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The Fraudulent Matrix of US Economic Statistics
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The US government and Western media enjoy accusing other nations of producing unreliable economic numbers, but it is widely recognised that there are no national economic statistics in the world as deliberately unreliable and misleading as those of the US. One notable feature of the Great Transformation was the US government’s innovativeness in fabricating statistics that raised economic misinformation to an art form. Many researchers have published studies demonstrating that the official US economic statistics in nearly all areas are badly distorted to paint a positive picture widely divergent from reality, but with the compliant media controlling the narrative, few Americans have any idea of the true state of their economy or the personal consequences of these statistical manipulations. As one commenter noted, “The jobs numbers are fraudulent, the unemployment rate is deceptive, the inflation measures are understated, and the GDP growth rate is overstated. Americans live in a matrix of lies.”

As we will see, the true unemployment rate is far higher than the number officially stated, inflation is more than three times as high as the US government acknowledges, and the GDP only little more than half of the published numbers. The same is true with statistics on wages, housing, and more.

GDP

You don’t have to be an economist to appreciate the difficulties in comparing national GDP rates nor the opportunities for deceit in their compilation. As an example, if our two countries and economies are identical but yours has a higher divorce rate, the legal fees and other costs of the divorce process will be added to your nation’s economic output and your country will have a higher GDP. That doesn’t mean your people are richer, nor does it mean your country is a better place to live. Similarly, if your country is as rabidly litigious as is the US, all those billions in legal fees from lawsuits will be added to your GDP. But again, that doesn’t mean your people are richer. In fact, except for the lawyers, they are all poorer, and it almost certainly isn’t a better place to live.

Education and health care are similar. If my country has a government-sponsored healthcare system and public schools and universities, these will be recorded in my GDP calculations at their low cost. If your country, like the US, has privately-owned and profit-driven health care and educational systems, the much higher costs will be recorded in your GDP statistics as a reflection of a much higher economic output. But that does not mean your people are richer than mine, and in fact they are much poorer because they must spend a high percentage of their incomes for health care and education.

If your country like the US spends more than $1 trillion on its military each year, these expenditures will be included in your national statistics and this alone would make it almost impossible for us to compete on the basis of GDP. But all that military expense does not make your people rich; instead, it impoverishes them, and all that killing does not make your country a better place than mine, even if you’re doing it to make the world safe for democracy.

From the above examples, it should be apparent there are many categories of transactions that serve to greatly inflate GDP numbers but that do not indicate wealth in a nation, and may in fact be indications of poverty. It should be apparent that some sectors of a nation’s GDP serve to enrich only a very few individuals while the vast majority of the population are left poorer. Health care is an obvious example, where the owners of insurance and pharma companies, profit-driven hospitals and clinics, are indeed richer for the experience, while virtually all of the population is poorer. The military is another clear example, with only weapons manufacturers and bankers being richer after a war while the impoverished population may be paying the cost for generations.

Effect of Privatisation on the GDP

Also, it should also be obvious that a nation like the US that has privatised most physical and social infrastructure will produce a higher GDP than a country like China where the basic infrastructure is owned by the government. The US prison system is a good example of a service that cost the taxpayers $20 billion before privatisation and $80 billion after. That served to increase the GDP by $60 billion, but only a few people were enriched by the process while millions were impoverished and society not measurably better off.

The US GDP will be inflated by all the airports, highways, railways, electricity generating stations, schools and universities, and much more, that have all been sold to investors in the private sector with resulting much higher fees and charges to the public, and thus a much higher GDP. But the enlarged GDP is actually an accurate indicator of increasing poverty among the population since the precise amount of that increased GDP must be extracted from the pockets of the population.

Basic accounting tells us that if someone receives money, someone else must have paid it, because money really doesn’t grow on trees. In the case of privatisation, all people must pay much higher fees and charges to the private firms than they paid before to the government, and it is precisely those increased fees and charges bled from every citizen’s bank account that create the increase in the GDP. The much-increased charges by the private companies will increase the GDP while that same amount is squeezed from the purchasing power of every citizen and concentrated in only a few hands, thus increasing a nation’s income disparity. This is Grade Three arithmetic. It cannot be any other way.

It should also be obvious that if, for example, China were to sell off its hospitals and its High-Speed rail system to private investors (as the Americans want so badly for China to do), China’s GDP, poverty rate, and income disparity would all rise measurably. When Kunming sold off its best children’s hospital to private owners, the fees charged to patients are already on their way to doubling; those hugely increased costs will increase China’s GDP, but many thousands of families in Kunming will now be poorer.

