Thursday, November 1, 2007

Hooray, Inflation Lowest Since 1963!!

According to the government, real GDP growth came in at a "greater than expected" 3.9% for 3Q2007. The key word here is REAL, i.e. inflation adjusted. Naturally, the lower the inflation figure used (the GDP deflator) to convert nominal dollars into "real" dollars, the higher the reported "real" GDP growth.

Nominal growth, in current dollars, was reported as 4.7% for the third quarter, versus 6.6% in the second quarter. In other words, the economy slowed down. But the government also reported that inflation for GDP purposes in the 3rd quarter was ... 0.77% annualized. No, that's not a typo. Incredulous? You should be, because that's the lowest GDP deflator figure since the third quarter of 1963. Yes, 45 years ago - see the chart below.

GDP Deflator Data: BEA

The last time inflation was reported to be this low Martin Luther King gave his "I have a dream" speech, the US had 15.000 troops in Vietnam (they still called them "advisors"), Lawrence of Arabia won the Oscars and The Beatles were becoming famous. Oh ... and Kennedy was shot.

The deflator supposedly collapsed (down from 4.2% in the first quarter and 2.6% for the second) while crude oil and food prices were zooming. C'mon.. who's kidding whom here? If we use the average of the first 6 months of 2007 as the deflator for the third quarter (3.4%), then reported "real" GDP growth would have been 4.7-3.4 = 1.3%. This provides a better picture of reality, in my estimation.

16 comments:

  1. Dick Feynman said "You cannot cheat nature".

    It seems that someone is trying to cheat nature by telling that inflation is much lower that it really it. At some point nature will prevail and no statistical tricks can hide the facts.

    ReplyDelete
  2. The difference of course is that Feynman was talking about physical laws. Economic 'laws' and economic constructs have a significant variance from hard facts; they ride the fine balance between 'not specific enough' and 'too general'.

    That's not to say that economic principles are useless; they can indeed be used to predict some things some of the time. Normally when the train is roaring down the tunnel towards you and you say, "Hey! That looks like a train and we're in a tunnel with nowhere to run!"

    ReplyDelete
  3. From a marketwatch.com article...Can you say flawed methodology?

    Flakmeister

    WASHINGTON (MarketWatch) -- As odd as it sounds, the government reported that inflation was at a four-decade low in the third quarter, primarily because import oil prices rose so much.

    If you don't understand that, welcome to the confusing world of national income accounting, where up sometimes is down, and where sometimes one plus one can equal zero.
    The simple explantion:
    Because of the way the government counts and reports the numbers, real-life inflation was understated and growth was overstated.

    The economy didn't really grow 3.9%, and inflation really wasn't 0.8%. The numbers aren't as good as they look.
    The complicated explantion:

    When reporting on gross domestic product, the government counts up all the economic activity in the country, including consumer spending, business and residential investment, and government spending and investment. Then it adds all the exports, and subtracts all the imports. The final total is gross domestic product.
    The fact that imports are subtracted is an important detail, so remember it.
    Of course, all this counting is done in current dollars, the kind you and I have in our pockets, the kind that lose value every day to inflation. In order to gauge how much of the increase in spending and investment during a quarter was due to real growth and how much to inflation, the government deflates the total number of dollars by its estimate for how much prices rose.
    In the third quarter, the government estimated that current dollar spending and investment increased at a 4.7% annual rate. After subtracting 0.8% for inflation, the real growth rate was 3.9% in the third quarter. See full story.
    How does the government estimate inflation? The same way it estimates growth, by looking at individual price changes for consumer spending, business and residential investment, and government spending. Then it adds the price changes for exports and subtracts the price changes for imports.
    It subtacts import price changes. Remember that.
    Sometimes the mechanical formula produces some "quirky, nonintuititive relationships," said Shelley Smith, who's in charge of figuring the price index for the government's Bureau of Economic Analysis.

    Most of the time, the government's formula doesn't produce any weird numbers, because the mathematical quirks all cancel each other out. But in the just concluded third quarter, it did produce quirky numbers that don't accurately reflect reality, even though they are correct from an accounting point of view.

    Imported crude oil prices rose from an average of about $69 a barrel in the second quarter to $75 in the third, but wholesale gasoline prices fell by about 10 cents to $2.07 a gallon. Imported prices for energy rose, but domestic prices didn't.

