海角大神

Yes, dear reader, we are working on a new book. And to save time and effort, we鈥檙e working on it right here in the pages of the聽Daily Reckoning.

What鈥檚 it about? Well, you might think that a writer has an idea鈥� You might think he knows where he is going. Then, he sits down to write it. And that is certainly part of the story. But often the idea is more of an intuition鈥�a vague feeling鈥�a hint that there is some place where it is worth going, in hope of finding treasure. Where? What treasure, exactly? Often, the author doesn鈥檛 know.

The treasure we鈥檙e looking for is insight. We鈥檙e trying to understand why it is that the smartest economists in the world are so stupid. 脗聽Incidentally, we hope to understand why GDP is a fraudulent measure of prosperity鈥�and why central banking is a failure鈥�and why the governments of the developed countries are doomed.

There is one simple idea that explains all of this鈥�an idea that is both intuitively self-evident鈥�and demonstrably unrelenting. But we鈥檒l come to it in good time鈥�let鈥檚 get back to economists:

Does Ben Bernanke really think he, personally, can improve the wealth and well-being of the world鈥檚 people by tinkering with his interest rates and bank policies? Apparently so鈥�

Do Stiglitz, Krugman et al really think they can help the debt-soaked economy to grow by giving it more debt at a cheaper rate? Yes鈥�that鈥檚 what they say鈥�

Does Jeffrey Sachs actually believe that he and other smart economists can develop a strategy for the entire world economy? That鈥檚 the way it looks鈥�

Yesterday, we took up the role of numbers. The greater the precision, we asserted, the greater the lie. Why? Because these economists really don鈥檛 know anything for certain. The best they can do is observe鈥�guess鈥�and hedge their bets with a 鈥榤aybe鈥� or a 鈥榩ossibly.鈥� The more precisely they claim to know something for sure鈥�the greater the distance between what they can actually know and what they claim.

But numbers are to an economist what make-up is to an aging starlet鈥�put on enough of it and maybe the folks won鈥檛 see the truth.

Behind every number is a wrinkle鈥� Small numbers hide small ones. Big numbers hide bigger ones. A big number, such as the unemployment rate, has a whole army of other numbers behind it. There are the statistical adjustments鈥�seasonal adjustments鈥�and enough arbitrary definitions to make a corpse look good.

The Bureau of Labor Statistics says that 8.2% of the workforce is unemployed. Simple enough. But what does it mean? What鈥檚 the 鈥榳orkforce?鈥� And what does it mean to be 鈧�藴unemployed?鈥� Think of all those people who work for cash鈥�like the Latinos you pick up at gas stations for day work. Are they unemployed? How about the guy who couldn鈥檛 find a job, so he went back to school? Is he unemployed? What about the housewife who would like to find a job鈥�sort of鈥�but isn鈥檛 actively looking for one? Are these people part of the workforce?

It鈥檚 obvious that you can change the assumptions a bit and change the reported unemployment rate a lot. When statistician John Williams looks at the data, for example, he comes up with a real unemployment rate of 23% 鈥� almost as high as the jobless rate in Spain.

And yet, the BLS tells us that US unemployment is 8.2%. Not 鈧�藴around 8%.鈥� Not 鈥榣ess than one in ten.鈥� But 8.2%鈥�exactly. And yet, there are so many slippery assumptions lurking in the shadows of this number that it is completely unreliable and practically meaningless. Or worse. It pretends to tell you something鈥�but once you have taken it in you know less than you did before, because what you think you know is largely a fraud.

You could take almost any number used by economists and do the same analysis. Each digit masks a wart鈥�a crease鈥�a frown.

Probably no numerical grease is thicker and less transparent than the GDP. There, the numbers dissemble and mislead, just like economists鈥� other numbers. But it鈥檚 worse than that. The GDP concept itself is a deceit; not just vanity鈥�it is fraud.

Here鈥檚 a story from the聽New York Post:

They take a limousine to McDonald鈥檚, own his-and-her Segway scooters and have designed their new house with 23 bathrooms, each equipped with Jacuzzi tubs.

Time-share magnate David, 77, and his beauty-queen trophy wife, Jackie, 46, were already Orlando鈥檚 gaudiest couple when they decided to open their doors to filmmaker Lauren Greenfield as they broke ground on a 90,000-square-foot monster home with a 120-foot Grand Hall modeled after France鈥檚 Palace of Versailles.

It鈥檚 bigger than a 747-jet hanger. Designs include three swimming pools, 10 kitchens, a bowling alley, a skating rink and a garage that fits 20 cars. The home鈥檚 mahogany doors and windows alone cost $4 million.

鈥淲e never sought to build the biggest house in America,鈥� Jackie says in the film, titled 鈥淭he Queen of Versailles.鈥� 鈥淚t just happens.鈥�

It has been described as tacky, trashy and tasteless, with the top three floors inspired by Las Vegas鈥� Paris Hotel.

Trashy? Tasteless? Hey, it added to the GDP!

About the New Book聽originally appeared in the聽Daily Reckoning. The Daily Reckoning, published by聽Agora Financial聽provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".