Effect of Financialisation on the GDP

In another vein, the US economy is so highly financialised that nearly half of the stated GDP consists merely of book entries transferring money from one account to another, not in any way comparable to the real production of manufacturing or the provision of real services. Many international economists have made statements to the effect that “When we remove the financialisation aspects from the accounts, the US real GDP is reduced by nearly 50% and the national per-capita income falls to about $15,000.”

From the above, you can see that the size of a nation’s GDP can be largely irrelevant to the wealth and prosperity of that nation, and that comparing nations on GDP is fraught with difficulties and arguments. GDP used to be a simple measure of goods and services produced in a nation, and was probably an accurate indicator at some point in the past, but it gradually became a way to record the score in a game of ‘mine is bigger than yours’. So, in addition to the real issues outlined above, we also have the US constantly trying to move the goalposts to increase its score by finding ever more creative ways to boost the GDP numbers.

The Scandal of “Imputed Rents”

One clever trick by the US government is something called “imputed rent”, which means that if you own a house the government adds to the GDP the amount you would have had to pay in rent (but didn’t), on the mind-twisting basis that if you didn’t own that house you would have had to pay this rent. This one item alone added about $1.6 trillion, or 15% to the US GDP. Also, GDP is adjusted (downward) for inflation so, as you will see in a moment, the US badly understates its annual inflation rate which automatically inflates its GDP by about another $2.3 trillion, or about 20%. These two items alone mean the US GDP is falsely and artificially inflated by about 35%.

Under the imputed rent scheme above, you as a homeowner living in your home are treated as two people, one a tenant, who pays an “imputed” (fairytale) rent, and the other a landlord running a small business owning and renting the house. You as tenant pay a pretend rent which goes into the pretend GDP, and you as landlord have a pretend rental income which goes into the pretend per-capita National Income of the country. US economists claim that this “theory of imputed rent may seem more natural if one imagines the extreme case of a society where everyone raises their own food and builds their own houses; without imputation the GDP would be zero”. US government economists have produced other longer and more confusing explanations as to why this imputed rent is appropriate, but they are all nonsense. The theory is simply that if an average house would rent for $25,000 per year, this amount is added to the average income of all homeowners.

Per Capita Income

The figure most often for the median per capita income in the US is around $35,000, and an average per capita income of around $55,00, figures that come straight from fantasyland. First, the ‘imputed rent’ I mentioned above is entered not only in the GDP (where it accounts for nearly 10%) but also in the figures for average national income, meaning that the income of every homeowner is inflated by his non-existent ‘rental income’. I could find no reliable figures for the actual amount of imputed rent included in the national income averages, but removing this single fictitious amount would potentially lower the real US per-capita average income to about $35,000. Other fictious amounts reduce it further.

As one intelligent internet poster wrote, “Like so much else about America, the nation’s wealth and high annual incomes are just another myth, and suddenly so much of the dissonant information we receive about the US begins to make sense – the documented stories of rampant poverty across the nation, middle-class households having to live on credit to maintain their deteriorating standard of living, deferred retirements, bankruptcies.”

Exactly correct. An increasingly small minority of the US population is indeed doing well, while an increasingly large number are living in poverty and slums, are going bankrupt, cannot find a job, cannot afford to retire, are dependent for their daily survival on government handouts, and can no longer afford to go to the doctor. But the propaganda machine persists in promulgating a false image of a shining mansion on a hill.

Inflation Rate

One author noted that “If inflation in America were calculated today by the same statistical methods used prior to the 1980s, the true rate would be almost 10% higher than that stated by the US government today.” And that’s correct, but this serious mis-calculation of the CPI is fraudulent on more than one level. First, it seriously deceives Americans as to the state of the economy, deflecting blame from the FED and the government to the people. After unleashing the massive economic destruction in the early 1980s, the FED didn’t want the public to know how badly they’d been trashed and plundered, and so immediately implemented the production of increasingly fraudulent economic statistics with lies that have increased by the year.

These false inflation statistics also involve a massive financial fraud, the theft of countless billions of dollars from the American people by their own government. The reason is that all Social Security payments, welfare and food support, and other items are linked to the rate of inflation and are legislated to increase each year to cover the actual increases in the cost of living. But since the US government deliberately understates the inflation rate by approximately 10%, all Social Security benefits have been underestimated and underpaid by this amount, compounded annually, and so Social Security, many pensions, and other payments should be about 70% higher than they are today.

