What are these “Shadowstats” graphs we place on the left sidebar for our readers?

Well, most folks nervous about the economy want to check the major indices and precious metal prices, so we have those for quick reference by popular demand. However, these don’t tell the whole story.

Things Aren’t What They Seem

Most readers in favor of small government are aware of the monkey business going on in the official unemployment figures. How can unemployment be reported so low when you see and know so many jobless Americans? Easy. Change the definition of who is counted in the workforce. If vast multitudes of unemployed, working-age Americans are removed from being ‘part of the workforce,’ then the fact of their unemployment no longer figures into the official “unemployment” number. And then politicians of all types can go home talking about how they successfully lowered unemployment and ought to be reelected. (Not really, but who are you to argue with “official” numbers.)

So you knew the unemployment numbers hide what’s really going on. But did you know this political spin is going on with most of the economic calculations?

Official inflation figures say it isn’t as bad as you think. GDP isn’t as bad as it looks. The USD is stronger than you would have guessed. Or so they claim…

In reality, the method of calculating inflation was changed several times in recent decades to justify how things aren’t inflating as much as historic calculations would indicate. Full details are explained at this excellent article by the economist who runs Shadowstats.

Here’s the short version. By redefining the normal standard of living downwards, apparent inflation is reduced. You’re buying hamburger because you can’t afford steak anymore? Well, that’s just the new norm, totally not caused by inflating meat prices.

Inflation then goes into the GDP calculations, and smaller inflation makes GDP appear better than reality.

How Does This Help Me?

Here’s a timely practical example. Maybe you saw the recent headlines about how GDP growth for the US Economy in 4Q2016 was disappointingly low. The discussion of it over at the WSJ is basically an exercise in cheering up investors with hope and rainbows for the future. “Yeah, GDP growth was disappointingly low. But here’s a bunch of reasons why we’re not all doomed and we can hope for better results in 2017… Just stay happy and keep investing your money or else this gravy train is coming to a cataclysmic end!”

The key part to consider is the bottom right graph in this compiled image they provide:

Source: publicly available with a Google image search.

That bottom right one chronicles the last decade of overly optimistic forecasts of economic growth; forecasts which failed to pan out and reality is still trying to catch up. “But this time, it’s different!” they say.

Want to know why reality can’t keep up with the expert number crunchers? Go back and take a look at the Shadowstats article, and scroll down quickly until you see a pair of line graphs labeled GDP. Yeah, with the bogus inflation measures, GDP doesn’t seem all that bad. But use an inflation measure better based in reality, and suddenly GDP looks atrocious.

Why does the economy never seem do as well as predicted? Shadowstats gives you a key insight.

Should you expect the economy to start getting better, like all the experts say it will? Not unless you see the Shadowstats data show things improving.

 

This is only going to give you a gut feel for how the US Economy is doing. But who are you going to trust? Official figures, or your lying eyes?

The Shadowstats data gives our readers something that helps explain what their eyes see around them every day, and why it doesn’t look as great as “official” figures want you to believe.