Statistical Misdirection

By Alasdair Macleod – Re-Blogged From Gold Eagle

Economists who understand credit cycles expect the current cycle to enter its crisis stage at any moment. Furthermore, it combines with increasing trade tariffs between the two largest economies to echo the conditions that led to the 1929-32 Wall Street crash and the subsequent depression.

With the dollar tied to gold, there was no doubt about how the collapse in demand affected asset, commodity and consumer prices ninety years ago. If the turn of the current cycle leads to a similar outcome, it is unlikely to be properly reflected in official statistics for GDP.

This article explains why GDP is a statistical fallacy, and the use of an inflation deflator is not only inappropriate but has been manipulated to produce an outcome that wrongly attributes success to monetary policies. Therefore, if an economic slump follows the coming credit crisis, it is unlikely to be reflected in these key government statistics.

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It’s All About Real Rates Not The Dollar

By Michael Pento – Re-Blogged From Gold Eagle

The Federal Reserve’s recent need to supply $100’s of billions in new credit for the overnight repo market underscores the condition of dollar scarcity in the global financial system. This dearth of dollars and its concomitant strength has left most market watchers baffled.

Since 2008, the Fed has printed $3.8 trillion (with a “T”) of new dollars in an effort to weaken the currency and boost asset prices–one would then think the world should now be awash in dollar liquidity. Yet, surprisingly, there is still an insatiable demand for the greenback, leading many to wonder what is causing its strength.  And importantly for precious metals investors, there is a need to understand why this dreaded dollar strength has not served to undermine the bull market for gold.

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Measuring Recession

By Alasdair Macleod – Re-Blogged From Gold Money

Using nominal GDP, or GDP deflated by the CPI, as the principal guide to the state of the economy is a common mistake which will eventually prove very costly. Having convinced themselves that GDP measures economic progress, government statisticians have suppressed evidence of price inflation, giving the illusion of economic growth. Policy makers appear unaware that they are leeching ordinary people and their businesses of their wealth to the point where an economic and monetary collapse becomes inevitable. This article exposes how the authorities use GDP and the CPI to conceal the true deterioration of an economy.

Introduction

When an economy turns from expansion to contraction there is an order of events. The first signs are an unexpected increase in inventories of unsold goods, both accompanied with and followed by business surveys indicating a general softening in demand. For monetarists, this is often confirmed by an inverting yield curve, which tells them that at the margin the short-term rates set by the central bank are becoming too high for business conditions.

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Inflation Rises Most Since September 2008

Summary

Inflation as measured by the “core” Consumer Price Index, which removes the volatile food and energy segments, jumped in August at the highest rate in 11 years, by 2.39%, a smidgen above the prior peaks of July 2018 (2.35%), February 2016 (2.33%), and April 2012 (2.32%).

The US is currently undergoing the second oil-and-gas bust since mid-2014, or same oil-and-gas bust, with two parts separated by a sucker rally. And so energy prices, which have a weight of 7.8% in the overall CPI, dropped 4.4% from a year ago, with gasoline and diesel prices falling 7.0%.

In August, the CPI for services rose by 2.70% compared to a year ago.

In terms of percent change, the CPI for durable goods in August ticked up 0.6% – the fastest increase since May 2012.

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Alternate Inflation Charts

Re-Blogged From Shadow Stats

The CPI chart on the home page reflects our estimate of inflation for today as if it were calculated the same way it was in 1990. The CPI on the Alternate Data Series tab here reflects the CPI as if it were calculated using the methodologies in place in 1980. In general terms, methodological shifts in government reporting have depressed reported inflation, moving the concept of the CPI away from being a measure of the cost of living needed to maintain a constant standard of living.

Further definition is provided in our  CPI Glossary. Further background on the SGS-Alternate CPI series is available in our Public Comment on Inflation Measurement.

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New Inflation Indicator

By Keith Weiner – Re-Blogged From Gold Eagle

Last week, we wrote that regulations, taxes, environmental compliance, and fear of lawsuits forces companies to put useless ingredients into their products. We said:

“For example, milk comes from the ingredients of: land, cows, ranch labor, dairy labor, dairy capital equipment, distribution labor, distribution capital, and consumable containers.”

There are eight necessary ingredients, without which milk cannot be produced.

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Will The Fed Cut Its Interest Rate Forecast

By Arkadiusz Sieroń – Re-Blogged From Gold Eagle

Some important pieces of the US economic reports, including the latest nonfarm payrolls, have disappointed recently. May indicators (including the leading ones) have hit a soft patch it seems. Will that push the Fed to downgrade its dot-plot or fine-tune the monetary policy mix anyhow? Can gold jump in reaction to the Wednesday’s FOMC policy meeting?

February Payrolls Disappoint

U.S. nonfarm payrolls plunged in February, falling way short of expectations. The economy added just 20,000 jobs last month, following a rise of 311,000 in January (after an upward revision) and significantly below 172,000 forecasted by the economists. The number was the smallest increase since September 2017, as one can see in the chart below. On an annual basis, the pace of job creation increased slightly last month to 1.8 percent.

Chart 1: Monthly changes in employment gains (red bars, in thousands of persons) from February 2014 to February 2019

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