In the calculation of inflation and the consumer price index (CPI), US government statisticians have been so innovative they’ve had to create separate categories to contain all their fraudulent calculations. Here are a few:

(1) Exclusions:

US officials realised the easiest way to lower the quoted CPI was to simply omit items, so they invented a measure they called “core inflation”. That should mean the central or most important portions of price increases, those most critical to consumers, but no. The US definition excludes precisely these critical items like food and fuel, eliminating the most important items from the inflation statistics, thereby creating a totally false picture. Measuring inflation without food and energy is almost the same as measuring inflation after you subtract all the inflation.

(2) Substitution:

Then, they imagined what they termed a “substitution effect”, meaning that when beef prices rise the public will cease purchasing beef and buy chicken instead. That part is true, but the cleverness is their conclusion that since we are no longer buying beef, they can remove it from the inflation calculations. So now, when the price of something rises, the US Labor Department just eliminates it from the calculations and substitutes something cheaper. Voilà, no inflation. But of course it’s all a lie. The US Farm Bureau measures the increasing prices of the identical basket of goods and the difference is large: For example, from 2007 to 2008, the Labor Department reported inflation of only 4.1%, while the real inflation reported by the FB was 11.3%.

(3) Geometric Weighting:

Another clever trick is to arbitrarily reduce the severity of price increases when some prices are increasing rapidly, as oil prices often do. The government ruled that if an item’s price rises “too quickly”, people will use less of it, so with any rapid price increase, the US government reduces its weighting in the CPI calculation. For example, health care is about 17% of GDP but it was given a weighting of only 6% because real health costs are rising. This alone reduces the US CPI by several percentage points. For both of the above, it should be clear that the US government is not recording actual price increases – in other words, real inflation – but is instead recording fictitious consumer behavior in the face of strong price increases.

(4) Hedonics:

This machination makes arbitrary adjustments for assumed quality improvements in goods and services. As an example, a home appliance may have been priced at $400 but experienced a minor improvement in a subsequent model year. Officials arbitrarily assumed the improvement was worth $150 and the basic appliance was now only $250, and then used that figure in calculating the CPI, showing a 40% decrease in appliance prices while in fact the price was unchanged. This kind of adjustment is now applied to almost 50% of all items contained in the calculation of the US CPI.

Unemployment

In July of 2013, Mortimer Zuckerman wrote a thoughtful and informed article for the WSJ titled “The Full-Time Scandal of Part-Time America”[1]The Full-Time Scandal of Part-Time America

https://www.wsj.com/articles/mortimer-zuckerman-the-...291652
in which he, a little too gently, devastated the US government’s unemployment statistics by pointing out that the almost 300,000 ‘new jobs’ created in June of that year were mostly smoke, in that full-time jobs plunged by well over 500,000 while part-time labor increased by about 800,000, a distinction the Labor Bureau found unworthy of mention. Low-paying jobs now account for almost half of all employment growth and even with that, less than 60% of Americans have a job of any kind. In one month, the US government listed a large number of new jobs in retail trade, but that was clearly impossible when major retailers like J.C. Penny, Macy’s, Sears, and the dollar store chains were all in trouble and closing stores, and shopping centers were so desperate for tenants they were renting space by the day or the hour. Zuckerman noted that, after Obama’s health care act mandated the provision of health insurance to all those working more than 30 hours per week, companies immediately cut workers’ hours to less than 30, often dividing one full-time job into two part-time jobs, to avoid that benefit cost.

Dave Kranzler wrote that “The US employment report is probably the most deceptively fraudulent report produced by the Government”.[2]The Non-Farm Payroll Report: The BLS Outright Embarrasses Itself

http://truthingold.blogspot.com/2013/09/the-non-far...s.html
The US government has gone through contortions every month since 2008, attempting to delude the population about a non-existent ‘recovery’ that it falsely claims occurred in 2009. In spite of all the hype, the truth is that the US economy is still sitting on the bottom pretty much where it was in 2008, with no recovery of any kind and no net new jobs created. The publicity about the creation of ‘service jobs’ and ‘health-care jobs’ is disguising low-paid employment for retail clerks and home-care for the elderly, and the unemployment statistics have suffered the same kind of creativity as has the CPI – if a category proves troublesome or embarrassing, the government simply omits it from the calculations.

