How Long Can Economic Reality Be Ignored?

How Long Can Economic Reality Be Ignored? (Source

Trump and Clinton have come out with the obligatory “economic plans.”  Neither them nor their advisors, have any idea about what really needs to be done, but this is of no concern to the media. They say what they are paid to say and that is whatever serves the corporations and the government. We are told that we have been enjoying an economic recovery since June, 2009, that we are more or less at full emploment with an unemployment rate of 5% or less, and that there is no inflation.  We are told this despite the facts that the “recovery” is based on the under-reporting of the inflation rate, the unemployment rate is 23%, and inflation is high. GDP is measured in current prices.  If GDP rises 3% this year over last year, the output of real goods and services might have risen 3% or prices might have gone up by 3% or real output might have dropped but is masked by price increases.  To know what really happened the nominal GDP number has to be deflated by the amount of inflation. In times past we could get a reasonable idea of how the economy was doing, because the measure of inflation was reasonable.  That is no longer the case. Various “reforms” have taken inflation out of the measures of inflation.  For example, if the price of an item in the inflation index goes up, the item is taken out and a cheaper item put in its place.  Alternatively, the price rise is called a “quality improvement” and not counted as a price rise. In other words, by defining inflation away, price increases are transformed into an increase in real output. The same thing happens to the measure of unemployment. Unemployment  simply isn’t counted by the reported unemployment rate.  No matter how  long and hard an unemployed person has looked for a job, if that person hasn’t job hunted in the past four weeks the person is not considered to be unemployed.  This is how the unemployment rate is said to be 5% when the labor-force participation rate has collapsed, half of American 25-year-olds live with their parents, and more Americans age 24-34 live with parents than independently. Finanial reporters never inquire why government statistics are designed to provide an incorrect picture of the economy.

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