Whose Numbers Are You Going To Trust When It Matters?

Recession, Retirement, Strategies

Every day we see infuriating, politically biased Facebook posts, followed by others totally debunking the point. Someone is lying, and may have spent a lot of money for a professional presentation, to make their lie convincing. Who do you trust?

  • “There is nothing from the CDC that I can trust.” Dr. Deborah Birx, concerned that the Center for Disease Control may be overstating virus deaths by as much as 25%:
  • “I was unaware they cut the previous month halfway through the month! But leave it to the BLS to try and throw us all off the scent of what a real unemployment number is….” Chuck Butler discussing the Bureau Of Labor Statistics (BLS) jobs report.

The BLS headlines, “CPI for all items falls 0.8% in April…. Food at home posting its largest monthly increase since February 1974.”

That sounded fishy! How much did food prices go up? I scratched around.

Breitbart fills in the blanks:

“Deflation picked up in the U.S. in April,…even while food prices soared. (Emphasis mine)

…. The food at home index increased 2.6 percent. The increase was broad-based, with all six major grocery store food groups increasing at least 1.5 percent over the month, the government said.

…. The index for meats, poultry, fish, and eggs increased the most, rising 4.3 percent. The index for cereals and bakery products rose 2.9 percent in April, its largest monthly increase ever. Dairy products, fruits, and vegetables all saw rising prices.

Pork prices skyrocketed. The price of pork chops rose 7.4 percent. Other pork prices, such as roasts and ribs, rose 10 percent. Egg prices jumped16 percent.”

Is this good news or bad news? Why does the BLS manipulate their statistics and taint their reports? Why is it important to know the truth?

A captain must always know the condition of the ship!

When it comes to looking after our life savings, I damn sure want to know and understand all the facts – not sugar-coated – just the truth.

How and where we invest is based on expectations of the future. Incorrect or tainted information can cost investors a lot of money, and destroy your retirement!

Where can we find the truth?

I met John Williams at a conference a few years ago. He publishes “Shadow Government Statistics”, defined as “Analysis Behind and Beyond Government Economic Reporting”. His Shadowstats newsletter is statistically amazing, his conclusions logical, and his presentation style blunt and honest. No sugar coating allowed!

I called John. With fake news everywhere, I wanted to hear the truth. We discussed not only what is happening, but why.

A little history lesson

Inflation is the government’s friend. Historically, inflation would rise, while social security checks would remain the same. Retirees would lose buying power every month. Occasionally congress would give retirees a “bump” in social security, not nearly enough to cover inflation, just enough to buy votes.

Inflation allowed the government to raise taxes without having to pass unpopular tax increases. With inflation, wages would rise and you hoped to maintain your buying power. Taxpayers would move into higher tax brackets, forking over a larger share of their earnings to the government. They called it “bracket creep.”

Things began to change during the Carter years. I saw the buying power of my parents’ life savings crumble due to high inflation.

The political class doesn’t want that kind of inflation. They prefer slow, regular erosion of buying power so the public won’t notice. Citizens were outraged and Carter was a one term president.

Enough was enough! Retirees saw their social security checks go up in the mid-70’s when congress indexed social security to inflation. In 1981, congress passed a law adjusting income tax brackets to inflation.

John directed me to several of his publications. First, we looked at inflation and the Consumer Price Index (CPI). Following are excerpts from his reports.

“Individual use of a CPI measure generally is tied to personal financial decisions or planning,…targeting financial returns that would stay ahead of inflation.

Accordingly, individuals look to the government’s CPI as a measure of the cost of living – maintaining a constant standard of living.

The CPI at one time met those parameters however, the government turned the CPI away from measuring the price changes in a fixed-weight basket of goods and services, to a quasi-substitution-based basket of goods, which destroyed the concept of the CPI as a measure of the cost of living of maintaining a constant standard of living.

Without meeting those parameters, an inflation measure has limited, if any, use for an individual.”

In his publications John provides dozens of examples of how they changed the calculations, all for the government’s benefit.

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Why would the government make these changes?