The US government has no qualms about massaging and rearranging numbers and categories to produce results, however inaccurate and dishonest, that place the US in the lead. In November of 2014, Glenn Kessler reported in the Washington Post Obama’s claim before Congressional leaders that “As I travel to Asia for the G-20 Summit, I’m going to be able to say that we’ve actually created more jobs here in the United States than every other advanced country combined”, a claim that was of course false. His definition of advanced nations omitted all those that were actually growing instead of retracting, nations like China, Russia, Brazil, India, Indonesia and Mexico. Perhaps his most dishonest position was to omit the fact that professional and middle-class full-time employment for educated people have disappeared at an alarming rate, with only unappealing part-time minimum-wage clerking positions being created, on which families cannot survive without welfare and food stamps. Kessler noted that his claim of the US having created 6 million “new” jobs compares to China alone having created more than 50 million new jobs since 2010. He ended his article with the comment that “One has to marvel at the clever economists in the White House who managed to slice and dice the numbers to come up with (these ‘facts’).”

Jim Clifton, the CEO of Gallup, in an interview on CNBC, called the US government’s unemployment figures “a big lie”,[3]Jim Clifton, Gallup CEO, on job numbers: It’s all a ‘big lie’ by the White House

https://www.washingtontimes.com/news/2015/feb/5/jim-...-a-bi/
explaining that “If you perform a minimum of one hour of work in a week and are paid at least $20 … you’re not officially counted as unemployed. If you have a degree in chemistry or math and are working 10 hours part time because it is all you can find… the government doesn’t count you.”

To further emphasise the perilous state of the US economy and labor picture today, only 60% of employable workers in the US have jobs . According to the government’s own statistics, a full 40% of all working-age citizens have no employment, but officials still claim an unemployment rate of only 6%. To add to the labor catastrophe, it has been reported that the fastest-growing segment of the US workforce is those aged 65-75, people who should be retired but who cannot live on their meager pensions and unaffordable health care and must sacrifice their retirement years and return to the workforce in order to survive.

I suppose this commentary wouldn’t be complete without reference to China’s numbers, at least from the American point of view. For any country, economic statistics are acceptable if the Americans like the numbers, otherwise they are “unreliable”, the accusation substituting as proof. With China’s economic statistics, the US government doesn’t like the numbers and so dismisses China’s statisticians as “untrained” and their statistics as “unreliable”, the accusations once again substituting as proof. However, the US FED (and other notable economists) conducted their own analysis of China’s economic statistics and confirmed that the country’s actual growth was in line with the official numbers.

China’s statisticians produce their numbers for the Chinese, not for the Americans, so they don’t bother explaining their methodology and thus leaving the Americans in the dark, craving many juicy details of China’s economy that cannot be easily derived from the gross statistical numbers. And when the Americans call, nobody will respond to their questions so they accuse the Chinese of being “unreliable”, of fudging the numbers, of exaggerating, of maybe having “two sets of books” so the government can know “what is really going on” with the economy. According to Mark Magnier of the Wall Street Journal (where else?), a new set of good numbers “raised fresh doubt about the trustworthiness of China’s own statistics”, with Citibank helpfully chiming in with “Growth Likely Overstated”, and some unbiased Western ‘researchers’ claiming the numbers were inflated by nearly 100%. Again, accusations equivalent to proof.

But the real purpose of these attacks was illuminated by an economics professor at the Hong Kong University of Science and Technology, Carsten Holz, a man who even wrote a paper on “the quality” of China’s GDP statistics, who said Chinese statistics suffer from “an atrocious lack of transparency”. That statement would translate loosely as “We want to know more, but they won’t tell us because (a) they believe it is none of our damned business and (b) they think we will find ways to use their numbers against them.” Correct on both counts.

Mr. Romanoff’s writing has been translated into 32 languages and his articles posted on more than 150 foreign-language news and politics websites in more than 30 countries, as well as more than 100 English language platforms. Larry Romanoff is a retired management consultant and businessman. He has held senior executive positions in international consulting firms, and owned an international import-export business. He has been a visiting professor at Shanghai’s Fudan University, presenting case studies in international affairs to senior EMBA classes. Mr. Romanoff lives in Shanghai and is currently writing a series of ten books generally related to China and the West. He is one of the contributing authors to Cynthia McKinney’s new anthology ‘When China Sneezes’. (Chapt. 2 — Dealing with Demons).

