Business Week : PHANTOM GDP! The GDP numbers are PHONEY and here's why!

[Joanne98]

If you believe that the Q2 GDP grew by 3.4% I have a bridge I want to sell you. Elaine Chao has been corrupting the numbers at the Labor Department. I posted this article when it came out. If you haven't read it you need too. The LIARS on CNBC are trying to pull in as many SUCKERS as they can before the market tanks. Don't be one of them!
http://www.businessweek.com/magazine/content/07_25/b4039001.htm

JUNE 18, 2007

COVER STORY
By Michael Mandel

The Real Cost Of Offshoring
U.S. data show that moving jobs overseas hasn't hurt the economy. Here's why those stats are wrong

Whenever critics of globalization complain about the loss of American jobs to low-cost countries such as China and India, supporters point to the powerful performance of the U.S. economy. And with good reason. Despite the latest slow quarter, official statistics show that America's economic output has grown at a solid 3.3% annual rate since 2003, a period when imports from low-cost countries have soared. Similarly, domestic manufacturing output has expanded at a decent pace. On the face of it, offshoring doesn't seem to be having much of an effect at all.

But new evidence suggests that shifting production overseas has inflicted worse damage on the U.S. economy than the numbers show. BusinessWeek has learned of a gaping flaw in the way statistics treat offshoring, with serious economic and political implications. Top government statisticians now acknowledge that the problem exists, and say it could prove to be significant.

The short explanation is that the growth of domestic manufacturing has been substantially overstated in recent years. That means productivity gains and overall economic growth have been overstated as well. And that raises questions about U.S. competitiveness and "helps explain why wage growth for most American workers has been weak," says Susan N. Houseman, an economist at the W.E. Upjohn Institute for Employment Research who identifies the distorting effects of offshoring in a soon-to-be-published paper.

FLY IN THE OINTMENT
The underlying problem is located in an obscure statistic: the import price data published monthly by the Bureau of Labor Statistics (BLS). Because of it, many of the cost cuts and product innovations being made overseas by global companies and foreign suppliers aren't being counted properly. And that spells trouble because, surprisingly, the government uses the erroneous import price data directly and indirectly as part of its calculation for many other major economic statistics, including productivity, the output of the manufacturing sector, and real gross domestic product (GDP), which is supposed to be the inflation-adjusted value of all the goods and services produced inside the U.S. (For a detailed explanation of how import price data are calculated and why the methodology is suspect, see page 34.)

The result? BusinessWeek's analysis of the import price data reveals offshoring to low-cost countries is in fact creating "phantom GDP"--reported gains in GDP that don't correspond to any actual domestic production. The only question is the magnitude of the disconnect. "There's something real here, but we don't know how much," says J. Steven Landefeld, director of the Bureau of Economic Analysis (BEA), which puts together the GDP figures. Adds Matthew J. Slaughter, an economist at the Amos Tuck School of Business at Dartmouth College who until last February was on President George W. Bush's Council of Economic Advisers: "There are potentially big implications. I worry about how pervasive this is."

By BusinessWeek's admittedly rough estimate, offshoring may have created about $66 billion in phantom GDP gains since 2003 (page 31). That would lower real GDP today by about half of 1%, which is substantial but not huge. But put another way, $66 billion would wipe out as much as 40% of the gains in manufacturing output over the same period.

It's important to emphasize the tenuousness of this calculation. In particular, it required BusinessWeek to make assumptions about the size of the cost savings from offshoring, information the government doesn't even collect.

GETTING WORSE
As a result, the actual size of phantom GDP could be a lot larger, or perhaps smaller. This estimate mainly focuses on the shift of manufacturing overseas. But phantom GDP can be created by the introduction of innovative new imported products or by the offshoring of research and development, design, and services as well--and there aren't enough data in those areas to take a stab at a calculation. "As these countries move up the value chain, the problem becomes worse and worse," says Jerry A. Hausman, a top economist at Massachusetts Institute of Technology. "You've put your finger on a real problem."

Alternatively, as Landefeld notes, the size of the overstatement could be smaller. One possible offset: Machinery and high-tech equipment shipped directly to businesses from foreign suppliers may generate less phantom GDP, just because of the way the numbers are constructed.

Depending on your attitude toward offshoring, the existence of phantom GDP is either testimony to the power of globalization or confirmation of long-held fears. The U.S. economy no longer stops at the water's edge. Global corporations often provide their foreign suppliers and overseas subsidiaries with business knowledge, management practices, training, and all sorts of other intangible exports not picked up in the government data. In return, they get back cheap products.

But the new numbers also require a reassessment of productivity and wages that could add fire to the national debate over the true performance of the economy in President Bush's second term. The official statistics show that productivity, or output per hour, grew at a 1.8% rate over the past three years. But taking the phantom GDP effect into account, the actual rate of productivity growth might be closer to 1.6%--about what it was in the 1980s.

