Bummer Summer Reading

Jack the Ripper was an artist named Walter Sickert.
Red hair is caused by a genetic mutation.
Some people actually hire their own paparazzi to make them look important.

These are just a few interesting things I’ve learned in this summer’s reading. But I didn’t intentionally go out of my way to read from “The Little Book of Bull Moves in Bear Markets,” by Peter D. Schiff - my husband picked it up and left it in the bathroom. Still, Schiff does a very good job explaining complex economic concepts.

Take the way the U.S. government reports on the economy, for instance. Having patiently explained in an earlier chapter how having the Fed simply print money to fund entitlement programs, pay for debt and “stimulate” the economy, Schiff now makes the case that the feds are doing all they can to keep us in the dark about the true economic state of our nation:

An indication of how secret the Fed wants its money printing activities to be was revealed in 2006. The government had for years been releasing money supply figures, one category of which enabled period-to-period comparison of money in circulation. Fearing knowledgeable analysts would use that information to determine the amount of inflation being created, the government announced that the category containing it, called M-3, would no longer be made public.

But wait, there’s more! The Department of Labor computes the Consumer Price Index (CPI) which Schiff identifies as a “metric whose computation methodology was specifically redesigned so that when it was computed... rampant inflation would appear to be relatively contained.” Schiff insists that real inflation per year is more like 8 to 10%, but he doesn’t explain how the CPI is computed or how he arrives at his number. I do know that the “basket of goods” upon which the prices are compared keeps changing.

Based on his “real inflation” figure of 8%, Schiff insists that the stock market lost 42% of its value from 2000-2008. But you’re still paying taxes on the “gains,” right?

Bogus inflation figures get used as the basis for a whole raft of other economic computations. Take GDP for instance. Any economic activity is part of the Gross Domestic Product. Thus, when a tornado wipes out a town, the resultant rebuilding is part of GDP. Are we any richer when we use up funds and other resources just to stay in one place? No matter; so long as GDP is growing, the government can claim that the economy is in expansion. The only thing that detracts from GDP is the rate of inflation....

Schiff also scoffs at our measure of worker Productivity. He asks, “If it is true that we are more productive than our trading partners, why is our trade deficit widening, not shrinking?”

Unemployment figures are dodgy, too. They don’t count the seasonally unemployed, the underemployed, the starving self-employed, or the discouraged.

So, what numbers do matter? Chiefly, pay attention to the trade deficit and to debt. Those numbers for this country are not good at all!

Peter Schiff is running for Christopher Dodd’s senate seat. While he seems to have a decent grasp of economics, don’t take any of my “book report” above as any kind of political endorsement for him. I know nothing else about his platform.