His full archive can be seen at

https://www.bluemoonofshanghai.com/ + https://www.moonofshanghai.com/

He can be contacted at:

[email protected]

Notes

[1] The Full-Time Scandal of Part-Time America

https://www.wsj.com/articles/mortimer-zuckerman-the-full-time-scandal-of-part-time-america-1405291652

[2] The Non-Farm Payroll Report: The BLS Outright Embarrasses Itself

http://truthingold.blogspot.com/2013/09/the-non-farm-payroll-report-bls.html

[3] Jim Clifton, Gallup CEO, on job numbers: It’s all a ‘big lie’ by the White House

https://www.washingtontimes.com/news/2015/feb/5/jim-clifton-gallup-ceo-on-job-numbers-its-all-a-bi/

 
• Category: Economics, History • Tags: American Media, GDP, Inflation, Unemployment 
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  1. US has real assets and advantages, but the financialization has warped the economy, no doubt.

    And I wonder about the valuation of certain high-tech industries. Was Facebook really work that much?

  2. Great article Larry and I agree overwhelmingly with you on about 98% of what you’ve written.

    But, under the paragraph titled ‘Effect of Privatisation on the GDP’ you write:

    The US prison system is a good example of a service that cost the taxpayers $20 billion before privatisation and $80 billion after.
    That served to increase the GDP by $60 billion, but only a few people were enriched by the process while millions were impoverished and society not measurably better off.

    One has to remember, that under Clinton’s Presidency (and Joe Biden, as a senator during the Clinton years was instrumental in the legislation introduced), laws were enacted which EXPLODED THE PRISON POPULATION due to all manner of victimless crimes(most for possession of small quantities of drugs for personal use), compounded by the ‘Three Strikes and You’re Out’ system that saw inmates get LIFE SENTENCES for having committed trivial offences.

    Rather than looking at the TOTAL spent on running the prison system, one should look at the cost PER INMATE for a better comparison of the figures.

    Also, let’s not throw the baby out with the bath water and criticise ‘Privatisation’. The fact is :

    In a COMPETITIVE FREE MARKET, where there are NO BARRIERS to new market entrants, THE PRIVATE SECTOR ALWAYS DELIVERS A BETTER, LOWER COST PRODUCT OR SERVICE than the government.

    This is ALWAYS true – with no exceptions.

    What your paragraph should have been titled is : Effect of CRONY CORPORATISM on the GDP.

    Firstly, your $20 billion (before) cost of the U.S prison system Vs $80 billion (after), is likely a comparison of the raw numbers, unadjusted for inflation.

    So for example, $20 billion in 1980 dollars (to cover the cost of a prison population that may have been say 2 million persons), is not the same as $80 billion in ‘Printed-To-Infinity’ 2022 dollars (to cover the cost of twice that number of inmates, give or take).

    But, even if adjusted for inflation it works out as $40 billion (before) and $80 billion (after), this is why YOU SHOULD NEVER HAVE A STATE OF AFFAIRS WHERE THE PRIVATISED ENTITY IS A MONOPOLY THAT CAN CHARGE WHAT IT LIKES.

    What private consumer would contract out something to an entity (ie: likely Zio owned parasitic oligarch), that would charge them MORE and deliver a WORSE OUTCOME ?

    ONLY corrupt Big Government would do that.

    That’s why it’s imperative that GOVERNMENT BE DEFUNDED and to the extent that any remains, it has to have its power to do mischief SEVERELY CURTAILED.

    When the U.S prison system was privatised, corrupt politicians sold out to EVEN MORE CORRUPT OLIGARCHS for the right to have said prisons transferred to private ownership.

    The fact is, a private prison system CAN WORK if :

    1) A competitive tender process is put in place where contracts are awarded to private sector organisations that put in the lowest bid, WHILE SIMULTANEOUSLY MEETING PERFORMANCE BENCHMARKS*.

    (*Sure, cost is one major factor but if a particular private sector operator was slightly more expensive but delivered a much lower rate of RECIDIVISM, whereby inmates that were released were much less likely to go back to a life of crime because they learnt a trade or other marketable skills while in prison, then that lower rate of crime in the community may save countless billions more than any excess paid to the prison contractor).

    2) No single contractor should be awarded the custodianship of the ENTIRE prison system in a particular state.

    So for example, in the state of California, one county or region has a prison awarded to one particular private sector contractor, and other prisons are awarded the contract to other SEPARATE contractors.

    In EACH CASE, said contractors MUST PROMISE CONTRACTUALLY to deliver a service for LESS than what it is costing the taxpayer, and future costs to stay lower (adjusted for inflation and the prison population).
    If not, there is to be NO TRANSFER TO THE PRIVATE SECTOR IN THE FIRST PLACE.

