Two Ways The Government Is Lying to You Right Now

We live in an inauthentic world, yet people perceived to be telling the truth are demonized and shunned by the establishment. The fact that it took everybody so long to figure out that mainstream media promoted “fake news” to support their own political agenda is testimony to the fact that we claim to seek authenticity but settle for insincerity, falsehood and duplicity in our personal, business and civic relationships. Those of us who refuse to settle are considered “difficult.”

The question I keep asking (because I am decidedly “difficult”) is whether these people are wrong because they are stupid or because they are lying. I’ve come to conclude that the two alternatives are not mutually exclusive though one of the worst sins our society commits against itself is confusing educational achievement and wealth for intelligence or good intentions.

The U.S. government is a major promoter of fake news. It lies to its citizens about virtually everything, but one of its specialties is the publication of phony economic statistics to justify failed economic policies. Whether this will change under the new administration remains to be seen (I’m not holding my breath and neither should you), but the last eight years were characterized by one false narrative after another bolstered by phony government statistics.

These two outright lies should concern you the most.

Lie #1: Our Unemployment Numbers Are Spectacularly Low

One of our government’s most baldfaced lies is the headline unemployment number that claims that less than 5% of the working population is out of work. This is utter nonsense.

This figure, known as U3, only includes people actively looking for work within four weeks of the survey. U3 declined from 10% in 2009 to 4.6% in November 2016 because many unemployed people stopped looking for work in America. U6, which includes only short-term discouraged workers, is 9.7%; were we to include both long-term and short-term discouraged workers, the figure would be over 20%. With a labor participation rate of only 62.7%, close to the 40-year low reached in September 2015, there are roughly 95 million able-bodied people out of the work force. There are many reasons for this, among them technological changes that are replacing many workers with machines, the culture of dependency promoted by Obama administration policies that lowered the eligibility requirements for many government benefits and eliminated welfare work requirements adopted during the 1990s, and the job- killing effects of Obamacare.

A recent paper by Harvard economist Lawrence Katz and Princeton economist (and former head of Obama’s Council of Economic Advisors) Alan Krueger describes the changing nature of American employment. Nine-to-five jobs are a thing of the past for an increasing number of Americans, which means that the stability that this type of employment provided is gone, with enormous consequences for families, communities and the psychological well-being of breadwinners. In a word (two words actually), part-time and temporary employment are the “new normal” for many Americans. Quoting from the report, “A striking implication of these estimates is that all of the net employment growth in the U.S. economy from 005 to 2015 appears to have occurred in alternative work arrangements.” (italics in original) The authors add that “it appears that as of late 2015, the labor market had not yet fully recovered from the huge loss of traditional jobs from the Great Recession.” Among the consequences of this is that an increasing percentage of the work force is not entitled to healthcare and other benefits provided by traditional employers. The percentage of workers in this category increased from 10.1% in 2005 to 15.8% in late 2015, an acceleration from the prior ten years when the percentage remained steady.

The last eight years saw a perfect storm of job-killing and incentive killing policies from the Obama administration coincide with accelerating technological change that severely damaged American workers and requires creative and forceful policy initiatives to reverse. As I’ve pointed out repeatedly, but the mainstream press never mentions, were the labor participation rate the same today as it was when Barack Obama took office in January 2009, U3 would be roughly 10%. Janet Yellen is aware of this data, which is one likely reason why she has been so reluctant to raise interest rates. Unfortunately, the level of interest rates isn’t the cause of this problem, but when you are a hammer, every problem looks like a nail. Sadly, American workers are the one getting slammed on the head.

One last point about employment was made by David Rosenberg in a recent interview with Kate Welling in Kate’s always fascinating and invaluable publication Welling on Wall St. When Donald Trump complains about jobs being exported to other countries, he is fighting the wrong battle. The main reason Americans are losing jobs is not foreign competition or currency manipulation; it is technology that is changing the nature of work and eliminating many traditional American jobs. Jobs policy needs to focus on educating workers for the new jobs market and making America a better environment for businesses through lower taxes and less regulation, not by imposing tariffs on foreign goods.

The second lie attempts to paper over an even more egregious discrepancy between reality and what American workers are actually experiencing.

