This whole exercise is getting old.

The biggest problem with the financial system is that of bad measurement. Without accurate data, no analyst can make sound investment judgments.

Unfortunately for all of us, the data is gimmicked to the point that nothing is valid any longer. GDP is gimmicked using a phony deflator. Unemployment is gimmicked by not counting those who stop looking for work. Inflation is gimmicked by ignoring food and energy prices. Employment is gimmicked by adjusting the work week to make the the economic equivalent of the loss of hundreds of thousands of job look like employment gains.

And on and on.

This is how those at the top of the economic-political food chain think: if the data is bad, change how you measure it until it looks good. And that equals growth!

If only we could apply a similar idea to issues like personal weight, home values, and the like. If we could do that, we’d all be six foot tall, multi-millionaires living in mansions with six-pack abs.

I realize that last example is ridiculous, but I use it to illustrate a key point with the “data” being promoted by the Feds today: that it’s a mirage. Changing the way in which you measure something doesn’t change its actual reality. You cannot create economic growth by altering how you measure GDP growth anymore than I can change my height by adjusting the “inch” measurements on a ruler to be smaller.

Unfortunately for economists, there is a thing called reality. And the ugly underlying economic realities of this “recovery” will eventually emerge, no matter how many accounting gimmicks are used.

When this happens, the move will be fast. Consider Italy and Spain. Both were considered rock solid members of the EU for years. Then in the span of a few weeks they nearly imploded and the ECB had to pump hundreds of billions into the system. Ditto for Cyprus, Enron, the subprime housing bubble and any other accounting fraud that people ignored when making investment decisions.

It always ends the same way: the truth comes to light and the losses are enormous.

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Best Regard,



Graham Summers