    Importantly also, each private sector operator should be compared to others and if one is consistently underperforming, their lease should be cancelled and more efficient custodians put in their place.

    So there it is, to the extent the U.S is a basket case, IT IS BECAUSE OF BIG GOVERNMENT LARGESSE BESTOWED ON FAVOURED CORPORATE CRONIES.

    And, by the same token, to the extent that American still functions, it is because in the small and medium size businesses especially, Americans are free to VOLUNTARILY purchase products and services from your favoured supplier and can express dissatisfaction by WALKING AWAY and shifting their patronage to those that deliver the best outcomes.

    If you current baker makes bread that’s overpriced, or uses lesser quality materials or is less innovative with the range of products offered at his store, you can go elsewhere to someone who will satisfy your needs.
    Same with your local auto mechanic, florist, masseuse, landscape gardener or … whatever.

    Not so in the MONOPOLISED government sector like the DMV (Department of Motor Vehicles), where waiting times are long, service is piss poor and …. you are unable to seek out a competitor.

    Bottom Line : ALL Government bureaucracies are overflowing with WASTE and INEFFICIENCY.

    With ALL government ‘transfer payments’, where Peter is robbed to pay Paul, there is a not a dollar for dollar ‘transfer’ in that Peter may pay $1 in taxes, but the welfare recipient on the other end may only get 30 or 40 cents in the dollar in return.
    This is because most of the money is squandered on inefficient bureaucracy – bureaucracy that has untold numbers of parasitic FAT CATS in upper management earning six figure salaries and producing diddly squat in return.

    As a wise man once said :

    Government ‘transfer payments’ are like giving yourself a blood transfusion from your left arm to your right arm, with more than half of the blood spilling on the floor in the process.

    • Replies: @Larry Romanoff
  3. if you own a house the government adds to the GDP the amount you would have had to pay in rent (but didn’t), on the mind-twisting basis that if you didn’t own that house you would have had to pay this rent. This one item alone added about $1.6 trillion, or 15% to the US GDP

    The theory is simply that if an average house would rent for $25,000 per year, this amount is added to the average income of all homeowners.

    With these gems of logic, soon the Americans’ net worth will be estimated by the market price of lungs, kidneys, liver, eyes and such other parts that can be harvested and sold. If you have two kidneys, you are inherently worth $200,000. And this will be added to the national wealth. Or even can be added to national income as “deferred sale”, because sooner or later one will have to sell it.

    US economists claim that this “theory of imputed rent may seem more natural if one imagines the extreme case of a society where everyone raises their own food and builds their own houses; without imputation the GDP would be zero”.

    No, the theory of imputed rent is not natural from any point of view, it is just stupidly cunning, or cunningly stupid. If in a society everyone raises their own food and build their own houses, the GDP is indeed zero; this happens in animal societies! The GDP is the total value of goods and services produced and sold to others, not consumed by self. If a baker consumes all he produced, he will earn nothing, and his contribution to the GDP shall be zero, not the “imputed value” of what he consumed.

    The theory of imputed rent’s stupidity can be brought out by a simple logic: by this theory, the value of Oxygen consumed by everybody can be added to the GDP!

    • Replies: @Mary Marianne
  4. @Truth Vigilante

    “In a COMPETITIVE FREE MARKET, where there are NO BARRIERS to new market entrants, THE PRIVATE SECTOR ALWAYS DELIVERS A BETTER, LOWER COST PRODUCT OR SERVICE than the government. This is ALWAYS true – with no exceptions.”

    This is a common fallacy, and is merely propaganda by the privateers and echoed by the media. There are no real examples where private enterprise was able to do better than the public service. What they are good at, is cutting services while raising prices.

    Read this, for some examples:

    Private Enterprise and the National Good
    https://www.unz.com/lromanoff/private-enterprise-and-the-national-good/

    • Replies: @Truth Vigilante
  5. on the mind-twisting basis that if you didn’t own that house you would have had to pay this rent. Under the imputed rent scheme above, you as a homeowner living in your home are treated as two people, one a tenant, who pays an “imputed” (fairytale) rent, and the other a landlord running a small business owning and renting the house. You as tenant pay a pretend rent which goes into the pretend GDP, and you as landlord have a pretend rental income which goes into the pretend per-capita National Income of the country.

    There’s a certain Tribe that specializes in “mind-twisting” schemes like this.

    • Agree: Larry Romanoff
  6. @Larry Romanoff

    This [that the Private Sector ALWAYS outperforms the Public sector in a competitive Free Market] is a common fallacy, and is merely propaganda by the privateers and echoed by the media. There are no real examples where private enterprise was able to do better than the public service.