    In the government's accounting, prices of imported goods rose at a 10.3% annual pace in the quarter, but that increase was subtracted when figuring the economy-wide price index. Import prices subtracted 1.3 percentage points from inflation in the third quarter. With domestic prices rising slower than they had previously, it was enough to push inflation to four-decade low of 0.8%.

    The accounting is right. But it's not reality

    ReplyDelete
  4. The mind reels. Somebody, please remind me why I didn't go into bankruptcy law.

    It seems like we've entered the realm of cartoon physics -- like Wily Coyote we have run off the edge of the cliff and will keep going as long as we don't look down.

    I love this blog and have lurked for a while reading comments and working my way through the archives. First class snark in the face of utter horror. I salute you!

    ReplyDelete
  5. This only a problem for those who live in the reality based community.

    ReplyDelete
  6. So now our government is cooking the books ENRON style...figures.
    After you exclude everything that went up in price you get an inflation figure close to zero, amazing how that works.

    ReplyDelete
  7. As Spock would say, "fascinating". You and Peter Schiff, see Safehaven.com have homed in on exactly the same fraudulent, nay, preposterous data regarding the GDP.

    I'm reminded of the days leading up to the French Revolution, when the French government, in debt up to its eyeballs, conspire, via the machinations of its finance minister, Jacques Necker, to publicly post a document asserting that the nation's finances were balanced. it was, of course, a total, pardon my French, canard.

    ReplyDelete
  8. ballista,

    Since neoclassical economics is incapable of dialectical analysis, it been proven wrong decade after decade, nevertheless I would also note that the problem hellasious refers to is not one of economics but of accounting methodology...That mainstream economists are, in the main, so willing to accept the results of such accounting speaks to their real function, that of idealogues.

    ReplyDelete
  9. Umm methinks that Occams KISS principle needs to be applied to GDP calcs.....

    keep it simple stupid!

    ReplyDelete
  10. And they expect us t swallow these numbers without thinking about them? Unfortunately, the vast majority of sheeple out there do accept them without question. Thanks goodness the truth is getting out in this an many other blogs.

    ReplyDelete
  11. If I was a skeptic I would have to say that alas they do not expect you to follow such numbers. I mean imagine, with a little education things could just get a little uncomfortable for some.

    So now that I got that out let me add to the chorus and congratulate you Hellacious on a fantastic resource for making sense of the financial situation that we have evolved. Thanks for making plain what otherwise is hidden in obscurity.

    ReplyDelete
  12. That was obviously supposed to have saif "If I was a cynic ... " Appologies.

    ReplyDelete
  13. Eva Peron said...

    The mind reels. Somebody, please remind me why I didn't go into bankruptcy law.


    Trust me, Eva, you don't want to go there. You just think you do.

    ReplyDelete
  14. Keep up the good work...thank you for your contributions. That was the best rationalization of what is going on. It's tough to get 3.9% when Bill Zollers concludes we could be in recession NOW.

