abyss. Perhaps the Empire State went back to colonial scrip without telling anyone else?
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