    Larry, I like your output posted in the UR and you’re one of the ‘go-to’ authors that I seek out here on a range of topics.
    BUT, let’s face it, …. you are CLUELESS about Private Sector efficiency Vs Public Sector parasitism.

    There is no need for me to cherry pick examples because I can pick ANY SECTOR in ANY COUNTRY in ANY ERA of HUMAN HISTORY to prove my point.

    In ALL cases where allegedly private sector performance was worse than the government run equivalent, this was NOT a Free Market with no restrictions to potential competitors and new entrants.
    In ALL cases, said private sector entity had a MONOPOLY or was limited to a select few oligarchic owned corporation that formed a CARTEL to charge above market rates.

    Anyway, let’s pick that sector which is the MOST IMPORTANT of all for the sustenance of life.

    And that is none other then the PROVISION and DISTRIBUTION of FOOD.

    [MORE]

    We all saw how GOVERNMENT RUN food provision went in the Soviet Union.
    You stood in line for HOURS to get a loaf of bread at the bakery.
    When you got to the head of the line, you had one or two choices of Less-Than-Tasty Soviet issue (possibly over baked, possibly under baked, possibly not risen to the full extent because insufficient yeast was added, possibly mouldy bread*).

    After all, what incentive was there for the bakery workers to make sure that the bread was baked just right or that the occasional pubic hair wasn’t found within the loaf ?

    It wasn’t as though you were going to head somewhere else. The bakery had a captive audience.
    The bakery example is but one among many. If you needed some soap there was likely only ONE type to choose from, that had some abrasive texture, that tended to give you a rash, came in only ONE FRAGRANCE. ie: ‘ Le essence of toxic waste dump at Chernobyl’.

    Now for something I know a hell of a lot about, seeing as I’m a car enthusiast.

    The Soviet Union said we will build a PEOPLE’s CAR and we will sell it AT COST. ie: since there is no excess mark up and outsize profits going to the ‘greedy capitalists exploiters’, the Soviet people will be BETTER OFF THAN THE EXPLOITED WORKING CLASS IN THE WEST.

    And yes, the Soviet car was cheaper than most western cars.

    NOT because western manufacturers could not build an equivalently priced car BUT BECAUSE western consumers wanted better features like leather trim, 16 way electrically adjustable seats, an electrically operated panoramic Moon Roof, a 20 valve (that’s FIVE valves per cylinder) DOHC four cylinder electronically fuel injected four cylinder engines that produced 140 – 150 kW of power and could rev to 8000 rpm (yes, Toyota mass produced such an engine 25 years ago that was in a sensibly priced car that the masses could afford), yet had BETTER fuel economy and produced FAR LESS toxic emissions than the 44 kW Lada.

    Meanwhile, to cater for those western consumers that wanted an austere vehicles with a low price, western car manufacturers DID produce vehicles that were ….. wait for it …. comparably priced or even CHEAPER than the Soviet Lada, but were FAR better quality, had FAR more features, were FAR better on fuel consumption and far, FAR BETTER in reliability, build quality and so forth.

    ‘HOW CAN THAT BE’ says Larry scratching his head and asking himself : ‘HOW CAN THEY DO THAT and STILL MAKE A PROFIT ?

    The answer is simple. It’s called INNOVATION, technical advancements that allow a manufacturer to make next year’s model for LOWER COST than last year’s model, because new more efficient techniques are applied in the production process.

    Anyway, back to the case of the Soviet experiment and the need for a ‘PEOPLE’S CAR’ :

    End Result : We ended up with the Lada VAZ-2101 :

    The one pictured is a ‘showroom standard’ fully restored specimen that is not representative of what these pieces of sh*t actually looked like after a year or two of use.

    Said vehicle was a COPY of the Italian Fiat 124 from 1966 (made under licence) and, when it came out in 1970, was not all that dated – seeing as it was only four years obselete.

    But, while the foreign competition innovated and introduced new features and technologies (anti-lock brakes, airbags, 5 star crash collision passenger impact zones, power windows, air conditioning and dozens of other safety and consumer desirable add-ons), the Lada was made the same way year in and year out with the same old wind up windows, no air-cond etc, for the next few decades.

    It leaked, it rattled, it had much worse fuel economy than the foreign competitors, it was not eco-friendly (it never was converted for use to unleaded fuel or provisioned with a catalytic converter for clean exhaust emissions etc), and had a THOUSAND AND ONE other shortcomings.