Lie #2: Inflation Keeps Getting Lower And Lower

Maybe it’s because I am not a trained economist (which I consider a badge of honor), but I can’t accept the arguments that we are in a low inflation environment. Economists are trained to measure inflation in a manner that is disconnected from real world prices. Leaving aside commodity prices, which are lower than at the beginning of 2014 but higher than a year ago, the prices of the goods and services needed by ordinary citizens to live their daily lives keep rising. In some cases, such as technology products, they may be getting more for their money (so-called “digital deflation”), but the fact remains that their expenses are rising. This is most apparent in healthcare, education, and government services, but I am hard pressed to think of a single important product that costs less today than it did a few years ago. There was some food deflation in the last year, but recovering energy prices compensated for that. Overall, life simply gets more expensive every year and there is little prospect that will change.

The fact that prices rose during a period when the cost of money was virtually zero is problematic since if we are indeed at the end of zero and negative interest rates, official inflation statistics will start to show increases (and are already doing so). I do not believe that interest rates were low for the last decade due to a lack of inflation; they were low because central banks lowered the cost of money by creating artificial demand for debt instruments (by buying trillions of dollars of them) and setting official interest rates at or below zero. They created a situation in which markets are now like a tightly coiled spring set to snap when normal functions return (which is why central banks are resisting so strenuously allowing that to happen).

To my mind, inflation is undervalued by the market because it is incorrectly measured (which means if you are hell-bent on owning US Treasuries at least buy TIPS). This means that the nominal returns on all assets, including but not limited to fixed income assets, are meaningfully overstated. If interest rates continue to rise, inflation will follow but the real number to watch remains the real (i.e. inflation adjusted) return on capital. And that is very difficult to measure in a world that isn’t honest about how it calculates price increases.



36 Responses to “Two Ways The Government Is Lying to You Right Now”

  1. I look forward to reading your insightful commentary every morning. It’s unfortunate there seems to be so many people who are gullible, misguided, and / or seemingly disinterested in educating themselves, just my opinion. Thanks!

  2. Exactly right – an educated citizen is our best defense against BS

    We should all pressure the Trump Admin to re-cast the old historic unemployment numbers and start using all three – 95mill have given up, Long- and short- unemployment, and U6. When business investment picks up the results will show

    ‘Audit the Fed’ and force use of real indicators of inflation, growth (or lack there of)

  3. About three or so years ago, I heard an interview with Kevin Ferry, Mr. Lewitt, you probably know who Mr. Ferry is.. Anyway, he used to show up on CNBC and other financial programs giving his take on the Bond Markets. I distinctly heard him say on an interview that the numbers coming out were just ‘artificial’ and do not reflect the true picture of what is really going on. Trading was taking place on these numbers being just pulled out of a hat. Reactionary and not real hard numbers. I’ve always taken what Mr Ferry says as purely honest. Bluntly to the point, though he had his unique way of describing the way the markets were playing out based on the ‘imaginary’ numbers reported. I’ve asked around and found out that Mr Ferry is just “laying low” and staying out of the market spotlight. Maybe he just got too disgusted with trying to explain the lunacy of what has been going on in the trade he enjoyed being part of? I don’t know, but that interview really took the wind out of my sails, but then realized even more that we live in a world where honesty; BRUTAL HONESTY is the best way to go through life. At least you can see what is coming at you and have time to at least make an earnest attempt to bob and weave to avoid getting sucker punched. Mr. Lewitt, thanks for speaking truth. It’s the best policy, no matter how painful it seems at first. It is a fact. Just please don’t get so disgusted that you disappear. Many of us appreciate what your insights are in what is going on. Doesn’t matter how many times the market pun-dents and gurus call a lemon an apple. A lemon is a lemon is a lemon. And a Tomato is a Tomato even though some pronounce it as “Toemawtoe”.

  4. My observations are that whenever the inflation ot workforce numbers are getting bad, the government changes the rules for counting these numbers so it looks like everything is improving. I’m on a fixed income (Social Security) and haven’t seen a real raise in 3 years yet I know everything has gone up in price, so why haven’t my benefits. The raise I got this year was completely eaten up by the raise in the cost on Medicare, so I got no real raise!!!!

  5. I agree with most of this content. Thank you for sharing. I believe we still need to ensure that manufacturing stays (and comes back) in this country. Even though traditional activity is being replaced by technology, that technology needs to be programmed and maintained (with fewer people of course). If the manufacturing plants are not here in the US, then those technology support jobs will not be needed. There are many other businesses that are boosted when the plants are here. Examples: Companies that; provide the original capital equipment, supply cleaning materials and paper of all sorts, building improvements, expansions, etc.

