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THE "REAL" ECONOMICS

"The System Isnt Broken. It is Built This Way"
True but Secret policy
False but Open policy
We are told something but which are false . what is true are not told to us .
How much we are to believe . Most of the so called exposes are to
mislead us . Most of the so called exposers are agents .
The below is just to tell you , what we are told is not true . what is the real truth
is hidden , very well . we can come to some conclusions on whats happening
around us .They cook up data so as to bring in the predetermined result they
wanted . All the official data is false , fraud , intentionally brought in to bring in
their agendas .

Consumer Price Index CPI

A measure that examines the weighted average of prices of a basket of
consumer goods and services, such as transportation, food and medical care.
The goods are weighted according to their importance. Changes in CPI are used
to assess price changes associated with the cost of living.
Core inflation / Consumer Price Index Ex Food & Energy
The Consumer Price Index (CPI) Ex Food & Energy is a measure of price
movements by the comparison between the retail prices of a representative
shopping basket of goods and services. Products such as food and energy are
excluded .
The preferred measure by the Federal Reserve of core inflation in the United
States is the change in the core Personal consumption expenditures price
index (PCE). This index is based on a dynamic consumption basket. Economic
variables adjusted by this price deflator are expressed in chained ( replacing an
expensive item with a cheap similar item for calculations , the index should be
called Consumer Survival Index and NOT CPI ) dollars, rather than the
alternative constant-dollar measure based on a fixed goods' basket.

Inflation is a sustained increase in the general price level of goods and services
in an economy over a period of time. When the general price level rises, each
unit of currency buys fewer goods and services. Inflation reflects a reduction in
the purchasing power per unit of currency. Take "" EGGS" as a case in point .
what was the price of one natural unadulterated egg , 50 years ago , and what is
the price of an egg filled with high amounts of antibiotics , steroids and other
harsh chemicals , which come from a totally unhealthy chicken , which cannot
even walk , and which is not allowed to move around .
GDP is a total hoax
GDP, Gross Domestic Product, is explained by governments to be the measure
by which the success and failure of an economy can be measured. It is roughly
explained to be the monetary value of all the goods and services produced or
alternatively all the wages earned and profits made in a specified period of time
(generally in one year).
Let us consider briefly the computation of the GDP measure. There are three
main ways to calculate GDP:
1) The expenditure method
2) The income method and
3) The value-added method.
Mathematically, the GDP can be defined with the following equation.
GDP = C + I + G + (X M) where, C = Private Consumption , I = Private
Business Investment , G = Public or Government Expenditure , X =
Exports , M = Imports
Consumer Spending or C
Consumer spending is defined as the total amount of money consumer spends
on everyday goods and services. Increased consumer spending indicates not
only higher disposable income but also better expectation and confidence in the
economy. Increased spending by consumers help driving up the GDP value.
Government spending records the total spending of Federal, State and
Municipal on goods and services. It covers the areas of education, defense,

judiciary and other things . Going to war and throwing money to undeserving
politicians seem to increase GDP.
The gain in the consumer sector is mainly due to the current housing and
consumer credit bubble which led to the boom in the construction, commercial
banking and real estate sector. All of which are consumer related.
To finance our consumption we can either borrow or finance it through savings
or retained earnings. The problem is when we borrow to finance our private and
public expenditure. As a result we are getting deeper and deeper into debt.
To maintain the GDP growth rate , spending in Consumer, Private Investment
or Government will have to increase. Since our GDP growth is fuelled by debt
we will have to borrow more in the future. This is where the problem comes in.
Why did people appear so angry and unhappy when the stock market was at
record levels, the unemployment rate is down sharply, inflation is subdued and
the number of jobs is increasing?
The economy isnt really doing what the statistics say it is doing. Our
statistics are wrong and Main Street folks know it.
Wall Street hedge fund mogul, Paul Singer, head of Elliott Management Corp
said.
Nobody can predict how long governments can get away with fake growth,
fake money, fake jobs, fake financial stability, fake inflation numbers and fake
income growth, When confidence is lost, that loss can be severe, sudden and
simultaneous across a number of markets and sectors.
Fake jobs: The Labor Department adds hundreds of thousands of jobs a year to
its count for positions it thinks, but cant prove, are being created by new
companies. This practice, which has gone on for decades, needs to be
investigated.
How to Fake Economic Growth
GDP is part of whats called the National Income Accounts. GDP measures
the value of goods and services produced in the economy; the other side of the
accounting ledger is GDI, or gross domestic income, which measures the
corresponding income generated from that production. That means that the

upward revision based on depreciation-driven business investment translates

into an upward revision of business income in GDI.
As economist, Dean Baker, has noted in his commentary on the revisions, The
new measure added $250 billion to depreciation in the corporate sector for
2012 and that the profit share of net corporate output (as percent of GDP)
rose to 25.5 percent in 2012, the fourth highest share in the post-war era.
A closer inspection of the 1.7% US 2nd quarter GDP number shows almost all of
the major gains in the economy came from business investment.
The Reuters commentary on GDP release indicated that consumer spending
(70% of the US GDP) slowed in the second quarter significantly from the first.
So it doesnt explain the 1.7% unexpected GDP rise. Similarly, government
spending (typically 24% of the economy) contracted for the third straight
quarter. So nothing there to justify the 1.7%. Exports rose, but imports rose
faster, which translates to a negative contribution to GDP.
It was mostly a turnaround in investment in nonresidential structures and gains
in outlays on equipment and intellectual products, according to Reuters, which
explains the 1.7%. Not surprisingly, thats the precise area in which the GDP
upward revisions have been focused.
Change the way depreciation is defined, adding to corporate profits, throw in
new categories of what constitutes business investmentand now you have a
30% or more higher GDP. If you cant generate a sustained real economic
recovery for five years with past and current economic policiesthen just
redefine the definition of recovery itself.
The GDP calculation is a fraud
GDP includes government spendingbut does not subtract any of the
borrowing the government does to fund its spending.
Frank Shostak, an adjunct scholar of the Mises Institute, observes, The GDP
framework gives the impression that it is not the activities of individuals that
produce goods and services, but something else outside these activities called
the economy. However, at no stage does the so-called economy have a life of
its own, independent of individuals. The so-called economy is a metaphor it
doesnt exist.

