Saturday, May 08, 2010

ShadowStats Not So Rosy

There's an alternative to the Gummint's numbers out there, called ""

The author utilizes different statistical methodologies to arrive at alternative CPI-U and Unemployment rates. For him, the picture is not quite as happy as the one presented by the Feds every month.

In fact, he shows U-6 unemployment as ~21.5% and U-3 (the one most often quoted) as ~17%.

Far more significant is his measure of M-3 (money supply). The Feds stopped issuing M-3 measures a few years back, but he kept up the chart.

It's negative, meaning that the supply is contracting. That's paralleled by the Fed's measure of M-2, but NOT their measure of M-1 (cash in circulation), which had moved north at the beginning of this year and only recently turned south again.

IF that's the case, things are going to get nasty later this year.

One more thing, just for Struppster: CPI-U is pretty high, and never went negative, unlike the Gummint measure of CPI-U.


J. Strupp said...

"CPI-U is pretty high, and never went negative, unlike the Gummint measure of CPI-U."

If M-2 (or M-3 projected) continues it's collapse, you won't have to worry about CPI or CPI-U or whatever inflation indicator you choose to follow.

P.S. I'd like to know how his CPI data is calculated none-the-less. It doesn't seem accurate that year over year CPI was running at over 9% during the mid 2000's.

Dad29 said...

He claims to be using the pre-Clinton method utilized by BLS.

Dad29 said...

Gasoline and housing, but mostly housing for CPI 2002-2008.

That's my guess, but review the tape of housing prices...

J. Strupp said...

Yeah I figured that he was counting energy and real estate. This isn't really a core CPI number then.

Dad29 said...

Well, it is explicitly NOT a "core" number, which was invented by DC folks to disguise the REAL number.

J. Strupp said...

Don't agree at all.

Core CPI was developed in order to measure inflation/deflation INERTIA building into the economy at large. You have to keep in mind that more volatile prices (food and energy) create noise in the CPI data because their prices fluctuate quite often week to week, month to month. Also, most prices (and wages of that matter) are set only once or twice a year. THIS is the data that core CPI is trying to capture. If the market has higher inflation expectations, producers will set prices higher to try and keep up with this inertia (vise versa for deflation).

Actually, the Cleveland Fed takes this one step further and uses "trimmed-mean" CPI which eliminates ALL major price movements of heavily weighted data. If you looked at "trimmed-mean" CPI, we are still falling off of a cliff. IOW, Ex-food and energy and other out of the ordinary price movements, we're teetering on deflation:

I think calculated risk posts trimmed mean CPI vs. core CPI data regularly if you want to look it up.

Dad29 said...

Well, that's nice.

Seems to me that they could have simply taken a 3-month rolling average of the volatile elements and used that instead of a week-to-week or month-to-month.

After all, if petro spikes in July and we pay $4.00/gal for a month, but only paid $2.85/gal for the entire year ASIDE from July, then "core" would not reflect that one-time hit to the paycheck, right?

So "core" says "nevermind that you're out $200.00 in excess gas prices for July, ..."

Seems a bit eggheaded to me...