  6. One inflation factor not talked about much is taxes. Just got my property tax bill for this year. It’s up 11.8% from last year. Other taxes, fees and services are also increasing faster than the stated inflation rate too. If inflation is said to be so low for the common person, why are public municipalities, insurance companies, etc. etc. costs rising so much? Silly question I know. At least social security recipients must have the advantage of low inflation. It must be the reason their annual benefit adjustments were zero for a couple years and this year’s is only a couple tenths of a percent. Lucky them!
    Seriously, anyone who touts the government statistics as accurate, are probably the ones somehow benefitting from them.

  7. the biggest, farcical illusion of “gubmint” that the under- informed american public largesse has swallowed for so long i want to vomit. Inflation and unemployment reporting of shameful-yet shameless-proportion. We dont calculate our livingcosts on copper or other base commodities….rather food, fuel for transport and heat, and necessary health care events. Tell me who has not seen those real after-tax outlays soar past any wge increases…….we are headed for the revolt……

  8. Right on!!! When we look at the policies of the current administration, (increased taxes, hundreds of costly regulations, Obamacare) the notion that we are at record unemployment is laughable. Who in their right mind would hire in this environment. The growth in jobs in the last eight years has been in spite of government policies which have failed miserably. The truly sad aspect of these fictions is that they are enthusiastically supported by the “elites” of our society-mainstream media & academics who are supposedly have superior knowledge and insight into all aspects of our modern existence

  9. Great article. Refreshing. I can’t tell you how good it feels to read honest, intelligent writing and analysis. I once told my wonderful uncle how relieved and relaxed and confident I felt about investing after discussing stocks with him; and he said, “That’s because I’m not trying to sell you anything.” It’s so despicable to have the government–the President!–lie straight to your face. What a complete lack of respect for the genuine trust many gave Obama. In particular, it’s disgusting how he was able to look into a sea of black, hopeful faces and see only a throw-a-way resource to be manipulated into more power, more money, more star status–for him. As far as the lies and distortions of unemployment and GDP, the thing that pops my eyes out is that our “economists” accept and use these completely unreliable figures in tried and true algorithms as though the inputs don’t affect the output. So the raw material of their deliberations is false. No wonder they get it all wrong. Just how stupid (or dishonest)_ can they be? Thank you so much for your insights.

  10. Absolutely. Amen. The government lies about everything, aided by the lapdog enemedia.

    So, what do we do about it, besides just whimper and complain? If you haven’t done so already, withdraw your consent and oppose them in every way you can do so peacefully.

    Ignore … evade … subvert.

    IGNORE: They tell you to eat a low fat diet heavy on cereal grains. Ignore them. Had you done so for the last 40+ years of their jihad against real food like eggs, butter, and coconut oil, you wouldn’t have all sorts of chronic diseases now.

    EVADE: They tell you you can’t have CBD oil (made from cannabis but producing no psychoactive effect) even though it’s the ONLY thing that stops your child’s seizures IMMEDIATELY. Find a way to get it, even if you have to go to another state.

    SUBVERT: Buy gold and silver. Use bitcoin. Use cash. Refuse to use the bankster banks. Tell the globalist tools at Facebook and Google to take a hike. Stop taking the big pharma drug lord’s drugs. Turn off the “news.”

    Don’t comply. Spit in the soup of the liars and sociopaths, figuratively speaking, whenever you can. Act like a free person, not some whipped dog or medieval serf. Make them pay for their lies, deceit, and crimes against the citizenry.

  11. Besides economic lies there is significant proof that the politician protect certain interests that will (has) bankrupt America. First is the approval and promotion of expensive synthetic drugs and the suppression of natural “cures” and treatments used effectively around the world. Just Google “Doctors killed in Florida” to see the mysterious deaths of successful doctors (15+) treating cancers but not following our laws(!) requiring only Chemo, Radiation, or Surgery. Vaccine companies and now Monsanto with GMO crops have taken the profits and shifted the liabilities to the taxpayers of unfolding negative health consequences. We have paid out $2.5 Billion in claims for vaccine damages in a special court. Whistleblowers are destroyed. I hope but doubt even The Donald can get to truth and real science. An engineer has proven that 90% of global warming is statistically correlated to Sun cycles and warm ocean or volcano events! 5% Man’s.