When there is a large surge in public spending, with the torrent of stimulus
packages from governments around the world, the GDP growth registers
most prominently in the expenditure method.
The Great CPI Scam--and We Lose Again
The Central Bank in conjunction with the government manipulates the
Consumer Price Index so that it will always understate the real inflation rate.
Then the Central Bank can argue that they have to print money because
inflation is too low. Central Bank Presidents then claim the we have to achieve
2-3% inflation to comply with their mandate of price stability and full
employment. If, for some reason, the CPI ever ticks higher than 2-3%, the Fed
will simply ignore it and claim that core inflation, which excludes food and
energy (where inflation is most evident) is the real measure of inflation. This
way they can keep interest rates low and credit easy.
Another part of the inflation index hoax is the down-sizing of consumer food
products.
What is coming
1. Gold Standard
Gold , Diamond and other so called precious substances are actually worthless
scraps , pushed on to us , through propaganda , promoting them as precious /
valuable substances . For a substance to be precious , it should be life saving or
at least increase the comfort / luxury , it should have intrinsic value .
2.Gross National Happiness
The assessment of gross national happiness (GNH) was designed in an attempt
to define an indicator and concept that measures quality of life or social
progress in more holistic and psychological terms than only the economic
indicator of gross domestic product (GDP).
Huxley brothers, Bertrand Russell , and George Orwell -whose real name
was Eric Blair , cousin to Tony Blair , all agents of the global rulers , have
written extensively on this , and are pushed on to us as school text books .
Like the England of his day, Huxley's Utopia possesses a rigid class structure,
one even stronger than England's because it is biologically and chemically
engineered and psychologically conditioned. And the members of Brave New
World's ruling class certainly believe they possess the right to make everyone
happy by denying them love and freedom.

Most of service sector jobs are to keep people engaged and to keep them
away from politics / power game .Stock Markets / derivatives play a
major role in making GDP appear good, whereas , these are all
manipulated book entries , which do not contribute anything positive to
the society .

The King commissioned Adam Smith to write a book about how the King could
increase the amount of gold in the royal treasury. Because that's all the King
cared about. The Wealth of Nations was written at about the time of the
American Revolution. Smith scratched the surface of the mechanisms of a free
enterprise economy, and he inflated his meager findings into one of the most
ponderous tomes of all time, until it was finally surpassed by War & Peace.
Economists still work by Smith's premise today. That is, the purpose of being
an economist is to pander to the ruler for the sake of enriching the treasury, with
no regard for the effect on the workers who actually earn the gold that is being
hoarded by the king.
Smith's work was based on the very thinking that led to the birth of the USA by
revolting against it.
Human wants are unlimited. Means to satisfy those wants are limited. Those
limited means have alternative uses. Thus, there are three aspects, i.e. 1)
Prioritisation of human wants, 2) discovering the alternative uses to which
every resource could be put and lastly 3) Efficient Utilization of every resource.

If we keep doing this policy of stimulus and growing government, its just
going to get worse for the average man. Our standard of living is going to fall . .
. People who are expecting Social Security cant get all that money. People
expecting government pensions cant get all their money . . . We simply cant
afford to pay them.
In a recent interview to talk about his New York Times best-seller Aftershock,

Wiedemer says, The data is clear, 50 percent unemployment, a 90 percent

stock market drop, and 100 percent annual inflation starting in 2013.
Before you dismiss Wiedemers claims as impossible or unrealistic, consider
this: In 2006, Wiedemer and a team of economists accurately predicted the
collapse of the U.S. housing market, equity markets, and consumer spending
that almost sank the United States. They published their research in the book
Americas Bubble Economy.
When the interview host questioned Wiedemers latest data, the author
unapologetically displayed shocking charts backing up his allegations, and then
ended his argument with, You see, the medicine will become the poison.

THE TERRIBLE environmental problems that confront us today, and those that
threaten the very survival of our species on this planet, are the inevitable
consequence of economic development, which is ironically identified with
progress, an overriding concern of almost every government throughout the
world today.
This is not generally realised, partly because neither the nature nor the
implications of this fatal process are clearly understood. To do so requires that
we first realise the fact that economic development has become the overriding
goal of governments throughout the world only in the last fifty years. President
Harry Truman of USA is supposed to have first suggested that it should become
so. Previously, economic development was the priority in but a very small area
of our planet, mainly in parts of western Europe and North America. And that
too for a period that is insignificant in comparison to mans total existence on
this planet.
Economic development consists of the continuous year-to-year increase in the
production, distribution, sale and consumption (throughput) of food, artefacts
and services. This is taken to be the only means of increasing wealth, and
thereby, human welfare.
This notion would have been totally incomprehensible to the traditional man,
for whom material goods were not seen as desirable in themselves, but only in

so far as their acquisition served his social interests, which were paramount for
him. Wealth, for him, was basically social wealth and also ecological wealth.
He saw his welfare as being predominantly determined by his ability to
maintain the integrity and stability of the social and ecological systems of
which he was a part. For it was only by maintaining the balance of the systems
that they could be counted upon to dispense their inestimable benefits; which he
was not willing to forgo merely in order to acquire material goods, that played
little part in the strategy of his life.
The economic systems of traditional society, as the economic historian Karl
Polanyi puts it, was submerged in social relations. So was its science and
technology.
The goal of continuously increasing the throughput of goods and services is
incompatible with the survival of social and ecological systems, which have an
optimum structure, and whose preservation requires an optimum amount of
these commodities. It is for this reason alone that economic development
(whether it be appropriate development, eco-development or the now
fashionable sustainable development) can only lead to social and ecological
disruption.
Why, we might ask, is economic activity out of control in this way? The answer
is that instead of being conducted at the level of the family and the community
(the original units of economic activity) they are now being fulfilled by
specialised, purely economic, surrogate social groupings, i.e. corporations
(private or government-owned) that by their very nature can have no social,
ecological, religious or moral preoccupations of any kind. In the traditional
societies the family and community were at once the units of all other activities,
such as education, the care of the old and the infirm, the fulfillment of the
government itself.
Unfortunately, in terms of the worldview of modernism (in which a
corporation-based society necessarily supplants the traditional worldview),
social and ecological disruption is of no account, since the very concept of
social and ecological wealth is incomprehensible. The society is seen to be no
more than the total number of individual producers and consumers who are
governed by the same institutions. Nature is but a source of raw-materials for
the economic process and a sink for disposing of its evermore voluminous and
toxic wastes. In such conditions, the fate of both society and nature are virtually

sealed. It is but a question of time before they are both cashed-in, and, in this
way, transformed into economic wealth.
It is in this way that with the economic development of New Zealand, at the end
of the eighteenth century, the vast whale population of the surrounding seas was
rapidly cashed-in. Then it was the turn of the seals. Once they were gone it was
that of the great Kauri forests of the North Island. Once they had been
destroyed, the bulk of the remaining forests were burnt to make way for
millions of sheep that turned the soil of the mountain areas into dust. This
runaway process is still under way today. If anything, it has accelerated, as it
has done throughout the Third World since it has been brought within the orbit
of the Western industrial system.
The recycling of materials, as economic development proceeds, becomes
impossible, in any case, because an increasingly degraded biosphere becomes
incapable of coping with the ever more massive throughput of materials.
In addition he now produces massive amounts of synthetic organic chemicals
such as PCBs, CFCs and nearly all modern pesticides which, being totally
foreign to the natural world (xenobiotic), cannot be recycled within it and can
only accumulateor break down into decayed products that are often equally
un-recyclableand that more often than not must interfere particularly
drastically with its normal functioning.
The international agencies, such as the Food and Agricultural Organisation of
the United Nations (FAO), are part of the problem and not of the solution.
FAOs Tropical Forestry Action Plan (TFAP) is an eight billion dollar economic
development project that involves planting vast plantations of fast growing
exotics for the benefit of the papermills and the rayon factories.
If we are to survive on this planet we shall have to create a very different sort of
society; one in which economic activities can once again be brought under
social control.
America's Bubble Economy: Profit When It Pops - October 6, 2006
by David Wiedemer , Robert Wiedemer , Cindy Spitzer
America's Bubble Economy Is Going To Become An Economic Black Hole