“Because the Politicians Wanted It. In the early-1990s, political Washington moved to change the nature of the CPI. Both sides of the aisle and the financial media touted the benefits of a more-accurate CPI, one that would allow the substitution of goods and services.

The plan was to reduce cost of living adjustments for government payments to Social Security recipients, etc.

The cuts in reported inflation were an effort to reduce the federal deficit without anyone in Congress having to do the politically impossible: to vote against Social Security. The inflation-calculation changes had the further benefit to government fiscal conditions of pushing taxpayers artificially into higher tax brackets, thus increasing tax revenues.

[Katherine] Abraham, the Clinton bureau [of Labor Statistics] commissioner, remembers sitting in Republican House Speaker Newt Gingrich’s office:

He said to me, “If you could see your way clear to doing these things, we might have more money for BLS programs.”

Federal Reserve Chairman Alan Greenspan and Michael Boskin, then chairman of the Council of Economic Advisors, were very clear as to how changing or ―correcting the CPI calculations would help to reduce the deficit.”

Congress passed a law protecting social security recipients from inflation; then told the BLS to change the numbers and quietly take it back – while continuing the stealth “bracket creep” to raise taxes.

John shows us the impact. The red line is the reported BLS numbers. The blue line is Shadowstats calculation based on the methodology used in 1980.

John describes what this graph really means:

“Like a vampire bat that sucks only enough blood for self-nourishment-leaving its victims alive for further abuse-the use of the C-CPI as a cost-of-living adjustment (COLA) measure is designed to suck real disposable income from the limited cash-flow of Social Security recipients, for the benefit of politicians who do not have the guts to vote against Social Security.

Those receiving, or who will be receiving Social Security payments were forced to pay into the system for all of their working lives, and generally believed the U.S. government would treat them fairly and honestly.”

I know John to be a soft-spoken, true gentleman. When it comes to these issues, he doesn’t mince words.

What is the true inflation number?

Using the official US inflation calculator, if an item cost $100 in 1980, it would cost $311.15 today.

John said, “Look at gold.” He believes gold prices are a measure of the reduction in buying power of the US dollar.

In 1980 gold prices were escalating wildly due to the Carter years inflation. Using the 1980 price, gold has gone up 280% – 33% higher than the official government number.

John shared the following graph. It shows an excellent correlation between gold prices and the 1980 inflation calculations.

The red dot in the lower right-hand corner is when John began calculating real inflation (1980). If you want more detailed information, go to his website, he is currently publishing an in-depth report on this subject.

What about unemployment numbers?

The BLS is playing the same game.

Once again, the political class hides the truth:

“In 1994, the Bureau of Labor Statistics (BLS) overhauled its system for estimating unemployment, including changing survey questions and unemployment definitions.

The new survey questions and definitions had the effect of minimizing the impact on unemployment reporting for those workers about to be displaced by the just-implemented North American Free Trade Agreement (NAFTA).”

At the time, I had close ties with an old-line consumer polling company, whose substantial economic monthly surveys were compared and contrasted carefully with census-survey detailsChange or reword a survey question, and change definitions, you can affect the survey results meaningfully.”

Government bureaucrats muffled “The Giant Sucking Sound” of jobs leaving the US, as presidential candidate Ross Perot described the NAFTA agreement.

I don’t trust government data. The BLS, with their academic theories and hedonic adjustments, is part of Big Brother’s propaganda machine. Like it or not, we have to go behind the scenes and find reliable data sources in order to make good financial decisions.

A 65-year-old man today, on average, can expect to live until age 84. A woman – 86.5. Social security will NOT keep up with inflation. Expect further reductions in benefits, hidden behind phony statistics. No wonder people are continuing to work past normal retirement age. Plan accordingly!

The data provided on John’s website, Shadow Government Statistics Is not politically motivated. I highly recommend it.

Note– I have no financial arrangement with John. He is a busy man and gave us a couple hours of his time for our education. I’m concerned that too many Americans are being duped by politically biased government data which could cause problems in their later years.
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