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The 2013 Economic Reality-Check

Articles & Blogs - International Commentary

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It has become an exhausting process attempting to translate back into the real world all of the fantasy-numbers passed off on us as “economic statistics”. It’s even more exhausting trying to unravel the Machiavellian nonsense dubbed “analysis” – and then trace back a path to sanity.

So rather than making a (futile) effort to rebut all of this vacuous propaganda in isolation, this article is an attempt to provide a (necessarily abbreviated) summation of the economic fantasy-world presented to us by the mainstream media.

As always, the best place to start in exposing this statistical mythology is the U.S. housing market, since that’s where the propaganda machine provides us with the best laughs. Ever since the collapse of the U.S. housing market in 2007; every two or three months the mainstream media has proclaimed that the U.S. housing market is “starting to recover.”

With the U.S. housing market (supposedly) experiencing roughly its 20th “recovery” over the past five years; this time the mainstream media assures us they’re serious. Let’s take a look at what the charts say.


As readers can clearly see, this chart shows new home starts “rising” to a level equal to the worst previous housing recessions in recorded U.S. history. To refer to this as a “recovery” is just plain silly. However, what makes this chart even more absurd is that most of these “housing starts” don’t even exist.

We can establish this with certainty by looking at two more U.S. housing charts:


 

What we see in these two charts are two ridiculous contradictions. When we compare the new home “starts” with “sales”, we see that the starts have been exceeding the sales by nearly a 2:1 margin every month for the past five years. Topping that absurdity, we have the inventories chart which shows that despite “starts” exceeding sales by a 2:1 margin that inventories have supposedly plummeted straight down.

Obviously, if new home starts were exceeding new home sales by a 2:1 margin every month, then:

a) Virtually all U.S. homebuilders would have already bankrupted themselves, because no business can remain solvent making twice as many units as they sell;

b) The inventories chart would be going straight up, not straight down.

Adding one final element of absurdity, we’re told that the U.S. “housing recovery” has been gaining steam in recent months. In fact, all the propaganda machine has been doing is inventing even more fantasy housing-starts – as the ratio of “starts” to “sales” has now expanded to roughly 2.5:1.

The stench of surreality doesn’t diminish when we turn to the subject of inflation. According to the U.S. propaganda machine; inflation isn’t simply “low” in the U.S. – it’s practically non-existent. Yet only six months ago, Asian governments convened an emergency summit to discuss the “global food-price crisis.”

At approximately that same time, the World Bank warned that global food prices were rising at an annualized rate of 120%. And in that same month, the U.S. government was reporting (literally) 0% inflation in the U.S.

Is it possible that global food-inflation could be exceeding a 100% rate while at that same moment “inflation” was 0% in the U.S.? We can answer that question with another question: do Americans eat food?

Note that while the U.S. Inflation Lie is the most extreme, all Western governments claim to be in similar inflation-resistant, economic cocoons – while inflation rages out of control across the rest of the world. Yet the moment we cease to believe Western inflation lies then we really venture into the realm of economic quick-sand, as many of our most important economic statistics are directly derived from these inflation numbers.

As regular readers know by now, every quarterly estimate of GDP must be fully “deflated” by the prevailing inflation-rate, otherwise mere changes in price become confused as “economic growth”. Put another way, if governments deliberately understate the rate of inflation then every point they understate inflation by can be (is) directly added to GDP.

Thus for any readers who still choose to reside in the “real world”, and who know that our governments are understating inflation by a wide margin; then we must all believe that Western GDP has been exaggerated to the upside by an identical margin.

Obviously we only need to subtract a few percentage points from Western GDP reports to turn all of the “weak recoveries” reported by these governments into continuing (and worsening) recessions. This means that we must (as a matter of arithmetic) be just as deeply skeptical of Western GDP statistics as we are of Western inflation numbers.

Of equal significance, “inflation” (i.e. rising prices) is nothing but an expression of the rate at which our (paper) currencies are plummeting in value. Indeed, in proclaiming “competitive devaluation” to be our official economic policy (i.e. racing to see which government can destroy the value of their currency fastest), our governments have explicitly confessed to unleashing crippling inflation upon the world.

Yet in a world where all our governments have explicitly confessed to destroying their currencies (and creating inflation); not only do our lying governments refuse to acknowledge this self-created inflation, they even have the audacity to tell us from time to time that these plummeting currencies are “rising in value.”

It would be a mistake, however, to view the U.S. as undisputed Champion of the Absurd when it comes to reporting on its economy. European governments have demonstrated they can peddle propaganda to their own populations just as ridiculous and implausible as the tripe gobbled up by American Sheep.