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What is going to happen when the greatest economic bubble in the history of
the world pops? The mainstream media never talks about that. They are much
too busy covering the latest dogfights in Washington and what Justin Bieber has
been up to. And most Americans seem to think that if the Dow keeps setting
new all-time highs that everything must be okay. Sadly, that is not the case at
all.
Right now, the U.S. economy is exhibiting all of the classic symptoms of a
bubble economy.
Meanwhile, Wall Street has been transformed into the biggest casino on the
planet, and much of the new money that the Federal Reserve has been
recklessly printing up has gone into stocks. But the Dow does not keep setting
new records because the underlying economic fundamentals are good. Rather,
the reckless euphoria that we are seeing in the financial markets right now
reminds me very much of 1929. Margin debt is absolutely soaring, and every
time that happens a crash rapidly follows.
But this time when a crash happens it could very well be unlike anything that
we have ever seen before. The top 25 U.S. banks have more than 212 trillion
dollars of exposure to derivatives combined, and when that house of cards
comes crashing down there is no way that anyone will be able to prop it back
up. After all, U.S. GDP for an entire year is only a bit more than 15 trillion
dollars.
But most Americans are only focused on the short-term because the mainstream
media is only focused on the short-term. Things are good this week and things
were good last week, so there is nothing to worry about, right?
Unfortunately, economic reality is not going to change even if all of us try to
ignore it. Those that are willing to take an honest look at what is coming down
the road are very troubled. For example, Bill Gross of PIMCO says that his
firm sees "bubbles everywhere"...
The following statistics are from one of the articles entitled "Why Is The World
Economy Doomed? The Global Financial Pyramid Scheme By The Numbers"...
-$70,000,000,000,000 - The approximate size of total world GDP.
-$190,000,000,000,000 - The approximate size of the total amount of debt in
the entire world. It has nearly doubled in size over the past decade.

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-$212,525,587,000,000 - According to the U.S. government, this is the notional

value of the derivatives that are being held by the top 25 banks in the United
States. But those banks only have total assets of about 8.9 trillion dollars
combined. In other words, the exposure of our largest banks to derivatives
outweighs their total assets by a ratio of about 24 to 1.
-$600,000,000,000,000 to $1,500,000,000,000,000 - The estimates of the total
notional value of all global derivatives generally fall within this range. At the
high end of the range, the ratio of derivatives to global GDP is more than 21 to
1.
Special drawing rights (SDR)
International financing instrument created in 1970 by the International
Monetary Fund (IMF) to coincide with the disfavor of the US dollar as
the principal currency of the world trade. Also called paper gold, an SDR is
neither paper nor gold but an accounting entry.
IT is said that when Lord Randolph Churchill made his extensive tour through
South Africa in 1891 he was acting as agent to obtain information for the
Rothschilds, who, of course, knew of the diamonds and gold which were being
worked there. He took with him on these travels a mining engineer and does not
seem to have himself followed up the favourable reports that this professional
made to him.
However that may be, it was 3 years before this when Cecil Rhodes applied to
the London Rothschilds to buy out the French interests in the Kimberley mines
and so obtain control of the Diamond industry in South Africa. For this
purpose, Rhodes was financed by the Rothschilds to the extent of 1,400,000,
and soon afterwards (with Barnato, to whom 5,338,000 was paid), the De
Beers Consolidated Mines was formed, and the Rothschilds put in the Jew Sir
Carl Meyer as their watchdog director. Out of the first deal, Rothschilds made
100,000 in 3 months by the rise in value of the Companys shares; they got a
further 100,000 commission for the purchase of the De Beers mine. The
Chairman of the De Beers Consolidated Mines is now the Jew Sir Ernest
Oppenheimer. Sir Alfred Beit (Jew) is a Life Governor. The Diamond mining
industry is a complete monopoly, and the price of these beautiful stones is kept
up by artificial means .
Before that, the Rothschilds had long been interested behind the scenes,
together with the Mosenthals, in London and South African Exploration Co. .

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They took a financial interest also in the enormously powerful firm of Wernher
Beit and Co., which owned huge tracts of land and gold mines in South Africa.
When Beit realised that it would be necessary to obtain the support of
international financiers and bankers in order to raise all the capital required for
the gold-mining industry, he decided to broaden the market by giving
participations to the Rothschilds of Germany, Austria and France. So writes J.
B. Taylor, of Wernher Beit & Co. in his A Pioneer looks back, 1939, p. 109.
Most significant of all is the information given by Dr. Hans Sauer in his book
From Africa, 1937; Dr. Sauer was present in Westminster Hall when the
Parliamentary Committee was examining Rhodes on his part in the Jameson
raid which fomented the outbreak of the war, and says he noticed that the
evidence was taken in a curious way and always went to ground like a hardpressed fox whenever it began to point too strongly at certain persons. Sauer
asked Rhodes the reason for this; Rhodes replied One of the big men knew all
about it.
In discussing Sauers book, the Cape Times, 2nd Nov., 1937, identifies the big
man as (the late) Lord Rosebery! Rhodes told Sauer that he had discussed the
possibility of the raid with Lord Rosebery when the latter was Prime Minister!
The dates of Roseberys Ministry were 1894-5, at which time he was a
widower, his wife having been a Rothschild, and his children half-caste
Rothschilds!
Four leaders of the raid, including Lionel Phillips, were sentenced to death by
a British Court, but the black cap meant nothing where Rothschilds were
concerned, so the prisoners were able to buy their lives by a fine of 25,000 per
head! Soon after this, there was a perfect epidemic of baronetcies among those
intimately concerned with the dastardly business of the Raid. Cecil Rhodes was
rewarded by becoming a Director of De Beers in 1900.
Not only do the Rothschilds control the mining of South African gold, but they
control also its price. In London, all gold bullion passes through the hands of
three firms who govern the price of gold from day to day; these are N. M.
Rothschild & Sons, Mocatta & Goldsmid, and Samuel Montagu & Co.
The Rothschilds, world kingpins, worth $500 trillion! They own Reuters, AP,
and fix the price of gold
Formula 4.1

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GDP = C + I + G + (X - M) Resource Cost/Income Approach To calculate

Gross Domestic Income (GDI), first consider how revenues received for
products and services are used: 1. Pay for the labor used (wages + income of
self-employed proprietors) 2. Pay for the use of fixed resources, such as land
and buildings (rent); 3. Pay a return to capital employed (interest); 4.Pay for the
replenishment of raw material used. Remaining revenues go to business owners
as a residual cash flow, which is used to replenish capital (depreciation), or it
becomes a business profit. So with the resource cost/income approach, GDP (or
GDI) is calculated as wages, rent, interest and cash flow paid to business
owners or organizers of production. So GDP by resource cost/income approach
= wages + self-employment income + Rent + Interest + profits + indirect
business taxes + depreciation + net income of foreigners.