    Allen C

    ReplyDelete
  15. telefon tarife karşılaştırma
    en uygun tarife
    en iyi tarife
    havalandırma
    gizli kamera
    izolasyon
    çelik baca
    paslanmaz çelik baca
    doğalgaz bacası
    Sohbet
    iso 9001
    iso 14001
    Yangın Söndürme
    yangın söndürme cihazları
    yangın dolapları
    yangın tüpü
    izalasyon
    ısıtma soğutma
    isitma sogutma
    Aspirator
    Aspiratör
    Vantilatör
    sohbetim
    turizm işletme belgesi
    turizm belgesi
    turizm yatırım belgesi
    Chat
    sohbet odası
    sohbet sitesi
    türkiye sohbet
    tr sohbet
    tüm türkiye sohbet
    arkadaş sohbet
    türkiye sohpet
    kızlarla sohbet
    kızlarla sohpet
    muhabbet
    muhappet
    kızlarla çet
    çet
    Gizli Kamera
    türkiye çet
    çet sohpet
    mırç
    mirç
    türkiye mirc
    mirc
    muhabbet
    Sohbet Sitesi
    Chat
    Sohpet
    Yangın
    yangın güvenlik
    yangın söndürme sistemleri
    yangın tüpü dolum
    yangın merdiveni
    yangın çıkış kapısı 
    Hava Soğutma
    Hücreli Aspiratörler
    Fanlar
    Radyal Körükler
    Toz Toplama
    Soğutma Kulesi
    Klima Santraller
    Malzeme Nakil Vantilatörleri
    iso 14001
    iso 14001
    iso 22000
    iso 22000
    haccp belgesi
    haccp belgesi
    ikamet tezkeresi
    yabancı çalışma izni
    yabancı personel çalışma izni
    yabancı çalışma izni
    yabancı personel çalışma izni
    ohsas 18001
    ohsas 18001
    iso belgesi
    iso 9001 belgesi
    ohsas belgesi
    ISO 9001
    Teşvik Belgesi
    Çocuk Bezi
    Hasta Bezi
    Makyaj Malzemeleri
    Makyaj Temizleme Mendili
    Kişisel Bakım
    kolonyalı mendil
    Islak mendil
    Dudak Koruyucu
    Temizlik Ürünleri
    Göz Kalemi
    Diyet Ürünleri
    Süper Site
    driver
    Güvenlik Kamerası
    Islak Mendil
    Kolonyalı Mendil
    Kolonyalı Mendil
    JoyTurk
    driver ara
    web tasarım
    Güvenlik Kamerası
    paketleme
    Kamera
    Kamera Kurulum
    Tatil
    Tatil Köyleri
    Turk tourizm
    Turkish tourizm
    Turk holiday
    Turkish holiday
    Turkish travels
    Turk Travels
    Tatil Yerleri
    Tatil Beldeleri
    Perde
    Perde Modelleri
    Kamera
    Epilasyon
    Emlak
    Yaşam
    Tatil
    Video
    Cilt Bakımı
    video
    süper
    perde
    jaluzi perde
    stor perde
    dikey perde
    perde modelleri
    perde
    jaluzi perde
    stor perde
    dikey perde
    perde modelleri
    magazin
    haberler
    spor haberleri
    video
    eğitim
    Giyim