By now, all but the most-masochistic of readers would have been fed up reading of the efforts of European governments to “fight the debt-crisis”. As with the U.S. housing sector, year after year we are assured on at least a quarterly basis that “this time” they finally have the problem under control.

How have European governments been “fighting” this debt-crisis? By lending more money to already-insolvent economies. And for the really, really insolvent economies there is also Austerity: where European governments slash the wrists of their economies with suicidal spending-cuts to reduce the size of their deficits – while (in fact) all of this Austerity has only increased deficits still larger, and thus made their debt-crises worse not better.

What are we to make of this entire tidal-wave of economic insanity, which has practically washed away any/all “sign posts” leading back to the real world? Don’t worry. The propaganda machine has an answer for that too: they call this “the new normal.”

In the “new normal”; housing-sector depressions can be turned into housing recoveries simply by fudging a couple of numbers. In the “new normal”; inflation can be conquered simply by closing one’s eyes and pretending it doesn’t exist – and by pretending that inflation doesn’t exist we can also turn recessions/depressions into “economic recoveries.”

In the “new normal”; our governments can tell us out of one side of their mouths that they’re destroying the value of our currencies with their competitive devaluation, while out of the other side of their mouths they talk about these currencies “rising in value.”

In the “new normal”, Deadbeat Debtors can be made solvent by lending them more money; and if Austerity has been proven to only cause economies to disintegrate at a faster rate then the appropriate prescription is even more Austerity.

Of course nothing about the New Normal is “newer” than the phrase itself; for we already had an old economic colloquialism which captures exactly the same concept: “this time it’s different.”

 

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Jeff Nielson
...
written by Jeff Nielson, January 29, 2013
As a 40 year real estate veteran (s/f, m/f and commercial), I am more knowledgeable than most about the housing sector. What I see is extreme hopium among the few builders that are left, and the biggest disconnect is that all these "starts" must be accomplished by using robots, because the skilled trademen I know are still unemployed. I also get a laugh at the touted mortgage ap numbers,because the reality is that approvals may be as low as 10%, and you never hear of this number. The true organic first time buyer, needed for any recovery---much less a sustained one, is nowhere to be found what with student debt enslavement,lack of mobility for the massive amount of underwater folks, and the continuing and incremental decline in median household income. As to inflation, we both know that the government needs to understate the number to hide the USD debasement and the concurrent decline in the standard of living. But this fraud is now becoming apparent to even the most uniformed and/or uneducated; the EBT card doesn't go as far as it used to.


Thanks again for the comment Apberusdisvet!

Indeed, it has always surprised (and disappointed) me that we haven't seen more people from the real estate sector gravitating toward precious metals and anti-mainstream media information sites (like this).

I would assume that NO ONE gets a clearer glimpse of how our economies are disintegrating AND the not-to-be-believed "economic statistics" foisted upon us. In particular, people in that sector should have noticed many of the things you listed:

1) The collapse in INCOMES (among potential buyers)
2) The collapse in BUYING POWER (which is somewhat different)
3) The huge disconnect between "official" numbers on new home construction and REALITY

The fact that most of the people in this sector remain oblivious to what is really going on, despite the evidence being (literally) in their face on a daily basis DOES help to explain one thing.

It explains HOW we can see so many talking-heads in the mainstream media and (supposed) "expert" economists blithely pedaling the Oligarch's propaganda. Obviously ALL of these people cannot be part of any "conspiracy".

This shows the importance of propaganda to propping up the Oligarchs' (fraudulent) Paper Empire. Without that constant brainwashing, they would quickly lose most of the (ignorant) foot-soldiers who help them SPREAD the lies. smilies/wink.gif
apberusdisvet
...
written by apberusdisvet, January 29, 2013
Jeff: As a 40 year real estate veteran (s/f, m/f and commercial), I am more knowledgeable than most about the housing sector. What I see is extreme hopium among the few builders that are left, and the biggest disconnect is that all these "starts" must be accomplished by using robots, because the skilled trademen I know are still unemployed. I also get a laugh at the touted mortgage ap numbers,because the reality is that approvals may be as low as 10%, and you never hear of this number. The true organic first time buyer, needed for any recovery---much less a sustained one, is nowhere to be found what with student debt enslavement,lack of mobility for the massive amount of underwater folks, and the continuing and incremental decline in median household income. As to inflation, we both know that the government needs to understate the number to hide the USD debasement and the concurrent decline in the standard of living. But this fraud is now becoming apparent to even the most uniformed and/or uneducated; the EBT card doesn't go as far as it used to.

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