Posted Feb 3, 2015 by Martin Armstrong
It is sad to say but a broken clock is still correct twice a day and that will be more accurate than anything government gets its hands on. The entire economic statistics are just wrong. In GDP, they count total government spending and then they count total personal income. Nobody bothers to back out government workers. So if government hires someone, in never-never-land quoted by top socialist economists, GDP grows. True, because the statistics count government workers twice.
Take trade, here the system still reflects the fixed exchange rate mechanism of Bretton Woods. There is nobody there counting the number of cars coming in at the port. All they measure is currency. When currency was fixed, then obviously if you spent more, this meant you got more. Once the floating exchange rate system was born, that method of measuring trade has been totally erroneous. Take the Swiss franc that suddenly rose 30% overnight. You did not get 30% more goods, you just paid 30% more for the same goods.
We seriously need to revise the entire would economic statistical methodology. As I just wrote about using debt to GDP ratios, this is completely irrelevant. If GDP drops, even if the debt is not increased, the debt to GDP ratio will rise making people think spending is increasing when it is not.
We have so much to straight-out, it is totally insane. We really need the crash and burn just to realign the whole nightmare and start over. Our greatest risk – which way will we go. More authoritarianism or freedom?