UK Cost of Living Increases: 9.5%

“By now, you are probably tired of reading me rail on and on about how government data fails to accurately portray the reality of inflation, and therefore GDP.”

NO — I’m not tired of it. It’s my favorite hobby horse, too. RAIL SOME MORE!

When inflation is understated and growth is overstated, the error is cumulative. Thanks to compounding, it makes a HUGE difference whether the long-term GDP growth rate is 2% or 3%. If inflation measures are suppressed to the tune of 1% by statistical legerdemain, then we may believe we are growing a robust 3%, when the truth is a crappy 2%. Among other things, operating under such an illusion spells doom for SocSec and Medicare.

Thanks to fiat currency, we already live in a world of money illusion — our unit of measurement, the dollar, is constantly stretching like a rubber ruler. Adding growth illusion — the belief that growth is healthier than it really is — encourages unaffordable spending and a megalomaniacal belief in a U.S. “superpower” which may be rotting away internally, as the former Soviet Union did (the CIA thought Soviet GDP was twice as large as it turned out to be, after the collapse).

Falsified statistics aren’t merely bad policy. They’re a deadly risk to security and prosperity.

I found this quote by Carlos Fuentes. Note that it was published in 1992, and the events of the past 16 years have only served to strengthen his analogy. I included the part about culture because I believe it is important to point out that U.S. cultural dominance can and is being extended well beyond its economic and military decline:

“Spain at her height could do anything. She could exhaust her treasury and forget her poor, her bankrupts, her devalued currency, her incompetent economy, her overvalued currency, her recessions and depressions, her debts both internal and foreign, her deficit spending, her negative trade balance, as long as she could keep herself at the head of the mission against the infidel, the Islamic threat and the Protestant threat. But eventually reality caught up and imposed the limits that imperial folly had so easily hurdled over.”

“The Spanish writer Fernando Diaz Plaja finds a provocative parallel in this situation between Spain and the United States. Both, at the height of their influence, joined military and economic force to an obsessive belief in their own moral justification. Whether against Protestantism, in the case of Spain, or against communism, in the case of the United States, the nation overextended its power, postponed solving internal problems, and sacrificed generations. And even when the enemy ceased to be menacing, the desire to use power persisted, inebriating, addictive.”

“The analogy can be stretched if one considers that in the middle of its protracted economic decline, Spain remained an extremeley powerful military force and indeed the great innovator and wielder of armed technology. The famous Spanish tercios, regiments of three thousand men, were admittedly the best fighting units in Europe. They were part of the best infantry in Europe, which again belonged to Spain, a nation that organized modern military command structures. Both ‘general’ and ‘admiral’ are Spanish military concepts; admiral is a derivation, once again, of an Arab word…”

“Spain not only pretended to European political hegemony; it also imposed–this was no pretension, but a reality–cultural fashions throughout Europe. This went from the manner of dress to the manner of war, and back to the formalities of court etiquette, deplomatic style, and conduct in polite society, which, according to Oswald Spengler, ‘gave (European life) a stamp that lasted till the Congress of Vienna and in essential points till beyond Bismark.’ From Charles V to Philip IV, adds the author of The Decline of the World, Europe lived ‘the Spanish century in religion, intellect, art, politics, and manners.’ Again, this was not the first or the last time that a vast empire, overextended, unaware of its many flaws, went surely toward its doom but actually created out of the corruption of its deterioration the ferment necessary to achieve the heights of creativity.”

“In spite of intolerance, corruption, incompetence, and commitment beyond its abilities, the Spanish monarch of the seventeenth century coexisted with the greatest flourishing of culutre that Spain would ever know: el siglo de oro, the Age of Gold, the greatest century of Spanish literature and painting–the age of the painters El Greco, Velazquez, Zurbaran, and Murillo, of the dramatists Lope de Vega and Calderon de la Barca, of the poets Quevedo and Gongora, and of the novelist Cervantes.”

(Carlos Fuentes, “The Burried Mirror”)

Jim and DownSouth,

Excellent comments.

Currency debasement is an ages-old phenomenon used to mask economic decline. During the Roman Empire they’d scrape the gold off the coins. Today we have bad statistics.

i really appreciated you interesting comments.

You don’t have to believe that a bunch of funny-hatted Masons are secretly controlling our economic affairs to be highly skeptical of the motivations of any administration when it comes to the measuring, calculation, and reporting of government statistics. It’s in the political interests of every government — Democratic and Republican — to present ongoing economic data in as positive a light as possible, because the negative electoral consequences are so predictable.

When you consider the extensive record of information suppression, manipulation, and outright distortion on the part of the current administration in virtually every area of government policy, I think it’s willfully naive to think that doesn’t extend to economic data and reporting.

This twisting of information is also happily abetted by our corporate media, since they are primarily concerned with securing and maintaining a regulatory and tax environment that’s as favorable as possible to major shareholders and senior management. They’re understandably concerned that things will change under a Democratic administration working with a filibuster-proof Democratic Congress, so the owners of Fox, CNN, ABC, and CBS et al are going to do everything in their power to put the happiest, shiniest spin possible on economic news from now until November in hopes of blunting the Democrats’ electoral hopes.

It IS a conspiracy. A conspiracy to defraud the working classes out of their wealth by hiding the true data about inflation. As a result, the top quintile’s wealth keeps expanding while the others’ shrink.

And some of us WEAR tin-foil hats because they’re comfortable, OK?

No more posting after midnight. I hate being thought of as crazy AND dumb.