Thursday, September 16, 2021
HomeFeatured EntriesThe AP and Youth Unemployment, Part II

The AP and Youth Unemployment, Part II

In the interests of splitting my thesis into manageable bites, here is my second observation from the same AP article I linked earlier.

They are doing their best to protect their little man-god from the constant barrage of criticism he deserves (which they freely heaped on GWB with much less cause – remember the “jobless recovery”?) but occasionally, they still slip in a little nugget of truth. Here is the relevant portion of this article:

New 2010 census data released Thursday show the wrenching impact of a recession that officially ended in mid-2009. There are missed opportunities and dim prospects for a generation of mostly 20-somethings and 30-somethings coming of age in a prolonged period of joblessness.

Do you see that little line there about “officially ended?” All the rest of us know that the recession never really ended. We didn’t experience any real economic growth, and no, it is not George Bush’s fault. Obama took a bad situation and made it much worse.

Yes, according the gov’t statistics, the recession ended in 2009, but this only proves that the gov’t can manipulate statistics.

Why would they do so? First, the number they were looking at was expected to go up after about 18 months. Recessions regularly end after about 18 months, so it was not like that result would have been shocking. Second, number crunching is an administration function, and the President has an interest in presiding over a growing economy, so their desire was for the recession to have ended right on schedule.

Why do I not believe them? Because the numbers are fishy. Recessions officially end when the economy posts two consecutive quarters of GDP growth. Guess what goes into GDP. Government spending. This is appropriate, as government spending actually does go into the economy even though most of it is utterly wasted. They do buy paper, fancy cars, votes, and pay wages, etc., so the money enters the economy.

But in this particular time period, do you remember what was happening with gov’t spending? Yes, going nutso is a great description of it. Rocketing up is another way of putting it.

Fed gov’t spending currently makes up between 20% and 25% of GDP, depending on the year and the state of the economy. Federal gov’t spending increased from $2,982B to $3,517B between 2008 and 2009. If everything else was utterly and totally stagnant, GDP should have increased over 4% in that year alone. It did not. It shrank by 3.5%.

Let’s take it a little farther. From 2007 to 2010, federal spending went from $2,728.9B to $3,456B and totaled $12,685.3B, an average increase of 7.27%. During the same time period, GDP dropped by .8%. If the private economy had been utterly and totally stagnant for that time period, GDP would have increased by an average of approximately 1.8% on government spending alone.

All these numbers together mean that the private economy has been consistently shrinking by over 2.5% per year for the last three years and all the “growth” in GDP has been in money borrowed and flushed down one rat hole or another, be it union coffers, Solyndra, unemployment checks, or a trip to Martha’s Vineyard. Those expenditures do not equate to job opportunities. They do not give us a market for our houses. They do not give us a return on our investments. It is lost.

[Thanks to www.usgovernmentdebt.us for all the great numbers. You make an economist’s heart sing. And thanks to these guys for the GDP numbers. Very user friendly.]

Another thing that makes the GDP number suspicious is inflation. They have to adjust GDP for inflation or else a country with a stagnant economy and 20% inflation looks like it’s growing like topsy. But how do we calculate inflation in this country? Well, it’s not stable or accurate. Prior to 1990, we calculated it based on a “basket of goods” and the price increase of the same basket. But then they began to tinker with it, adjusting it for quality increases and taking out certain “volatile” items, which is reasonable to a certain extent. But increases in quality are hard to quantify and it is hard to say if or when certain volatile price increases are no longer volatile in both directions but are causing overall price increases.

Well, guess what that does? Understates inflation. This is good for the gov’t in several ways: Social Security payment increases are tied to inflation, so when the number is low, raises are low. Tax bracket increases are tied to inflation so when inflation is understated, they get tax increases via bracket creep. And then the one that is addressed here: GDP looks better than it actually is.

So yes, when you take out volatile food and energy prices, and adjust it for the joy of having ice in the doors of our refrigerators and better iPhones than we used to have, inflation is quite manageable. Of course, that doesn’t help much when I’m trying to cook dinner, pay my electric bill, or fill up my truck, but Uncle Sugar tells me that doesn’t count.

So when you read that the inflation rate is nearly zero, know that under other methods of calculating inflation which were the ones we used 20 years ago (when Ronald Magnamus Reagan was setting the economic world onto turbo boost), it is closer to 10% than 5%. If GDP was adjusted for that change, we would have not seen one growth quarter yet, even with these increases in gov’t spending. This means the private economy is not just stagnant but is shrinking at a startling rate.

The amusing part of all this (if you’re not too depressed to see anything at all amusing in this utterly discouraging topic) is that the AP essentially acknowledges that the economy is not recovering at all, which we all have known in our guts, with their statement that it “officially ended.” They know it didn’t really end but they have been required to parrot the government line like the good little bird cage liners they are. And people wonder why no one trusts the government or the media any longer.

Queen Hotchibobo
I was born in Saginaw, Michigan, and I grew up in a house on Saginaw Bay. My daddy was a poor, hardworking Saginaw fisherman. Too many times he came home with too little pay. Naw, not really, but it sounds more interesting than the real bio, so there you are.

6 COMMENTS

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6 COMMENTS

  1. “Inflation is always and everywhere a monetary phenomenon.” What Milton Friedman meant by that was that once the extra money is printed and goes into circulation, the price increases are automatic. It’s just a matter of time. The consumer price increases (CPI) are not inflation. They are the evidence that inflation has already occurred, and are as phony as a three dollar bill for the reasons Queenie stated so well.

    • Yes, CPI is a measure of inflation, but as with so many things related to economic measure, it is a terribly imprecise tool even when it is not being deliberately manipulated. The simple fact is that no two families value or purchase the same “basket of goods” as another family. So if one family consumes a great deal of pasta but another family hates it, increases in pasta prices won’t be equally reflected in their inflation experiences.

      With millions of products on the market, you can see where measuring price increases for American families on average would be difficult even if the quality didn’t change at all.

      Of course, as you said, with the Fed pumping money into the system, it will be easier to recognize regardless of whether or not it’s easy to measure as it will be everywhere and severe.

  1. “Inflation is always and everywhere a monetary phenomenon.” What Milton Friedman meant by that was that once the extra money is printed and goes into circulation, the price increases are automatic. It’s just a matter of time. The consumer price increases (CPI) are not inflation. They are the evidence that inflation has already occurred, and are as phony as a three dollar bill for the reasons Queenie stated so well.

    • Yes, CPI is a measure of inflation, but as with so many things related to economic measure, it is a terribly imprecise tool even when it is not being deliberately manipulated. The simple fact is that no two families value or purchase the same “basket of goods” as another family. So if one family consumes a great deal of pasta but another family hates it, increases in pasta prices won’t be equally reflected in their inflation experiences.

      With millions of products on the market, you can see where measuring price increases for American families on average would be difficult even if the quality didn’t change at all.

      Of course, as you said, with the Fed pumping money into the system, it will be easier to recognize regardless of whether or not it’s easy to measure as it will be everywhere and severe.

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