Us economic Data, Falsification

The market is stuck in Roscommon over the true state of the U.S. economy.

On the one hand, US inflation has fallen from a high of more than 9% in June, and the CPI inflation rate in July was even lower than market expectations, raising high expectations about the Fed’s ability to control inflation and the belief that the Fed will continue its aggressive rate hike path. An increase of 50-75 basis points (0.5-0.75%) is expected at the September meeting, meaning the Fed’s benchmark rate will soon be in the range of 3%-3.25%.

In anticipation of this, Treasury bond yields of all maturities, the anchor of asset prices in capital markets, have also started to rise again since June, and inverting 2-year yields to 10-year yields has become almost routine.

On the other hand, the US reported GDP growth at an annualized rate of -0.6% in the second quarter, compared with -1.6% in the first quarter. To some extent, the US economy seems to have entered a recession…

In light of this realization, the rally in US stocks since June has been halted and the market is stuck in a rut, raising the question of “pricing in an American recession” again.

However, if you look at some of the key economic data, the American economy is strong enough to make Mr. Market doubt life.

The latest US unemployment rate in July was 3.5%, the lowest in more than 50 years. Average hourly earnings in the US rose 0.5% month-on-month and 5.2% year on year in July, both beating market expectations. Not only has the labor market been hard to find, pushing up wages for Americans, but the job-seeking ratio has risen to 1.67 (1.67 job openings for every unemployed person), setting off a wage-inflation spiral in the United States.

In the face of a red-hot US economy, it is natural, of course, for markets to expect the Fed to continue its aggressive path of rate hikes.

Here’s the problem

On the one hand, two consecutive quarters of negative economic growth in the United States, which some believe is already in recession.

On the other hand, the U.S. labor market is hard to find, the unemployment rate is at a 53-year low, and the economy is on fire.

This, this, this, the American economy, is now good, or bad?

In view of this, it is simply argued that:

Us economic data is fake, unemployment rate is fake!

Those who argue that America’s statisticians are falsifying also argue that the economy is so good that crude oil, America’s most important and fundamental source of consumer energy, should theoretically be rising and inventories falling. However, data showed that US crude oil inventories not only did not decrease, but also increased, and crude oil prices plummeted, plus manufacturing PMI (purchasing managers’ index) remained above 50, while the service PMI was the lowest, second only to the 2020 pandemic…

This series of contradictory data makes many people start to exaggerate on financial and economic “we mediaā€¯:

Hum, the United States statistics, also can falsify!

First, regarding the credibility of official statistics, I believe that any investor in his right mind knows that official economic data in the United States is more open, transparent, frequent and accurate than in any other country in the world. In addition, many of the official statistics in the United States are actually private statistics.

When it comes to civilian data, which has proved to be very reliable in practice, the US authorities are willing to adopt the doctrine of “taking over”, rather than thinking that these civilian institutions are “malicious, fabricating”, or even “infiltrated by hostile forces”.

For example, the judgment of economic recession, such as the manufacturing purchasing managers’ index (PMI), the inflation expectations survey, which is very important to investors, the former data is the judgment of private institutions, approved by the official sector of the United States; The last two figures are based on surveys conducted by private organizations and approved by official organizations.

After all, investors are fighting in the market with their real money. If a private organization conducted statistical surveys, falsified data at will, deviated from the real situation, and had no salary from the US government; these organizations would have disappeared in the market long ago due to the loss of credibility, and could not have existed for so many years. And they publish their numbers every month.

Even the official statistics of the United States, such as unemployment rate and inflation rate, are all data from the bottom up, without leadership instruction or indicators. Whether the numbers are good or not is a matter of investigation and statistics, and government officials are not held accountable for poor numbers, nor are there incentives for good numbers — but if you falsified your numbers, it is a serious crime, punishable by jail time, and a loss of credit in the American system as a whole.

Zero returns VS extremely severe penalties. In this case, the US official sector will never fabricate specific data for one or two times. There is no motivation or willingness to fabricate data, and there is no benefit.

In fact, there is one sector in China that is in a similar statistical situation — the central bank system.

Whenever the People’s Bank of China publishes high-frequency data, whether it is money supply, social financing or the central bank’s balance sheet, the quality and accuracy of the data are basically the best among the statistics of major ministries and commissions in China.

This is because the central bank and legal currency systems of any country in the contemporary world are basically inherited from Britain and the United States, and the statistics of such systems are inherently objective statistics from the bottom up, there is no need to falsify, even when the government needs it most, it is just to tamper with the concepts and definitions of statistics.

Therefore, all the claims that the US has falsified its economic data this time are pure nonsense. They also do not understand the performance of the US economy.

Of course, I’m not saying that US data can’t be falsified. It’s definitely true — for example, a website called Shadow Statistics (SGS) argues that the US has been continuously “adjusting” the statistical components of the US CPI since 1980, and that this adjustment greatly understates the true level of inflation.

It can be said that the United States government in the inflation data, there is a systematic and persistent falsification. What I mean by that is that there is systematic and persistent data falsification in the United States (let alone in other countries), but not one or two, or one or two.

In the chart below, the red line is the official CPI inflation rate, the blue line is the ‘real inflation rate’ as calculated by SGS in 1990 and 1980, respectively, and the yellow line is the popular perception of inflation.


In short, the official inflation rate in the United States basically matches the inflation that the average person is feeling, but if you count it another way, it looks very different.

If the government “falsifies” CPI data, it is the long-term will of various government departments and even the whole country, not the preference of a president or a statistician.

However, we can argue that since the US economic statistics are not falsifying, so why the current US economy statistics are fighting each other?

The answer is simple, because of the money illusion.

The so-called “money illusion” is a psychological illusion in which people react only to the nominal value and number of a currency, ignoring changes in its real purchasing power and total circulation.

Under the illusion of money, whenever the nominal number goes up, people think their wages have gone up and they think they are earning more.

Companies use this “raise” to attract more people to work, and the unemployment rate in the United States has dropped to its lowest level in more than 50 years.

Consumers are more willing to spend because they feel they are making more money, so American consumers are spending a lot more (in nominal money terms), so inflation is up, and the consumer economy seems to be thriving.

Since production and consumption are strong, the U.S. economy certainly looks hot. These numbers are not fake at all. They are real.

Unfortunately, the real GDP growth rate in the United States is calculated to exclude inflation. America’s nominal GDP growth over the past two quarters has not been slow — it has been one of the fastest in recent years — but unfortunately, once you take into account the current inflation rate, it has to turn negative.

This is why the US GDP growth rate has turned negative.



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