    The quality control at the factories was ABYSMAL, body panels were no in alignment, things didn’t work straight out of the factory and others would fail in short order.

    Don’t believe me ?

    OK, UR readers I URGE you put aside 9 mins of your time to watch this video featuring a typical vehicle of the Communist era and SEE FOR YOURSELF WHAT CARS WE’D BE DRIVING IF BIG GOVERNMENT RAN THE CAR INDUSTRY :

    The fact is, in the government run car factories in the Communist block, no one gave a rat’s arse because there was NO INCENTIVE TO INNOVATE, NO INCENTIVE TO MAINTAIN QUALITY CONTROL seeing as the Soviet consumer was a captive audience that could shop elsewhere.

    Needless to say, as soon as the wall came down, these vehicles were thrown in the rubbish tip or just abandoned in the street where they stood, as Soviet consumers rushed to buy the foreign cars.

    Now, contrast that to a typical western car manufacturer like General Motors.
    In a typical year from the past it might manufacture 8 million vehicles and, if it was a reasonably GOOD YEAR they might make $3 – $4 billion profit (many years they made much less and as for the years they LOST MONEY, well those are legion).

    So Larry, you do the maths. $4 Billion profit divided by 8 million cars = $ 500 PROFIT PER CAR (and that’s in a GOOD year).

    The Marxists will come back with :

    ‘Oh those greedy capitalists will mark up the price exorbitantly and charge whatever they want’.

    ACTUAL REALITY: NO THEY WON’T.

    Because if the private sector marks up the price of their product, people will SHOP ELSEWHERE and choose from OTHER MANUFACTURERS like Toyota, Honda, Mazda, Subaru, Nissan, Mitsubishi, Suzuki, Daihatsu etc (and that’s just from the country of Japan alone). Add in the manufacturers from other nations and the consumer is INUNDATED WITH CHOICE.

    And that’s the essence of Free Market Capitalism. It’s all about :

    1) VOLUNTARY CHOICE without Big Government coercion
    2) FREEDOM to exercise our god given rights
    3) VARIETY – which only the private sector can deliver because, let’s face it, what is the private sector ? It’s just a bunch of ENTREPRENEURS like you and me, people with a vision (like a Steve Jobs or a Henry Ford), working to satisfy consumer desires.

    BOTTOM LINE: If food provision and distribution were left to Big GOVERNMENT, we would be eating a limited variety of garbage food and waiting in long lines each day to get it.
    That’s how it would be in the first world.

    In the third world, PEOPLE WOULD BE STARVING TO DEATH BY THE TENS OF MILLIONS as government initiated bottlenecks, disruption and inefficiency ensured that not enough got to the right places at the right time.

    Larry, you are a very knowledgeable bloke in many areas but, as far as Free Market Capitalism is concerned and its UNPARALLELED ABILITY TO GENERATE REAL WEALTH that is orders of magnitude better than ANY other system, you have much to learn.

    Life is pretty good in China and there is an abundance of sensibly priced and tasty foods available for the connoisseur.
    But that’s because the PROVISION and DISTRIBUTION of food has been left to the PRIVATE SECTOR.
    Had the government been in charge … well, we need only look back a few decades to the era of Chairman Mao for the disastrous outcomes.

  7. Thank you, Mr. Romanoff, for providing more detail for something I’ve long believed.

    Are you familiar with the ShadowStats website, which gives less biased economic figures? It seems to me the author of that site, while extremely conscientious, still understates official inaccuracy, since he corrects for specific technical details while ignoring underlying conceptual problems. The most obvious example of this is GDP, which is a measure activity rather than productivity, but it is generally used as if it were measuring productivity.

    It is remarkable to me to read economists, or even economic journalism, from a century or more ago, and to see how clearer thinking, more accurate, and more logical it was back then. The field has really allowed itself to become merely a propaganda appendage of the political class since then.

    Regarding imputed rents, it would be good if US GDP statements carried a Surgeon General-like warning: “This statistic includes imputed transactions that did not actually occur”, but since GDP is most usually used as a comparative figure (e.g., GDP compared between different time periods, GDP compared between different polities), perhaps the key question is whether imputed values were always in the US GDP figures or if they have been added when was that and how much, and are similar imputed values used in other countries and how much?

  8. @Old Brown Fool

    I think what you describe is exactly the kind of dystopia that the American empire is slowly headed for — the selling of lungs, kidneys and oxygen to raise the American GDP.

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