unlawflcombatnt

Friday's Industrial Production "increase" of 0.2% is another example of the Federal Reserve manipulating statistics to make currently published figures appear "good" or "improved." From the Fed's own publication of Industrial Production figures taken from 10/30/06, the "Gross Value of Final Products and Nonindustrial Supplies" has been downwardly revised for every single time period shown. Every quarterly report has been revised downward. August and September's numbers have been downwardly revised. Even the total for 2005 has been downwardly revised by $36 billion, from the previously reported $2.990 trillion down to $2.954 trillion. (This would subtract approximately 0.1% from 2005's reported GDP.)

Even using only the current numbers, there has been a $15 billion net decline in Industrial Production since August. However, using the previously published number for August of $3.1301 trillion, there has been a decline of $64.4 billion to November's $3.0657 trillion. This is a decline in the annual rate of over 2% in 3 months.

(Below is a modified copy of both the Federal Reserves report from 12/15/06 on Industrial Production on the top with a copy of the Fed's report from 10-30-06 on the bottom. The changed numbers are underlined in red.)



(Friday's Fed Release can be found at Industrial Production)

Are these signs of an economy that is "strong, and getting stronger"? At best, much of this so-called "growth" has been a result of statistical manipulation, especially through the downward revision of previously published numbers.

unlawflcombatnt

Economic Populist Forum

EconomicPopulistCommentary

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The economy needs balance between the "means of production" & "means of consumption."

Lizra

Help the clueless.... So why would they do this?

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aceventura3

The Fed has been attempting to slow the economy since 2004 because they have publiclly stated that the economy is growing too fast generating inflationary concerns.

I don't think it is uncommon for national economic reports to be revised. To know if they have recently started manipulating data, we would have to know the history of how frequently and how often this paticular report has been revised.

It is interesting how things have changed. 15 years ago you could hardly find anyone who even knew that the Federal Reserve Board existed and even fewer who knew what their current stance on the economy was. Greenspan in paticular became a "rock star", I think it went to his head.

Our entire economic system is predicated on growth and every participant from top to bottom manipulates data because of pressures to show growth, if the data is consistently manipulated over time, you can still use the data as long as you factor in what you consider the manipulation factor. For example the speedometer in my car is about 5% off, if it says I am going 65 in reality I am going closer to 62. If there is a significant shift, then we have a problem until we get a handle on it and understand the shift.

We currently have so many people looking at economic measures in so many different ways that if one measure is inconsistant with others it is called into question or simply discounted.

Personally I think our economy is strong and diverse. Industrial production is cyclical within its overall long term trend. However, there is service, technology, communication, agriculture, energy, financial, military, medical, entertainment and other sectors in our economy that can lead growth when industrial production slows. Often a major problem is when people don't anticipate changes in macro economic trends and get trapped in a failing economic sector.

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Willravel

If we stopped printing money that wasn't backed, we'd actually slow inflation. What they're dong is putting a bandaid on an arterial hemorage. Can someone please tell me why the Fed answers to no one?

aceventura3

http://www.newyorkfed.org/aboutthefe...int/fed49.html

Actual printed money is a small percentage of our actual "money supply". They print money because we need it. Old money needs to be replaced and we have to fund liquidity.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

unlawflcombatnt

Much of our money supply creation comes from banks when they loan out money. Banks have an almost unlimited ability to create money through loans. They can loan out large multiples of the amount of money they have in "checkable" deposits. And when this "loaned" money is deposited in another bank as a checkable deposit, that bank can create still more money by loaning out multiples of their new checkable deposits. The only limits are how much banks are required to keep in reserve.

unlawflcombatnt

Economic Populist Forum

EconomicPopulistCommentary

_________________
The economy needs balance between the "means of production" & "means of consumption."

aceventura3

The multiplier doesn't actually increase "real dollars" but it does add leverage and some risk. "Real dollars" are increased from real economic growth.

If you had a nation of 100 cavemen and they had $10 each iin the bank equalling $1,000 real dollars and the bank had a 25% reserv requirement, the bank could loan $750. If that $750 loan was deposited the bank could then loan $562.5, etc, etc. In this case you still only have $1,000 in circulation and the net worth of the nation of ten cavemen is still $1,000.

On the other hand if one of those cavemen invented the wheel and used a bank loan to build wheels to sell to the other cavemen allowing them to do more work, each dollar would have more and more value (able to exchange each dollar for more goods and services) if "real dollars" remained fixed. However at some point the dollars would become inefficient as an exchange medium unless more dollars were introduced into the system to met the increasing demands for dollars as a means for trade. If the value of a dollar get too high, its value as an exchange medium gets less. This happened to gold and dollars replaced gold as an exchange meduim. Now paper dollars are being replaced by electronic dollars. I think that is why people really don't pay attension to M1 any more.

Inflation as measured by dollars can be manipulated by those who control the supply of dollars, however real inflation (what one good or service is worth compared to another) has nothing to do with dollars and everything to do with relative value. I am more interested in real inflation, i.e. how many hour will I need to work to for food each week? As long as that number goes down each year, I know I am making progress.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."