    ReplyDelete
  16. pee pee babes -
    perfect lady boys -
    pix and video -
    planet of stars -
    playful hands -
    porn access -
    porn pass for all -
    pov freaks -
    pregnant freaks -
    pride access -
    private gwen -
    puma swede -
    punished gay -
    real 8 teens -
    real internet sluts -
    real milf sex -
    real rookies -
    rectal freaks -
    rectal rooter -
    seductive wife -
    sex effects -
    sexxx drive -
    sexy teen sandy -
    she gapes -
    sleeping tushy -
    slut lickers -
    smoking mina -
    solo desires -
    speculum plays -
    sperm suckers -
    strapon lesbians -
    strip club exposed -
    sweet georgia -
    sweet sophie moone -
    sydney moon -
    taste of uk -
    teach me fisting -
    teen brazil -
    teen charms -
    teen dreams -
    teen stars magazine -
    throated -
    tiffany lee fisher -
    tina doll -
    tit anime -
    titty paradise -
    total super cuties -
    trixie swallows -
    tushy lickers -
    tushy massage -
    tushy school -
    twistys -
    ultimate fantasy girls -
    uncensored clips -
    ussr sex -
    varsity teens -
    vika dreams -
    vip members -
    vivid -
    west coast gangbangs -
    xxx films online -
    xxx key -
    xxx teen pussy -
    yank my crank -
    young xxx babes -
    zoli boy -
    big sausage pizza -
    1st lesbian experience -
    4 ever models -
    18 amy -
    1000 facials -
    1000 orgasms -
    absolute kim -
    adult doorway -
    adult movie time -
    alannah miles -
    alyssa doll -
    amateur creampie -
    angie xxx -
    anna marie anderson -
    ann angel -
    annas funhouse -
    anti innocence -
    asshole fever -
    ass lick -
    atm freaks -
    bad tushy -
    beaver bong -
    big cock crew -
    big dick girls -
    bikini banger -
    bio hazard bitches -
    black bros white hoes -
    black cherrys -
    bond anime -
    border bangers -
    brilliant xxx movies -
    caged tushy -
    candi from the block -
    catalina cruz -
    chicks on vids -
    chubby freaks -
    club jessica james -
    club sandy -
    college fuck fest -
    creamed cuties -
    creampie cuties -
    creampie ebony -
    creampie king -
    creampie reality -
    creamy pie holes -
    cum drunk sluts -
    cumshot central -
    cute latina -
    deep throat frenzy -
    diamond pierce -
    digital porn movies -
    dirty 101 -
    dirty damsels -
    doctor tushy -
    dp amateurs -
    dp fanatics -
    dp freaks -
    drunken 18 -
    drunken bi -
    drunken gay -
    ebony cum dumps -
    emily doll -
    emily sweet -
    erica star -
    euro fuck trip -
    facial abuse -
    fantasy girl brooke -
    fassinating -
    female celebrities -
    females domination -
    flexy pussy -
    footsie babes -
    freak spankings -
    freaky ebony -
    freaky granny -
    freaky midgets -
    freaky milfs -
    freaky tranny -
    frenzie fuck -
    fucking hookers -
    gay gravy -
    gay like girl -
    gay porn access -
    gays glory holes -
    gays tales -
    georgia adair -
    ghetto gaggers -
    gia marie -
    girlfriend handjobs -
    girls gone wild -
    gobble my goo -
    good holes -
    grandpas fuck teens -
    guys get fucked -
    handjob porno -
    herself pics -
    horny euro sluts -
    hot wives and girlfriends -
    jean swing -
    joon mali -
    jp 18 -
    just dirty movies -
    just sasha -
    karups hometown amateurs -
    karups private collection -
    kate star -
    kira dreams -
    kung fu whores -
    lactalia -
    latent gay -
    latina abuse -
    leroys girls -
    lestai -
    lezbo honeys -
    lez cuties -
    licensed to blow -
    lily koh -
    little lupe -
    lusty grandmas -
    madison summersmagic blondes -
    maniac pass -
    martina dreams -
    masha star -
    matts models -
    mean amazon bitches -
    mean bitches -
    met art -
    milk my cock -
    model teen world -
    mommy loves cock -
    my porn interview -
    my xxx pass -
    nasty adam eve -
    next door amateur -
    nicole star -
    nubiles -
    old bride -
    older women -
    old freaks -
    only carla -
    only melanie -
    only swallows -
    only tease -
    only teen blowjobs -
    open air pleasures -
    oriental orgies -
    paul markham teens -
    pee and blow -
    pee pee babes -
    perfect lady boys -
    pix and video -
    planet of stars -
    playful hands -
    porn access -
    porn pass for all -
    pov freaks -
    pregnant freaks -
    pride access -
    private gwen -
    puma swede -
    punished gay -
    real 8 teens -
    real internet sluts -
    real milf sex -
    real rookies -
    rectal freaks -
    rectal rooter -
    seductive wife -
    sex effects -
    sexxx drive -
    sexy teen sandy -
    she gapes -
    sleeping tushy -