Formula 4.2
GDI = wages + self-employment income + Rent + Interest + profits + indirect
business taxes + depreciation + net income of foreigners The above formula is
probably hard to memorize, so at least try to remember this relationship - GDI
= wages + rent + interest + business cash flow .Total GDP figures should be the
same by either method of calculation. But in real life, things don't always work
out this way. Official figures usually have a category called "statistical
discrepancy", which is needed to balance out the two approaches.

GDP FRAUD
Its happening right now(2014) in America. A massive criminal conspiracy is
being carried out to benefit the political class and big business elitesall to the
detriment of the great American middle class.
There is no better evidence for the conspiracy than the just released secondquarter GDP number: 4% growth in GDP. This is pure fraud. This is a
government-run scam. The news on every fronteconomic, foreign,
government scandalscould not get any worse. And then suddenly on the heels
of the worst GDP quarter in 67 years (-2.9%)right after we find out that the
average household has lost one third of its net assets since 2003 and almost half

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since 2007right after we find out that 36% of Americans (77 million people)
are in debt collectionsuddenly we find out the economy is flying? Really?
What if the number is pure fraud, just like the jobs numbers the month before
the 2012 election? Whistleblowers now say that the figure of 800,000 jobs in
one month was made up based on estimates by pro-Obama employees of the
Labor Department. Some of us doubted the statistic at the time. The number
just seemedin a wordrancid.
This new GDP number in one word: rancid. It does not reflect the reality on
the ground. Ask any CEO. Something is wrong. This GDP turnaround of
almost 7% month to month has never been seen in history. (By the waythat
800,000 jobs increase for one month had also never been seen before, either.)
Not that even a growth rate of 4% a month would solve the problems if it were
real. Any consumer in America will tell you that inflation is running wild. Meat
prices are at all-time highs. So are grocery prices. So are cable TV bills. Health
insurance premiums are up dramatically more than in the six years before
Obamacare combined. The price of the gas we put into our cars has doubled
since Obama became president. The cost of electricity is at an all-time high.
But theres very good reason to believe that the supposed 4% GDP spike is not
real. Like the October 2012 jobs report based on pure fraud, this new GDP
report has holes the size of Texas.
In the governments own words, this statistic is based on incomplete data and
estimates.
Its also based in large part on inventory accumulation. In other words, the
growth of GDP is based on businesses piling up inventory in the hopes
someone might buy it. As ZeroHedge.com points out, 52% of GDP growth in
the past year is simply inventory hoarding, not actual sales.
Lastly, the fraud of Q2 GDP is also based on the new way the government is
now measuring GDP. They came up with a new way to count GDP that just
happens to revise all GDP numbers since 1999 upwards. The second quarter of
2014 was the first real-life quarter since the new revision took effect. So
assume a large portion of the bump is due to this sudden upward revision. In
other words things just got better on paperbut not in the real world.

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Look At The GDP Fraud!

Allegedly rational beings continue to base their entire conception of how the
economy is doing on a single fraudulent numberthe Gross Domestic Product
(GDP).
Consider the Washington Post's Economy shrinks as federal spending cuts
trump private sectors growth. The fraud is in the headline.
Fourth-quarter economic activity was far below the 1.1 percent annual growth
rate economists had predicted. Exports fell at a rate of 5.7 percent in the fourth
quarter, reflecting the slowdown in Europe. Businesses also drew down their
inventories after unusually high stockpiling in the previous period. That
reduced economic growth by 1.27 percentage points.
Unusually high stockpiling in the previous period.??
But perhaps the biggest surprise [ ? ] was the size of the drop in federal
spending: 15 percent at an annual rate during the fourth quarter. Defense
spending suffered an even bigger decline, dragging down growth by 1.3
percentage points. Many agencies began adopting contingency plans, instituted
hiring freezes and delayed projects in anticipation of widespread budget cuts
all of which depress spending.
Still, economists said the decline looks especially dramatic because government
spending had jumped more than usual in the previous quarter.
Government spending had jumped more than usual in the previous quarter.!!
Here's the spin.
That may have been a reflection of government agencies and private
contractors shifting spending earlier in the year in anticipation of budget cuts,
boosting third-quarter growth at the expense of the fourth.
GDP is highly dependent on government spending, especially defense spending.
And that spending is deficit spending floating atop a cesspool of endless

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borrowing and, lately, enthusiastic money printing by the Fed. In effect, the
United States borrows or prints money to keep the GDP number above zero.
"the idea that economic growth relies on government spending [is] a Keynesian
pipe dream."
And then there is the choice of the GDP deflator. The deflator is used to
convert nominal GDP into real (inflation-adjusted) GDP. The lower the deflator,
the higher the GDP. BEA's choice of a particular deflator appears to be
arbitrary, it is a total mystery why the BEA didn't simply choose a lower
deflator to put 2012 Q4 GDP into positive territory.
The BEA used a deflator (inflation rate) value of 0.6%. If they had used the
CPI, GDP would have contracted 1.56%, not 0.14%.
A jump in pay may have helped consumers. After-tax income rose at a 6.8
percent annual rate from October through December, the biggest increase since
the second quarter of 2008, todays report showed.
In addition to improving wages and salaries, some companies also paid
dividends and employee bonuses earlier than usual before tax rates went up
this year. The Commerce Department estimated that about $26.4 billion of the
increase in incomes was attributable to early dividend payments and another
$15 billion reflected bonuses and other types of irregular pay.
The gain in consumer spending may be difficult to sustain this quarter as a tax
increase takes a bigger chunk from earnings...
Thus we see that income going to the wealthy inflated aggregate income
because government tax policy affected the timing of dividend and
bonus payments.
What is interesting is that supposedly rational actors are so heavily invested in
this GDP fraud, which further validates every single thing about how humans
function. This is especially true when humans have a vested interest in
maintaining the fraud.

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It appears that humans will believe literally anything that allows them to
pretend that the complex constructs they have created (like the U.S. economy)
are functioning properly, even when it is glaringly obvious that they are not.
Venezuela Shows The World How To Practice GDP Fraud
I have noted multiple times that the universal practice of counting government
spending at 100 cents on the dollar in GDP turns fraudulent when governments
start to manipulate their spending in order to manipulate the GDP numbers.
Latin America ,the last about 15 years of its history have been dominated by a
guy named Hugo Chavez. Chavez was first elected President in 1998, and reelected in 2000, 2006 and 2012. He spent his nearly 15 years in power
imposing what he called the "Bolivarian Revolution," along with a personal
form of socialism/ authoritarianism. At the time of his final re-election in
October 2012 he was critically ill with late-stage cancer, and he died in March
2013, leaving Venezuela to his personally-selected successor Nicolas Madura.
How has Venezuela been doing during the last 5 or so years of Chavista rule?
If you believe the official economic statistics, just fine. Yes, Venezuela is
rather dependent on oil as its chief export, so that when oil prices took a big
tumble from mid 2008 to early 2009 from about $140/bbl to $65/bbl,
Venezuela's economy took a dip in 2009 and into 2010, which they
admit. Here is official Venezuela GDP data from the Central Bank. But putting
aside the 2009-10 event, the official statistics show fairly impressive GDP
growth in 2008 (6+%), 2011 (4.2%), 2012 (5.5%), and into 2013 (0.5% in Q1
and 2.6% in Q2). It would be great if the U.S. could match those kinds of
numbers!
Foreign Policy on May 10.

