-- Published: Monday, 6 February 2017 | Print | Disqus
Charts and commentary by David Chapman
Phone: 416-604-0533 Email: email@example.com
“The stuff that dreams are made of”—The Maltese Falcon, 1941
“Here’s to the fools who dream”—La La Land, 2016
It is comforting to know that we now live in an “alternative universe” with “alternative facts” and that not only will “America be great again” but America will also be “safe again.” So we guess that is why the Dow Jones Industrials (DJI) passed a milestone, surpassing 20,000 even as valuations are at or near some of the highest levels ever and margin debt is almost at a record. The elation hasn’t lasted long, however; the bloom suddenly began take on a tired look and then wilted under pressure of the White House administration’s ban on immigration from certain Mid-East countries.
It all reminds us of George Orwell’s book 1984 which is one of the most influential dystopian novels ever written. It has suddenly become popular again.
And if all others accepted the lie which the Party imposed—if all records told the same tale—then the lie passed into history and became truth. "Who controls the past," ran the Party slogan, "controls the future: who controls the present controls the past." And yet the past, though of its nature alterable, never had been altered. Whatever was true now was true from everlasting to everlasting. It was quite simple. All that was needed was an unending series of victories over your own memory. "Reality control," they called it: in Newspeak, "doublethink."
It is quite simple really. As long as a person’s perception of the truth can be externally verified, then even a lie can become the truth. So “make America great again” is the perception that America wasn’t great because “for too long those in politics have reaped the rewards of government while the people have borne the cost”, that “politicians prospered, but the jobs left and the factories closed,” that there was “little to celebrate for struggling families all across the land,” that “mothers and children trapped in poverty in our inner cities, rusted out factories, scattered like tombstones across the landscape of the nation, an education system flush with cash but which leaves our young and beautiful students deprived of knowledge,” and finally “American carnage, stops right here and stops right now.”
But is it verifiable? There are always examples. And if enough accept it as the truth it becomes the truth—or does it? Take the recent travel ban from seven Muslim-majority countries. While we are sure the White House administration may have solid reasons for the decisions the reality is there has been no attack on US soil from any of those countries over the past 40 years. Yet countries that have allegedly been involved in attacks on US soil such as Egypt and Saudi Arabia were noticeably absent. Nor is this a “ban” as described by the President in a tweet but an “extreme vetting” as clarified by the White House press secretary. Some say Egypt and Saudi Arabia were left off because of the President’s business interests in those countries. Maybe it was, maybe it wasn’t, but the perception is there. And is it a “ban” or an “extreme vetting”? “Doublethink”? They are two different things.
Subsequently a judge has suspended enforcement of the President’s ban setting up the potential for a constitutional crisis at some point.
The recent American election may have been one of the most divisive in US history. Judging from the turnout at protests it appears that the divisiveness should not be understated. So far, it has been “relatively” peaceful, but there are moves afoot in at least five state legislatures to limit and even criminalize protesting. More “doublethink”? And then what? Serious clashes on the streets? The protests are said to be the largest since the Vietnam War. Many of us have been around long enough to still vividly recall the Vietnam War protests, including Chicago in 1968 and Kent State in 1970. It was also a period where US cities were literally burning because of race wars in major US cities in 1967, leading to over 100 deaths and the1968 riots following the assassination of Martin Luther King.
For an economic and market analyst, the modus operandi is that one should stay clear of politics. But if the economy and the market is the dog, and politics is the tail, we now have the tail wagging the dog in a manner that we have rarely witnessed in the past. It may be no mistake that not only is the Trump cabinet the richest in US history with primarily billionaires and multi-millionaires, but the President himself is the wealthiest US President ever by a wide margin. The cabinet is also drawn heavily from the private sector, including banking (five with a background from Goldman Sachs) and corporate CEOs, besides some career politicians and former US army generals making it one of the most corporate cabinets ever.
Supporting the President, although not directly, are numerous other billionaires such as the Koch Brothers (Koch Industries) who, along with many of the President’s appointees, draw heavily from many who oppose Washington and everything it stands for, including many of the agencies (EPA, Energy, Education amongst others) that they are charged to lead. They also draw heavily from what is known as the “Tea Party” branch of the Republican Party. The most objectionable may be Steve Bannon who comes via Goldman Sachs and is a former Executive Chairman of Breitbart News, an alt-right newspaper known for its extreme views and conspiracy theories, many of which the President appears to subscribe to himself.
