Remember, this video is several years old... but... Crash Course Chapter 16: Fuzzy Numbers - Crash Course Videos at Chris Martenson - consumer price index, cost of living, data manipulation, deficit, economic statistics, economy,, GDP, growth rate, hedonics, Inflation, Medicare, recession, Social Secu So I'm watching this video, chapter 16 of his crash course, titled Fuzzy Numbers. It's talking about the debasing of official statistics since at least the 1960s. He explains that inflations comes from expectations and amount of money floating around and that current policy is to control both. Kennedy scrubbed discouraged workers to lower unemployment numbers. Johnson introduced the unified budget that took Social Securities surplus and offset the deficits. Nixon gave us the core inflation measure that takes out the food and fuel, or as some say: taking out the inflation from inflation. Clinton left us a statistical morass to measure inflation. Each admin contributed their own lies to our numbers. Chris argues that our measurements no longer match reality and we're just telling ourselves lies. Bureau of Labor Statistics (BLS) reports CPI (inflation). Up to the 80s, inflation was measure with the same basket of goods. In 1996, Clinton pushed through the Boskin Commission suggestions which introduced: Substitution: when the price of something rises, assume consumers will use a cheaper alternative. ex. Take a steak out of the basket and put in hot dogs. In this way, it underreports inflation and is out of sync with the Farm Bureau which does not do this. So from 2007-2008, the Farm Bureau says Food rose 11% while the BLS says only 4%. Geometric Weighting: anthing that rises too fast in price will get a lower weighting under the assumption people will lose less of those things. Health Care which is 17% of the GDP gets only 6% of the CPI basket. Hedonics: adjustments for the improving quality of certain things that "lead to greater enjoyment". Say a cell phone sells for $300 last year and an improved model sells for $300 this year but with a nicer screen. The BLS will argue that the screen improvement is worth $100 dollars, or the same as last year's model of phone was selling for $200. Then suddenly the basket sees a $200 "phone" offsetting inflation although everyone has to pay $300 for it. Of course, this only goes one way. If the phones of today only last a year while phones from 10 years ago lasted for 5 years, that is not factored in. Hedonice adjustment now apply to TVs, dishwashers, college textbooks, etc. and now adjust 46% of the CPI. If we were to ignore this nonsense and do the CPI as it used to be done, what would inflation be at? Mr. Williams over at Shadow Stats does exactly that and in 2008 it would have been at 13%. Today it seems to be running at 11-12%: Alternate Inflation Charts This also has a social cost, if CPI was calculated like it used to be, Social Security payments will have to be 70% higher than they are now and Medicare payments should be too. Instead we see seniors living in Poverty while we squandered the SS surpluses away on other budget items and hospitals are forced to close and deny services to the community... Then Chris tackles the GDP. It has become inflated several ways. The 2003 GDP was $11T. But it contained: $1.6T of Imputations. This is where it's assumed value having been created but no transactions occured. Ex. Imputations are added from "the value the owner of a house recieves by not having to pay themselves rent". The government figures out what you should be paying yourself in rent to live at your place and adds that to the GDP. They also add in the benefit of "free checking" some banks give you, it's imputed to have value because "if it weren't free you'd have to pay for it." Both of these example alone make up $1T of our GDP. Hedonics, again. Ex. Because computers are ever faster each year, it's considered to be more productive, and recorded as having contributed more than it cost. So if costs $1,000, they might give it a fictitious GDP figure of $1,200. Note, this is opposed to the hedonics in the CPI which would be used to lower it's real cost. Hedonic adjustments to the GDP in 2003 was a whopping $2.3T. In 2003, those two numbers combined for $3.9T of $11T. At least 35% of the GDP in that year were on transactions that you "could not witness, record, or touch", they were merely "modeled or imputed" or dare I say fictitious. Now how to take statements such as "Debt to GDP are quite low" or "Income Taxes as a % of GDP are low..."? Now that the GDP is in the denominator of those figure, making the GDP bloated will lower those ratios. Real GDP is inflation adjusted while pre-Inflation adjusted is called nominal GDP. Ex. Say the basis year is 2010, and the entire economy makes 1 car in 2010 that sells for $1000 and another car in 2011 that sells for $1100. Nominal GDP for 2011 would be $1100 while the real GDP would have been $1000 to reflect 0% growth. There you can see another reason why politicians have the BLS understate inflation in the CPI, to overstate the real GDP. Each % point that CPI is understated equals a full % point that GDP is overstated. I suggest watching it is better than reading my synopsis.