Here's an excerpt:

[I]t is getting harder to find items such as sugar, cooking oil, and corn
flour -- an essential part of any Venezuelans' diet. According to latest
figures from the Central Bank, scarcity peaked in April to reach a
historic record of 21.4 percent. This means that roughly 1 of every 5
products consumers want to purchase is missing from the shelves. Not
surprisingly, Venezuelan consumers are being forced to queue for basic
staples, sometimes in an undignified manner. Rolling electricity

18

blackouts continue to be yet another thorn in the government's side.

They've been the norm following the complete state takeover of the
electricity industry in 2007.
Well, how could GDP possibly be growing at those impressive rates if
production of everything that counts is going down? Perhaps the price of oil is
going up? Turns out that the price of oil has been fairly stable since the
beginning of 2011, fluctuating between about $80 and $110/bbl. That's not the
answer. Also, Venezuelan oil production has declined since the start of the
Chavez years, going from about 3.2 million barrels per day in 1998 to about 2.3
million in 2012, and the decline has mostly continued in recent years.
Venezuelan oil production declined in 2008, 2009 and 2010, had a slight 3.8%
increase in 2011, and was completely flat in 2012.
The answer can only be one thing -- an explosion of government spending,
dishonestly counted at 100 cents on the dollar in GDP as if it were real wealthgeneration. According to Bloomberg last September 13, Venezuela had a 67%
increase in government spending in the run-up to the 2012 election. That's one
way to get a 5% increase in GDP! The problem is, it's not real. The Bloomberg
article reports that the biggest piece of the increased spending was for
subsidized housing . But of course they count the spending at 100 cents on the
dollar positive. And thus you can see how a country can report 5% GDP
increase when in fact its economy is in serious decline.
But of course, everybody who counts takes the fraudulent numbers without the
slightest skepticism. For example, the CIA in its 2012 World Factbook
reports the official government numbers of 5.5% GDP growth in 2012 and
4.2% in 2011 (although it does say as to 2011 that "record government
spending" helped to produce the result). The World Bank also takes up the
official fraudulent numbers and passes them on without comment .
The United States is doing the same thing, just, so far, on a smaller scale as a
percent of GDP. But with U.S. GDP growth running under 2% per year, could
government spending increases result in positive GDP growth figures when
honest accounting would show negative? It is absolutely possible, and
becoming more likely all the time.
The GDP Fraud
If GDP is telling us that the US economy is steadily improving, how come so

19

many folks on Main Street feel so bad? Dont they read the papers? Dont they
know the GDP is improving?
The short answer to these questions is that the GDP calculation is a fraud.
To understand why the GDP numbers could be so good when the economy all
around looks so bad, it is necessary to understand a few pertinent details of the
GDP calculation. For one thing, GDP includes government spendingbut does
not SUBTRACT any of the borrowing the government does to fund its
spending.
Frank Shostak, an adjunct scholar of the Mises Institute, observes, The GDP
framework gives the impression that it is not the activities of individuals that
produce goods and services, but something else outside these activities called
the economy. However, at no stage does the so-called economy have a life of
its own, independent of individuals. The so-called economy is a metaphor it
doesnt exist.
Convention tells us that the GDP framework is, more or less, a tool used to
measure the size and health of this metaphor, the economy. Most often, we
hear it expressed as a rate of growth either positive or negative. And it is this
widely followed number that determines when economic expansions end and
recessions begin (two consecutive quarters of negative growth.). But GDP as
a measurement is really just hogwash. It can no more calculate the health of an
economy .
Let us consider briefly the computation of the GDP measure. There are three
main ways to calculate GDP:
1) The expenditure method
2) The income method and
3) The value-added method.
Theoretically, all three methods should produce the same result although, in
practice, this almost never happens. For instance, when there is a large surge in
public spending, as we have seen recently with the torrent of stimulus packages
from governments around the world, the GDP growth registers most
prominently in the expenditure method.

20

Roughly speaking, this method calculates the size/activities of an economy

by totaling its expenditures, minus imports. It is also the most common method
employed to determine GDP. The equation looks like this:
GDP = private consumption + gross investment + government spending +
(exports imports).
To understand just how misleading the expenditure method can be, let us
consider briefly the case of the Australian economy. It is widely accepted that
the Aussies, under the deft stewardship of Prime Minister Kevin Rudd, had
avoided entering a technical recession during the crisis from which we are now
said to be recovering. Its a nice storyexcept that it is a lie or, at best, a
one-third truth.
Australia DID unquestionably fall into recession. Its just a matter of
definitions.
The Fraud of GDP
The number one myth that politicans want you to beieve is the following:
1.

U.S. GDP Is Growing

U.S. GDP has increased by 4.26% from 2007 to 2010, according to data
compiled by the U.S. Bureau of Economic Analysis. In the same period of
time, the U.S. national debt has increased by 61.6%, according to the U.S.
Treasury. Looking at these numbers, you dont need to be an economist to
see that something is very, very wrong.

Contrast the point above with a family whose income has increased by 4% but
whose debt has increased by 15 times more. Is this improvement or merely
conspicuous consumption? Unless this family used the debt to purchase an
investment that has held its value or increased in value, all that has occurred is
conspicuous consumption and a substantial drop in the familys net worth.
In the case of our economy that is primarily what has occurred. In the case of a
family, instead of focusing on what they spend (the GDP approach) we focus on
their net worth. Are they becoming wealthier or poorer. Why dont we focus on
net worth to measure the state of our economy? Is there any surprise that
government encourages you to spend? It may make you worse off but it makes
GDP look better.

21

The fraud is that GDP measures spending, regardless of debt. A country is like a
family. It is not better off because it spends more. It is better off when its wealth
increases. The proper measure of well-being is Net Worth, which is often
negatively related to spending.
GDP Fraud Exposed
A joke on the reality of GDP economics, published Sunday in China's Global
Times:
Two economists are walking down the street when they pass two piles of
dogshit.
The first economist tells the other, "I'll pay you $20,000 to eat one of those
piles." The second one gladly complies and collects his $20,000. He then said,
"I'll pay you $20,000 to eat the other pile." The first one then gets his $20,000
back.
The second economist says, "You know, I don't feel very good. We both have
the same amount of money as when we started. The only difference is we've
both eaten shit."
The first snaps back, "But you forgot that we have created $40,000 worth of
GDP."

