Numerical Clues Telling You That You Can’t Trust the Feds

26.01.2018 • United States

Bill Bonner – Bill Bonner’s Diary (United States) –

BALTIMORE – The Davos crowd was told that the world economy is minting one new billionaire every two days…

Eighty-two percent of the world’s wealth generated last year went to the “One Percent.”

That leaves 18% for the bottom 99%. Many of the 99 percenters must have gotten nothing at all… or less than nothing.

Squirrely Numbers

Numbers are always a little squirrely. Give them a bribe or threaten them with violence, and they’ll say practically anything.

But, spontaneously, more and more numbers are coming forth and bearing witness against a fraudulent economy.

They tell us that the feds’ GDP calculations are not to be trusted…

Looking at the economic picture in the U.S., we are meant to see happy people getting richer, with a bubbly stock market, low consumer price inflation, and jobs for whomever wants one.

That is the picture the news media, the financial press, Wall Street, and the Trump administration draws.

But what we see is claptrap. The dots don’t connect.

In a labor pool with barely any increase in average wages, if some wages are going up, other wages must be going down.

And in a country where growth is concentrated in a few urban-suburban conglomerates – Washington, D.C., New York, San Francisco, etc. – there must be a lot of places where people are not drinking cappuccinos, sending their children to private schools, or listening to NPR.

Illusory Growth

In the bottom half of the U.S. population, 117 million adults earn an average annual wage of $16,000 a year.

These people are worse off than they were at the end of the last century… and probably worse off than they were when the Fake-Money Era began in 1971.

But we’ll let you draw your own conclusion.

We asked our research department, ed by the able Joe Withrow, to comb through the U.S., county by county, and tell us where people were better off… and where they weren’t.

His report can be read in full here. You should read it. The assumptions and analytical methods he used are important.

In addition to the expected evidence came a revelation: GDP growth is largely counterfeit.

Economic Botox

We’ll get to that in due course…

First, here are the highlights of Joe’s report… including a map:

imageFor a full breakdown of this map, be sure you read the full special report.

According to the Bureau of Economic Analysis (BEA), wages have risen 36% since the 2008 financial crisis. The jobless rate has been cut in half. And GDP has grown 20%.

The economy is cranking out more jobs… more money… and more stuff.

America is back!

Or is it?

Per Joe:

The U.S. is a diverse nation of 325 million people. It’s composed of 50 states. Those states are composed of 3,141 counties. And those counties are very different from one another… as are the people who live in them.

But the BEA ignores this in its analysis. Instead, it rounds up economic statistics from all over the nation. Then it picks out the averages… and puts makeup on them. It smooths out their wrinkles and evens out their complexions.

GDP includes “all private and public consumption, government outlays, investments, private inventories, paid-in construction costs, and the foreign balance of trade.”

Can you spot the problem?

GDP measures include government outlays… but those outlays exceed tax receipts by a wide margin every year.

So, a portion of government outlays are financed by money created from nothing… and that is picked up as “growth” in GDP.

The people receiving that money then spend it on something… which is picked up in the “private consumption” part of GDP.

That means GDP records the Fed’s fake money as “growth” – twice.

By the way, government transfer payments have exploded by 45% since the 2008 financial crisis. And GDP metrics have captured every single penny of that as “growth.”

Depressed Counties

At Bonner & Partners, we pass no judgment. Old… young… fat… lazy – we don’t care how attractive your county is. We just want to know what it looks like before the feds doll it up.

Joe continues:

The map reveals that people in 2,278 counties have gotten poorer over the past 10 years. As best we can tell, that means 73% of U.S. counties are in a depression.

Let’s look at each of our metrics. Over the past 10 years:

  • Unemployment has risen in 56% of counties
  • The labor force participation rate – which tracks the number of Americans either working or actively looking for work – has fallen in 60% of counties
  • The poverty rate has increased in 87% of counties
  • Inflation-adjusted wage growth has decreased in 98% of counties

What is most surprising to us about this study is that even in counties where the Deep State and its crony industries are in full flower, most people are withering.

Could that be true? Could nearly three-quarters of U.S. counties really be in depression? And what does GDP really mean?

More to come…

Regards,

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Bill


Editor’s Note: David Forest is the newest analyst over at Casey Research. He is a geologist with a 20-year career in petroleum, mining, and mineral exploration. David uses his decades of experience to spot profitable investments in the commodities and natural resources sector.

MARKET INSIGHT: COMMODITIES ARE READY TO RUN

By David Forest, Senior Analyst, Casey’s Big Speculation

We’re entering what I believe will be one of the biggest investment opportunities we’ve seen in the current millennium: a major upcycle in commodities.

My research shows that commodities as a group are about to enjoy a historic resurgence. The kind that has happened regularly and reliably throughout history, and which has made fortunes for early investors.

Now looking at commodities today, you might not believe we’re at a bottom.

Most commodities right now are priced middle-of-the-road on a historical basis, if not a little on the high side.

Supply and demand figures also don’t show much cause for alarm.

But let me show you what set my colleagues and I into high speed…

You see, this chart shows clearly that commodities are indeed at a cyclical super-low. The kind that historically precedes explosive upward market moves with great reliability.

Take a look:

Chart

Here’s what you’re seeing in the chart above…

The black line is commodities prices – but not in absolute terms. Rather, we plotted commodities (as represented by the GSCI Index) as a ratio to the stock prices of the S&P 500.

Why is this a critical distinction? Because, as I showed above, absolute prices of commodities right now appear to be at very healthy levels.

But when we look at commodities compared to everything else in the world, they’re ridiculously cheap.

Right now, the ratio of the commodities index to the S&P 500 is below 1. The average of the same ratio since 1970 is 4.1 – meaning that commodities are more than 75% below the normal pricing that’s prevailed for the last 47 years.

In fact, this is the lowest the commodities-to-stocks ratio has ever been during this recorded period. Lower than the lows put in during the early 1970s or at the peak of the dot-com bubble in the late 1990s (both circled in green above).

Both of those periods were followed by an explosive reversion to the mean. Between 1972 and 1975, commodities, as measured by the GSCI Index, soared 250%. Between 1999 and 2007, the gains were even more spectacular, with commodities soaring 400%.

And today, commodities are even cheaper – in relative terms – than before those two coiled-spring events.

Game on.

– David Forest

P.S. The time to get involved in commodities is not when they’re already front-page news and prices have soared… It’s now.

This is the market we’ve all been waiting for… and Doug Casey and I believe we’re going to see some incredible moves in commodities in the next few years.

To learn how you can position yourself to profit from this rare market phenomenon, click here to watch our brand-new video presentation.

-Read more at bonnerandpartners.com-

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