Hence the propensity for “alternative facts” and accusations of “fake news” heaped on long established media such as the New York Times and CNN. There is considerable to criticize the mainstream news for. The mainstream news appeared to have accepted the official story of 9/11, the weapons of mass destruction (WMD) as the reason behind the illegal invasion of Iraq, and, they have underplayed the ongoing wars in the Mid-East even as the US dropped over 26,000 bombs on Mid-East countries in 2016. War is Peace. That, along with the massive growth of the Internet, gave birth and credence to the proliferation of alt news from both the left and the right and the percolation of conspiracy theories from all sides. Hence an “alternative universe”, “alternative facts” and “fake news”.
One glaring example of “alternative facts” and “fake news” are the monthly economic numbers put out each month by the Bureau of Labour Statistics (BLS), the Federal Reserve, and others. Over the years, the US government has manipulated and massaged the monthly releases to paint an economic picture that looks better than it really is. This is why someone like John Williams of Shadow Government Statistics www.shadowstats.com is so valuable. And it is also why the President and others have called the economic releases a “hoax”.
Williams is a private consulting economist who has held his practice for over 30 years. He became a specialist in government economic reporting almost by accident. His reporting on government statistics led to his results being published back in 1989 and he even held lengthy discussions with the agencies involved. Government statistical reporting was rated back then as bad.
This only got worse as the government changed the methodologies to present a better picture. It all led to Williams forming Shadow Stats in 2004. Williams puts out regular updates on Money Supply, Inflation, GDP, CPI Unemployment and the US Dollar, as well as reports on economic releases that go behind the reported numbers in an attempt to show the real picture.
One of the worst examples of misleading reporting is the monthly nonfarm payrolls and unemployment numbers. Without going into detail on how they are calculated (see www.shadowstats.com), the real picture is nowhere near as good as it is reported every month. A prime example is the monthly unemployment number, reported widely as being at 4.8%. But that is the headline unemployment U3, the official rate. The U6 unemployment rate includes marginally attached workers, discouraged workers unemployed within one year, plus part-time workers for economic reasons. That number is 9.4% as of January 2017. Williams goes one step further and reports an alternate unemployment number that is U6 plus discouraged workers defined back in 1994 as no longer in the labour force and unemployed for more than one year. That number is currently at 22.9%, a far cry from the official unemployment rate.
By examining numbers that are not massaged in the same manner, one discovers that the US labour force has gone up by 6.3 million since the financial crisis of 2008. But those not in the labour force have jumped by 15.8 million. Not all are retirees. Retirees have only increased by 9.4 million. Not all of the remaining 6.4 million are students, the disabled, and stay-at-home mothers. The actual number of unemployed has gone up by 1.2 million (U6). The employment picture is not as rosy as the officials report it to be. But the mainstream media are also guilty of not delving into the numbers and instead accepting the official numbers. The U6 unemployment rate along with John Williams Shadow Stats unemployment rate are rarely or ever discussed on mainstream business channels.
There are many other examples of massaged and manipulated numbers put out by officials that gives rise to “alternative facts”. All are meant to show a better economic picture than what really exists. Interestingly while there are some instances of massaged and manipulated numbers in Canada what is put out by Canadian officials primarily through Statistics Canada are actually quite good by comparison.
The “alternative facts” has fuelled both the alt-right and the alt-left to accuse the government and the media of reporting “fake news” by not showing and discussing the real picture. No wonder the number living in poverty has gone up by 5.2 million since 2008 and the number receiving food stamps has jumped an incredible 14 million. Inequality has soared in the US since the 2008 financial crisis in a way rarely seen in US history. Two other times come to mind – The “Gilded Age” a period from roughly 1870 to 1900 and the “Roaring Twenties” covering the 1920’s and into the Great Depression of the 1930’s. Today’s sharp rise in inequality has given rise to the ascendancy of the current President and the creation of an “alternative universe.” It’s La La Land for the 1%. Not so much for everyone else.
Copyright David Chapman 2017
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