Economic Recovery by Statistical Manipulation

Inside The Numbers
Facing the prospect of a 2nd quarter (2013) GDP report showing economic
growth less than 1% (some professional forecasting services predict as low as
0.5%), and a year to year growth of the US economy likely to come in at barely
1%compared to a 2011-12 already tepid 1.7% Obama administration will
announced a major revision of how it calculates GDP which will bump up GDP
numbers by as much as 3% according to some estimates. Thats one way to
make it appear the US economy is finally recovering again, when all other
fiscal-monetary policies since 2009 have actually failed to produce a sustained
recovery.

22

Todays GDP definition revisions is not the first time that politicians, failing in
their policies, have simply rewritten the numbers to make the failure go away.
But this time, the GDP revisions will be made going all the way back to 1929.
So watch for the slowing US economy GDP numbers from last October 2012
onward to be significantly revised upward.
Instead of an actual, paltry 0.4% GDP growth rate in the fourth quarter of 2012,
a weak 1.6% in the first quarter 2013, and the projected 0.5%-1% for the 2nd
quarter 2013all the numbers will be revised higher in the coming GDP
estimate for the 2nd quarter 2013. The true GDP growth rate of the most recent
April-June 2013 period, projected as low as 0.5% by some professional
macroeconmic forecasters, might not thus get reported.
President Bill Clinton played fast and loose with economic statistics as well at
the end of his term, redefining who was uninsured in terms of health care
coverage. The total of 50 million uninsured at the end of the 1990s, was
reduced to 40 millionafter having risen by ten million during his eight years
in office. Today, they still claim there are only 50 million without health
insurance coverage, despite the ten million more becoming unemployed since
the Great Recession began in 2007, tens of millions of population increase in
the US, and millions more having left the labor force.
Similarly, under President Reagan in the 1980s a raft of government statistics
were revised. Unemployment in particular was revised downward by various
means to make it appear fewer were jobless in the wake of the 1981-82
recession. Changes were made to inflation data as well to make it appear lower
than it was, and to how manufacturing was defined to make it appear that the
mass exodus of manufacturing offshoring of jobs was not as great as it was in
fact.
There has been radical shift in GDP definition since earlier this year, in a series
of analyses on US GDP numbers over the past year, July 2012-June 2013, in
which the warning was raised , the US economy was slowing significantly
from its already weak historical 2011-2012 annual growth rates of less than 2%
to around half at 1% . The point was raised the Obama administration appears
may use the 5 year scheduled GDP revisions to boost the appearance of the
slowing US economy.
One explanation is that Gross Domestic Income (GDI) has been running well
ahead of GDP (Gross Domestic Product). GDP is supposed to measure the
value of goods and services produced in the US, while GDI is a measure of the

23

income generated in the US. They are supposed to be about equal, with some
adjustments for capital consumption and foreign net income flows. The idea is
whatever is produced in terms of goods and services generates a roughly
equivalent income. However, it appears income (GDI) is rising faster than GDP
output. The BEA revisions therefore appear aimed at raising GDP to the higher
GDI levels.
But income is rising faster because investors, wealthy households (2%), and
their corporations are increasing their income at an accelerating pace from
financial securities investmentsthat dont show up in GDP calculations which
consider only production of real goods and services and exclude financial
securities income like stocks, bonds, and derivatives. So instead of adjusting
GDI downward, the BEA will raise GDP. It appears from early press indications
it will do this by reducing deductions from GDP due to research and
development and by now counting some kinds of financial investments as GDP.
When GDP was developed back in the 1930s, economists purposely left out
financial assets price appreciation in the determination of GDP. Such assets did
not reflect real production of goods and services, it was determined. But today
in the 21st century, massive gains in capital incomes increasingly come from
financial asset appreciation. Even many non-financial corporations now
accumulate up to 25% of their total profits from what are called portfolio
investmentsi.e. financial asset speculation. Like profits from real production,
that gets distributed to shareholders in the form of capital gains, dividends,
stock buybacks, etc. That income also ends up in reported Gross Domestic
Income, or GDI. So capital incomes surging to record highs in recent years are
showing up in a rising GDI in relation to GDP. The governments answer is to
conveniently revise GDP upward to better track GDI. But that doesnt represent
real economic growth and does represent a false recovery when measured in
terms of new GDP revisions.
If GDP is revised upward, a host of other government data will have to revise
up as well. That will likely include employment numbers as well. How reliable
will be future jobs numbers, not just GDP numbers, is therefore a reasonable
question.
Apart from making it appear the US economy is doing better than it in fact is,
what are the motivations for the forthcoming redefinition of GDP ?
For one thing, it will make it appear that US federal spending as a share of GDP
is less than it is and that US federal debt as a share of GDP is less than it is.

24

Revising GDP also enables the Federal Reserve to justify its plans to slow its
$85 billion a month liquidity injections (quantitative easing, QE) into the banks
and private investors. This tapering was raised as a possibility last June, and
set off a firestorm of financial asset price declines in a matter of days, forcing
the Fed to quickly retreat. But the Fed and global bankers know QE is starting
to destabilize the global economy in serious ways. Redefining GDP upward,
along with upward revisions to jobs in coming months, will allow the Fed to
revisit tapering after September, when the budget-debt ceiling-corporate tax
cut deals are concluded .
The Fed has stated it will begin to reduce its QE when the economy shows
more growth and unemployment numbers come down to 6.5%, from the current
roughly 7.5% low-ball estimate. (Other government data show unemployment
at more than 14%, but politicians and the press ignore that number). Revising
GDP upward will thus provide the Fed with an argument to start tapering. Fed
Chairman, Ben Bernanke, is quite aware of the usefulness of the projected
revisions, moreover. In his recent testimony to Congress he specifically noted
that the economy was growing better than (old) GDP numbers indicate if the
higher Gross Domestic Income (GDI) is considered.
It is ironic somewhat that what we are about to witness with the GDP revisions
is a recognition that the economic recovery since 2009 has been a recovery for
corporate profits and capital incomes, stock and bond markets, derivatives and
other forms of income from financial speculationall now at record levels
while weekly earnings for the rest continue to decline for the past four years.
What the GDP revisions reflect is an attempt to adjust upward GDP to reflect in
various ways the gains on financial side of the economy, the gains in income for
the few and their corporations.
When you cant get the economy going otherwise, just change the definitions
and how you calculate it all. Manipulate the statistics.
U.S. Government Manipulated Economic Statistics
If the government doesn't like what people are saying, they don't bother just to
change the conversation, they change the meaning of the words.
The latest example of this was revealed earlier this week when the Bureau of
Economic Analysis (BEA) announced new methods of calculating Gross
Domestic Product (GDP) that will immediately make the economy "bigger'
than it used to be. The changes focus heavily on how money spent on research