  12. Mr. Lewitt is spot on in his assessment of both issues. Almost everything the federal government tells you is a lie but the employment and inflation figures, which can and do turn most markets on a dime, are among the biggest lies. Since Nixon ended the gold standard in 1971 the purchasing power of the USD has declined 90% by almost any metric you want to use to measure it. In simple terms this means the cost of goods and services which most people purchase with their dollars has increased by a factor of almost 10! This means that what you could buy for a dime in 1971 now costs a dollar. This is why the house you grew up in that your parents paid $30,000 for, now costs $400,000 or more. It’s also why the new car that your father bought for $5,000 or less in 1971 now costs $40,000 or more. It’s why the health insurance that you were paying less than $300 a month for fifteen years ago, now costs you $700 or more…It’s why the college education that might have cost $2,000 you a year in 1971 now costs $$20,000 a year or more…About the only thing that costs less each year is a big screen TV could be because television is the preferred media for manipulating public opinion; i.e. for brainwashing the American public, and since the continuation of this charade requires that the masses be led around by the nose like little trained pigs, cheap TV’s help to perpetuate the big lie!

  13. I wonder if private companies are doing the same and releasing fake information from their annual reports to survive and last longer. Building and sustaining a fictitious world won’t makes things better for the future generations, but, covering the garbage under our own consciousness, anyway, the decision on how to live is always in our hands.

  14. Thought I was the only one who realized this. I too realized the mortgage debacle of 2008 yet had know idea of how to profit from it. This country is screwed. The stock market is rigged and falsely elevated. We are just able to pay interest on our debt. Scared for my children’s future. Can’t wait for when the government confiscated our 401k’s and ira’s to pay down debt so other countries to be willing to buy our debt. You wonder why they want to ban firearms. Look at what happened in Greece when they implemented austerity measures. We won’t be throwing stones when that happens here.

  15. Socialists like the Progressives or left — Obama view us all as “Work Units”. We are like a commodity, or cattle in the field. Since they know best what is good for, while protecting their privalege, they feel no obligation to be truthful or give us an education to better ourselves or make us free thinkers or independent of their oversight. This article expresses that, along with our failing school systems and reduced freedom of speech at our universities.

  16. ditto land of oz. now a ;police state. our country’s government is AU$480billion in debt.
    population 24 m. usa 320m…that is 13.5 to 1(people). your debt. US$19.5tn. about 40:1
    so we are catching up to USA. our govt. is a puppet government. our state governments are spendthrifts.and our local governments are blood suckers. so we are going broke too. our household debt is one of the highest in the world. yes we think that the place is shangri la. a rude awakening is ahead.

  17. It is refreshing, in a sense, to read and/or hear the truth even though it causes us to make some tough decisions. The sad part of this “truth” is that it exposes a government that is elected to protect us. One has to question the true reason for the lies. Yes, it could be to prevent panic in the streets, as has been proposed or something else. I remember a presidential candidate about 8 years ago stating that he was going to reduce the stature of the U.S. in the world. What better way than to reduce the citizens to dependency on the government.

  18. You’re all idiots, don’t you know the new American motto? “BE A GOOD CITIZEN, OBEY AND CONSUME” …..HUMAN DRONES! The American flag stars (representing states) should be replaced by the logos of the top 50 corporations and on the flag it should read ” be a good citizen, obey and consume”.

    You should also never make money EVER for simply having money. Meaning if I had a billion dollars. I and my entire family would never have to work nor contribute to society anymore for the rest of my family’s existence on this planet is WRONG ON SO MANY LEVELS. We’d just be a leech on society sucking out money from the broken system for simply owning money. It’s wrong wrong wrong wrong. How much money is enough money? Put that in your pipe and smoke it!!!!!!!!!!!!!

  19. We dont hear much about how the world is now like Japan. It is a balance sheet recession. My understanding of it is that inflation is not happening because when people save money and pay down debt the money is taken out of circulation. The money that has been borrowed went into stock appreciation too, through buy backs so it too did not circulate. Of course whatever asset class that has gone up also has sucked up the money. We are not being told about this in the media, so is that a lie done by omission?

    Another lie by omission, is not teaching or telling us about the thing called financial oppression which is the way they devalue debt by slow inflation. Without inflation the debt value remains the same. With deflation the value of debt goes up, which is the worst thing for debt payers.

    These concepts are not reported but are the biggest things going on.

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