    slut lickers -
    smoking mina -
    solo desires -
    speculum plays -
    sperm suckers -
    strapon lesbians -
    strip club exposed -
    sweet georgia -
    sweet sophie moone -
    sydney moon -
    taste of uk -
    teach me fisting -
    teen brazil -
    teen charms -
    teen dreams -
    teen stars magazine -
    throated -
    tiffany lee fisher -
    tina doll -
    tit anime -
    titty paradise -
    total super cuties -
    trixie swallows -
    tushy lickers -
    tushy massage -
    tushy school -
    twistys -
    ultimate fantasy girls -
    uncensored clips -
    ussr sex -
    varsity teens -
    vika dreams -
    vip members -
    vivid -
    west coast gangbangs -
    xxx films online -
    xxx key -
    xxx teen pussy -
    yank my crank -
    young xxx babes -
    zoli boy -
    big tit patrol -
    1st lesbian experience -
    4 ever models -
    18 amy -
    1000 facials -
    1000 orgasms -
    absolute kim -
    adult doorway -
    adult movie time -
    alannah miles -
    alyssa doll -
    amateur creampie -
    angie xxx -
    anna marie anderson -
    ann angel -
    annas funhouse -
    anti innocence -
    asshole fever -
    ass lick -
    atm freaks -
    bad tushy -
    beaver bong -
    big cock crew -
    big dick girls -
    bikini banger -
    bio hazard bitches -
    black bros white hoes -
    black cherrys -
    bond anime -
    border bangers -
    brilliant xxx movies -
    caged tushy -
    candi from the block -
    catalina cruz -
    chicks on vids -
    chubby freaks -
    club jessica james -
    club sandy -
    college fuck fest -
    creamed cuties -
    creampie cuties -
    creampie ebony -
    creampie king -
    creampie reality -
    creamy pie holes -
    cum drunk sluts -
    cumshot central -
    cute latina -
    deep throat frenzy -
    diamond pierce -
    digital porn movies -
    dirty 101 -
    dirty damsels -
    doctor tushy -
    dp amateurs -
    dp fanatics -
    dp freaks -
    drunken 18 -
    drunken bi -
    drunken gay -
    ebony cum dumps -
    emily doll -
    emily sweet -
    erica star -
    euro fuck trip -
    facial abuse -
    fantasy girl brooke -
    fassinating -
    female celebrities -
    females domination -
    flexy pussy -
    footsie babes -
    freak spankings -
    freaky ebony -
    freaky granny -
    freaky midgets -
    freaky milfs -
    freaky tranny -
    frenzie fuck -
    fucking hookers -
    gay gravy -
    gay like girl -
    gay porn access -
    gays glory holes -
    gays tales -
    georgia adair -
    ghetto gaggers -
    gia marie -
    girlfriend handjobs -
    girls gone wild -
    gobble my goo -
    good holes -
    grandpas fuck teens -
    guys get fucked -
    handjob porno -
    herself pics -
    horny euro sluts -
    hot wives and girlfriends -
    jean swing -
    joon mali -
    jp 18 -
    just dirty movies -
    just sasha -
    karups hometown amateurs -
    karups private collection -
    kate star -
    kira dreams -
    kung fu whores -
    lactalia -
    latent gay -
    latina abuse -
    leroys girls -
    lestai -
    lezbo honeys -
    lez cuties -
    licensed to blow -
    lily koh -
    little lupe -
    lusty grandmas -
    madison summersmagic blondes -
    maniac pass -
    martina dreams -
    masha star -
    matts models -
    mean amazon bitches -
    mean bitches -
    met art -
    milk my cock -
    model teen world -
    mommy loves cock -
    my porn interview -
    my xxx pass -
    nasty adam eve -
    next door amateur -
    nicole star -
    nubiles -
    old bride -
    older women -
    old freaks -
    only carla -
    only melanie -
    only swallows -
    only tease -
    only teen blowjobs -
    open air pleasures -
    oriental orgies -
    paul markham teens -
    pee and blow -
    pee pee babes -
    perfect lady boys -
    pix and video -
    planet of stars -
    playful hands -
    porn access -
    porn pass for all -
    pov freaks -
    pregnant freaks -
    pride access -
    private gwen -
    puma swede -
    punished gay -
    real 8 teens -
    real internet sluts -
    real milf sex -
    real rookies -
    rectal freaks -
    rectal rooter -
    seductive wife -
    sex effects -
    sexxx drive -
    sexy teen sandy -
    she gapes -
    sleeping tushy -
    slut lickers -
    smoking mina -
    solo desires -
    speculum plays -
    sperm suckers -
    strapon lesbians -
    strip club exposed -
    sweet georgia -
    sweet sophie moone -
    sydney moon -
    taste of uk -
    teach me fisting -
    teen brazil -
    teen charms -
    teen dreams -
    teen stars magazine -
    throated -
    tiffany lee fisher -
    tina doll -
    tit anime -
    titty paradise -
    total super cuties -
    trixie swallows -
    tushy lickers -
    tushy massage -