25

and development (R&D) and the production of "intangible" assets like movies,
music, and television programs will be accounted for. Declaring such
expenditures to be "investments" will immediately increase U.S. GDP by about
three percent. Such an upgrade would immediately increase the theoretic size of
the U.S economy and may well lead to the perception of faster growth. In
reality these smoke and mirror alterations are no different from changes made
to the inflation and unemployment yardsticks that for years have convinced
Americans that the economy is better than it actually is.
Data released confirms that the economic "recovery" is weaker than expected
and remains heavily dependent on Federal support. Personal spending was
indeed up 3.2%, the biggest jump in two years, but real earnings were down by
5.3%, the biggest fall since 2009. Not surprisingly the buying was made
possible by a drop in the savings rate, which came in at just 2.6%, the lowest
since the 4th quarter of 2007. No doubt, rising home prices and falling
mortgage rates (made possible by Fed stimulus) allowed Americans to
refinance their homes and to borrow and spend the money that they did not
earn. With GDP continuing to disappoint, a statistical make-over couldn't come
at a more convenient time.
In the simplest terms, GDP is calculated by combining a nation's private
spending, government spending, and investments (while adding trade surplus or
subtracting trade deficits). Business spending on R&D, a portion of which
comes in the form of salaries, has traditionally been considered an expense that
does not explicitly add to GDP. But now, the United States will lead the rest of
the world in redefining GDP. Washington has now declared that the $400
billion spent annually by U.S. businesses on R&D will count towards GDP.
This equates to about 2.7% of our nearly $16 Trillion GDP. The argument goes
that, for example, the GDP generated by iPhones has far exceeded the cost
spent by Apple to develop the product. Therefore, Apple's R&D is not an
expense but an investment.
The BEA also argues that the cost of producing television shows, movies, and
music should count as investments that add to GDP. Supporters of the change
often hold up the blockbuster television comedy Seinfeld as an example. Given
that the show's billions in earnings far exceeded its initial costs, they argue that
the production expenses should be considered "investments" (like R&D) and be
added into GDP.

26

In essence, the new methodology is an exercise in double accounting. For

instance, suppose a company employs an accountant who works in the sales
department, who is then transferred to the R&D department at the same salary.
He still counts beans but now his salary will be billed to the R&D budget rather
than sales. In the old methodology, the accountant's impact on GDP would
come only from the personal consumption that his salary allows. Going
forward, he will add to GDP in two ways: from his personal consumption and
his salary's addition to his company's R&D budget. The same formula would
apply to a trucker who switches from a freight company to a movie production
company (for the same salary). If he moves refrigerators, he only adds to GDP
through his personal spending, but if he hauls movie lights, his contribution to
GDP is doubled. It makes no difference if the movie bombs.
These double shots are different from traditional investments, which inject
savings (or idle cash) back into the marketplace. Until money from personal or
corporate savings is invested, it is not adding to GDP.
Another change that will artificially boost GDP concerns how government
salaries will be counted. Unlike most private sector compensation, wages,
salaries, and pension contributions paid to government workers are added
directly to GDP. This distinction makes sense and eliminates potentially double
accounting. Profits generated by private companies add to GDP when they are
ultimately spent or invested by the company. Wages reduce profits, and
therefore reduce GDP. But that reduction is cancelled out by the consumption
of the employee receiving the wages. Governments do not generate profits, so
salaries are the only way that public spending adds back to GDP.
The new system magnifies the GDP impact of government pensions, which are
a principal component of public sector compensation. Going forward, the
pensions will be calculated not from actual contributions, but from what
governments have promised. Under the old system, if a state had a $10,000
pension obligation but only contributed $1,000, only the $1,000 would be
added to GDP. Under the new system the entire $10,000 would be counted. So
now governments can magically grow the economy simply by making promises
they can't keep.
The bottom line is that now certain private sector salaries (in R&D and
entertainment) will be counted twice and public pension contributions will be
counted even if they aren't made. The economy will not actually be any larger
or grow any faster, but the statistics will claim otherwise. With the stroke of a

27

pen, our debt to GDP ratio will come down. Will this soothe the fears of our
creditors? Will critics of big government take comfort that spending as a share
of GDP may be lower? Government is confident that its trick will work, and
that distracting attention with a statistical illusion is the sole motivation for the
change.
A similar type of hocus pocus has been successfully used to make inflation
appear much smaller. Changes in methods used to calculate the Consumer Price
Index (CPI) have resulted in a widening gap between increases in real prices
and the CPI. The changes, that incorporate such concepts as hedonic
adjustments and substation bias, were made to make the CPI more "accurate,"
but have instead produced consistently lower results.
Since the late 1980's, The Economist Magazine has compiled something called
the "Big Mac Index,"(BMI) a global survey of the cost of McDonald's signature
hamburger. Although the index is primarily used as a means to compare
purchasing power parity around the globe, it also can be used to track the prices
of Big Macs in the U.S. over many years.
From 1986 to 2003 the U.S. BMI rose roughly in line with the CPI. Although
the burger occasionally rose faster or slower, over that 17 year period both
indexes increased by about 68% (or about 4% per year). But from April 2003 to
January 2013 the CPI Index is up just 25% percent (from 183.8 to 230.28 or
about 2.5% per year) while the BMI is up 61% (from $2.71 to $4.37 or about
6.1% per year), or more than twice the rate of inflation.
What could possibly account for the difference? Has the Big Mac gotten bigger,
better, tastier, or healthier? As an iconic product, McDonald's has been reluctant
to change a proven formula. If the Big Mac hasn't changed, is it possible that
our inflation yardstick has?
It has been estimated that if the government used the same methodology to
measure inflation that it used during the 1980's, we would be currently dealing
with official inflation that would be many times higher than today's official
1.5% rate. The Big Mac appears to confirm this.
But now the government appears ready to distort the figures even further. With
little resistance from the media or the public, the Obama Administration and
Congressional Republicans seem ready to switch the inflation measurements
used for Social Security away from the CPI in favor of the even more

28

attenuated "Chain Weighted CPI." This index, which is consistently lower than
the CPI, looks to incorporate changes in spending patterns when consumers
switch to more affordable products (in other words, it measures the cost of
survival, not the cost of living). And while many admit that this is a
manipulation, no one really seems to care.
Similarly clumsy tricks have been used to make our unemployment problem
appear less severe. Over the years new methods have been introduced to factor
out those who have "dropped out" of the labor force or to count part-time or
temporary workers as employed.
Don Draper says, If you can't change the conversation, change the words. If
that doesn't work, just change the dictionaries.
GDP revisionswhich will continue henceforth to boost future GDP numbers
focus largely on boosting the contribution of business investment to GDP.
The revisions have resulted in significant increases in the estimates for business
investment and will continue to do so in the future . The boosts to investment
totals have to do with changes in how depreciation is calculated, pension
accounting, and other items. The changes in depreciation in particular have
resulted in GDP upward revision.
Since GDP is part of whats called the National Income Accounts. Like all
accounting, there are two sides to the ledger. GDP measures the value of goods
and services produced in the economy; the other side of the accounting ledger
is GDI, or gross domestic income, which measures the corresponding income
generated from that production. That means that the upward revision based on
depreciation-driven business investment translates into an upward revision of
business income in GDI.
As economist Dean Baker has noted in his commentary on the revisions today,
The new measure added $250 billion to depreciation in the corporate sector for
2012 and that the profit share of net corporate output (as percent of GDP)
rose to 25.5 percent in 2012, the fourth highest share in the post-war era.
A closer inspection of the 1.7% US 2nd quarter GDP number shows almost all
of the major gains in the economy came from business investment. There are
four major areas of GDP: government spending, exports in excess of imports,
consumer spending, and business investment.
The Reuters commentary on todays GDP release indicated that consumer
spending (70% of the US GDP) slowed in the second quarter significantly from

29

the first. So it doesnt explain the 1.7% unexpected GDP rise. Similarly,
government spending (typically 24% of the economy) contracted for the third
straight quarter. So nothing is there to justify the 1.7%. Exports rose, but
imports rose faster, which translates to a negative contribution to GDP. It was
mostly a turnaround in investment in nonresidential structures and gains in
outlays on equipment and intellectual products, according to Reuters, which
explains the 1.7%.
Not surprisingly, thats the precise area in which the GDP upward revisions
have been focused.
Change the way depreciation is defined, adding to corporate profits in addition
to the already record growth for profits, throw in new categories of what
constitutes business investmentand now you have a 30% or more higher
GDP.
If you cant generate a sustained real economic recovery for five years with past
and current economic policiesthen just redefine the definition of recovery
itself.
In the age of quantitative easing and overt government intervention in the
economy, its impossible to trust any of the economic statistics that we are
being shown as indicators of the supposed health of our economy. Whether it is
GDP numbers, manufacturing data, inflation statistics or housing figures, all of
the macroeconomic data that drives the financial news agenda are manipulated
to suit the propagandistic purposes of the government and the central bankers.
A striking case in point presented itself late last year when Ben Bernanke and
the Federal Reserve announced they were tying the latest round of quantitative
easing not to a set period of time or set amount of funds, but to an
unemployment rate target. The move puzzled many analysts at the time, as the
unemployment rate has never been within the mandate of the Federal Reserve.
In fact, the privately owned central bank doesnt even possess a direct
mechanism for influencing the number.
The move was perfectly understandable, however, to those analysts who
understand that unemployment figures are one of the most flagrantly
manipulable government-issued statistic, subject to all sorts of arbitrary
definitions in the meaning of the term unemployment itself.
As flagrant as the manipulation in unemployment statistics has been, perhaps
even more brazen in recent years has been manipulation of stocks and equity

30

markets. Economic commentators are again pointing to all-time record highs on

the Dow and other major stock indices as sure signs of economic recovery, and
the mainstream talking heads are reporting the moves in these markets with all
the breathless hyperbole of excited children.
What many who are living through this age of jobless recovery know all too
well, however, is that these markets, too are hopelessly manipulated, and that
the trading taking place in these markets is subject to the same parlor tricks that
define the unemployment statistics.
What many may be surprised to learn, however, is that government
manipulation of these markets is on the record and openly admitted.
On October 19, 1987, stock markets around the world crashed, from Hong
Kong to Europe to the US. The Dow Jones plummeted over 22% in a matter of
hours.
Ostensibly in response to this crisis, President Reagan signed into
law Executive Order 12631establishing a body formally known as the
Presidents Working Group on Financial Markets. This body, famously
dubbed the Plunge Protection Team by the Washington Post in 1997, is
explicitly mandated to maintain investor confidence in US markets through
whatever actions it deems necessary.
The group and its actions are shrouded in official secrecy, but its actions have
long been identified by independent market analysts.
In 2011 I had the opportunity to talk to the late Bob Chapman, the economic
analyst behind The International Forecaster, about the manipulations of this
plunge protection team and the active collusion between government and the
big traders in these market interventions.
Just as in all other areas of life, it is a truism that those things which are
suppressed in one place tend to rise to the surface unexpectedly elsewhere.
Such is the case with market manipulation. Although it is relatively easy for the
federal government and institutional investors to send prices up or down
through relatively straightforward manipulation, it is more difficult to prevent
those interventions from becoming visible in other parts of the economy.
Gold market analysts have long pointed to the increasing amount of gold
stocks, ETFs, and other forms of so-called paper gold in the market. In 2010,
Adrian Douglas estimated that there were about 45 paper claims for every
ounce of physical gold in existence, meaning that the true price of gold was
closer to $54,000 an ounce.

31

In startling testimony before the Commodity Futures Trading Commission in

2010, Bill Murphy of the Gold Anti-Trust Action Committee laid out a
blistering expose of the systemic manipulation of the precious metals markets
with the participation of some of the highest ranking economic officials in the
US government:
As an executive at Goldman Sachs in London, Robert Rubin developed an
idea to borrow gold from central banks at minimal interest rates (around 1
percent), sell the bullion for cash, and use the cash to fund Goldman Sachs
operations. Rubin was confident that central banks would control the gold price
with ever-more leasing or outright sales of their gold reserves and that
consequently the borrowed gold could be bought back without difficulty. This
was the beginning of the gold carry trade.
When Rubin became U.S. treasury secretary, he made it government policy to
surreptitiously operate an identical gold carry trade but on a much larger scale.
This became the principal mechanism of what was called the strong-dollar
policy. Subsequent treasury secretaries have repeated a commitment to a
strong dollar .
The picture that is being painted here is one of a thoroughgoing fraud. In fact,
even in this relatively short and necessarily incomplete expose, we have the
sense of a fraud so large and ensconced in the marketplace that it would be
impossible to perpetrate without the active collusion of the government
regulators themselves. Sadly, as the existence of bodies like the Plunge
Protection Team and the failure of the CFTC to prosecute demonstrable market
manipulation shows, this type of thoroughgoing collusion is precisely the case.
This leaves the average working man or woman in a seemingly intractable
problem. They have been told all their lives to entrust their savings to the
financial experts, believing that a healthy portfolio of stocks and bonds will
protect and even grow their wealth so that there will be a nice nest egg left over
for their retirement. As this economic house of cards begins to topple, however,
people will find themselves in the same position as the Romans under
Diocletian or theFrench of the Revolution or the Germans in the Weimar
Republic or the Argentinians under the collapsing peso: having their entire life
savings wiped out seemingly overnight.
There is a feeling in financial and government circles that the worst is past and
were on the road to redemption.
The snag is that economic recovery is at best, limited to those near the top of
the wealth, income pyramid and at worst, a fabricated illusion boosted by a

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media that is dominated and controlled by those with a vested interest in money
creation driving their wealth to ever higher peaks.
The final paragraph puts the icing on the cake: the economic recovery is a
statistical illusion created by deflating nominal GDP with an understated
measure of inflation.
The commercial, private and government debt mountain continues to climb, as
it must to sustain the economic system which continues to drive inequality,
competition for resources and environmental destruction, while encouraging
corruption and fraud.

Monetary system based on Debt by the central bankers is the problem.

Excessive Taxation is the problem.
Excessive Government is the problem.
Untransparent policies are the problem.
Lazy , ignorant , selfish people are the problem.
Our Education System Isn't Broken, It's Designed to Create Winners and
Losers
Francis Joseph .
email. francisnjoe@gmail.com
Dubai returned , one of the first members of India Venture Capital Association .
Former Consultant with www.crowehorwath.net/ae/