    tushy school -
    twistys -
    ultimate fantasy girls -
    uncensored clips -
    ussr sex -
    varsity teens -
    vika dreams -
    vip members -
    vivid -
    west coast gangbangs -
    xxx films online -
    xxx key -
    xxx teen pussy -
    yank my crank -
    young xxx babes -
    zoli boy -
    big tits round asses -
    1st lesbian experience -
    4 ever models -
    18 amy -
    1000 facials -
    1000 orgasms -
    absolute kim -
    adult doorway -
    adult movie time -
    alannah miles -
    alyssa doll -
    amateur creampie -
    angie xxx -
    anna marie anderson -
    ann angel -
    annas funhouse -
    anti innocence -
    asshole fever -
    ass lick -
    atm freaks -
    bad tushy -
    beaver bong -
    big cock crew -
    big dick girls -
    bikini banger -
    bio hazard bitches -
    black bros white hoes -
    black cherrys -
    bond anime -
    border bangers -
    brilliant xxx movies -
    caged tushy -
    candi from the block -
    catalina cruz -
    chicks on vids -
    chubby freaks -
    club jessica james -
    club sandy -
    college fuck fest -
    creamed cuties -
    creampie cuties -
    creampie ebony -
    creampie king -
    creampie reality -
    creamy pie holes -
    cum drunk sluts -
    cumshot central -
    cute latina -
    deep throat frenzy -
    diamond pierce -
    digital porn movies -
    dirty 101 -
    dirty damsels -
    doctor tushy -
    dp amateurs -
    dp fanatics -
    dp freaks -
    drunken 18 -
    drunken bi -
    drunken gay -
    ebony cum dumps -
    emily doll -
    emily sweet -
    erica star -
    euro fuck trip -
    facial abuse -
    fantasy girl brooke -
    fassinating -
    female celebrities -
    females domination -
    flexy pussy -
    footsie babes -
    freak spankings -
    freaky ebony -
    freaky granny -
    freaky midgets -
    freaky milfs -
    freaky tranny -
    frenzie fuck -
    fucking hookers -
    gay gravy -
    gay like girl -
    gay porn access -
    gays glory holes -
    gays tales -
    georgia adair -
    ghetto gaggers -
    gia marie -
    girlfriend handjobs -
    girls gone wild -
    gobble my goo -
    good holes -
    grandpas fuck teens -
    guys get fucked -
    handjob porno -
    herself pics -
    horny euro sluts -
    hot wives and girlfriends -
    jean swing -
    joon mali -
    jp 18 -
    just dirty movies -
    just sasha -
    karups hometown amateurs -
    karups private collection -
    kate star -
    kira dreams -
    kung fu whores -
    lactalia -
    latent gay -
    latina abuse -
    leroys girls -
    lestai -
    lezbo honeys -
    lez cuties -
    licensed to blow -
    lily koh -
    little lupe -
    lusty grandmas -
    madison summersmagic blondes -
    maniac pass -
    martina dreams -
    masha star -
    matts models -
    mean amazon bitches -
    mean bitches -
    met art -
    milk my cock -
    model teen world -
    mommy loves cock -
    my porn interview -
    my xxx pass -
    nasty adam eve -
    next door amateur -
    nicole star -
    nubiles -
    old bride -
    older women -
    old freaks -
    only carla -
    only melanie -
    only swallows -
    only tease -
    only teen blowjobs -
    open air pleasures -
    oriental orgies -
    paul markham teens -
    pee and blow -
    pee pee babes -
    perfect lady boys -
    pix and video -
    planet of stars -
    playful hands -
    porn access -
    porn pass for all -
    pov freaks -
    pregnant freaks -
    pride access -
    private gwen -
    puma swede -
    punished gay -
    real 8 teens -
    real internet sluts -
    real milf sex -
    real rookies -
    rectal freaks -
    rectal rooter -
    seductive wife -
    sex effects -
    sexxx drive -
    sexy teen sandy -
    she gapes -
    sleeping tushy -
    slut lickers -
    smoking mina -
    solo desires -
    speculum plays -
    sperm suckers -
    strapon lesbians -
    strip club exposed -
    sweet georgia -
    sweet sophie moone -
    sydney moon -
    taste of uk -
    teach me fisting -
    teen brazil -
    teen charms -
    teen dreams -
    teen stars magazine -
    throated -
    tiffany lee fisher -
    tina doll -
    tit anime -
    titty paradise -
    total super cuties -
    trixie swallows -
    tushy lickers -
    tushy massage -
    tushy school -
    twistys -
    ultimate fantasy girls -
    uncensored clips -
    ussr sex -
    varsity teens -
    vika dreams -
    vip members -
    vivid -
    west coast gangbangs -
    xxx films online -
    xxx key -
    xxx teen pussy -
    yank my crank -
    young xxx babes -
    zoli boy -
    blind date bangers -
    1st lesbian experience -
    4 ever models -
    18 amy -
    1000 facials -
    1000 orgasms -
    absolute kim -
    adult doorway -
    adult movie time -

    ReplyDelete