More broadly, it becomes clear that "gains from trade are being measured instead of productivity," according to Robert C. Feenstra, an economist at the University of California at Davis and the director of the international trade and investment program at the National Bureau of Economic Research. "This has been missed."

Pat Byrne, the global managing partner of Accenture Ltd.'s (ACN ) supply-chain management practice, goes even further, suggesting that "at least half of U.S. productivity has been because of globalization." But quantifying this is tough, he notes, because most companies don't look at how much of their productivity growth is onshore and how much is offshore. "I don't know of any companies or industries that have tried to measure this. Maybe they don't even want to know."

Phantom GDP helps explain why U.S. workers aren't benefiting more as their companies grow ever more efficient. The cost savings that companies are reaping "don't represent increased productivity of American workers producing goods and services in the U.S.," says Houseman. In contrast, compensation of senior executives is typically tied to profits, which have soared alongside offshoring.

IMPORTING EARNINGS
But where are those vigorous corporate profits coming from? The strong earnings growth of U.S.-based corporations is still real, but it may be that fewer of the gains are coming from improvements in domestic productivity. In fact, holding down costs by moving key tasks overseas could be having a greater impact on corporate earnings than anyone guessed--or measured.

There are investing implications, too, although those are harder to quantify. Companies with their primary focus in the U.S. might suddenly seem less attractive, since underlying economic growth is slower here than the numbers show. But if the statistical systems of other developed countries suffer from the same problem--and they might--then growth in Europe and Japan might be overstated, too.

When Houseman first uncovered the problem with the numbers that is created by offshoring, she was primarily focused on manufacturing productivity, where the official stats show a 32% increase since 2000. But while some of the gains may be real, they also include unlikely productivity jumps in heavily outsourced industries (see BusinessWeek.com, 6/2/07, "Overseas Sweatshops Are a U.S. Responsibility") such as furniture and audio and video equipment such as televisions. "In some sectors, productivity growth may be an indicator not of how competitive American workers are in international markets," says Houseman, "but rather of how cost-uncompetitive they are." For example, furniture manufacturing has been transformed by offshoring in recent years. Imports have surged from $17.2 billion in 2000 to $30.3 billion in 2006, with virtually all of that increase coming from low-cost China. And the industry has lost 21% of its jobs during the same period.

Yet Washington's official statistics show that productivity per hour in the furniture industry went up by 23% and output by 3% between 2000 and 2005. Those numbers baffle longtime industry consultant Arthur Raymond of Raleigh, N.C., who has watched factory after factory close. "And we haven't pumped any money into the remaining plants," says Raymond. "How anybody can say that domestic production has stayed level is beyond me."

WRENCHING PROCESS
Paul B. Toms Jr., CEO of publicly traded Hooker Furniture Corp., (HOFT ) recently closed his company's last remaining domestic wood-furniture manufacturing plant, in Martinsville, Va. It was the culmination of a wrenching process that started in 2000, when Hooker still made the vast majority of its products in the U.S. Toms didn't want to go overseas, he says, but he couldn't pass up the 20% to 25% savings to be gleaned from manufacturing there.

The lure ofoffshoring works the same way for large companies. Byrne of Accenture is working with a "major transportation equipment company" that's planning to offshore more than half of its parts procurement over the next few years. Most of it will go to China. "We're talking about 30% to 40% cost reductions," says Byrne.

Yet no matter how hard you look, you can't find any trace of the cost savings from offshoring in the import price statistics. The furniture industry's experience is particularly telling. Despite the surge of low-priced chairs, tables, and similar products from China, the BLS is reporting that the import price of furniture has actually risen 6.7% since 2003.

The numbers for Chinese imports as a whole are equally out of step with reality. Over the past three years, total imports have climbed by 89%, as U.S.-based companies have rushed to take advantage of the enormous cost advantages. Yet over the same period, the import price index for goods coming out of China has declined a mere 2.3%.

FACADE OF GROWTH
The import price index also misses the cost cut when production of an item, such as blue jeans, is switched from a country such as Mexico to a cheaper country like China. That's especially likely to happen if the item goes through a different importer when it comes from a new country, because government statisticians have no way of linking the blue jeans made in China with the same pair that had been made in Mexico.

Phantom GDP can also be created in import-dependent industries with fast product cycles, because the import price statistics can't keep up with the rapid pace of change. And it can happen when foreign suppliers take on tasks such as product design without raising the price. That's an effective cost cut for the American purchaser, but the folks at the BLS have no way of picking it up.

The effects of phantom GDP seem to be mostly concentrated in the past three years, when offshoring has accelerated. Indeed, the first time the term appeared in BusinessWeek was in 2003. Before then, China and India in particular were much smaller exporters to the U.S.

The one area where phantom GDP may have made an earlier appearance is information technology. Outsourcing of production to Asia really took hold in the late 1990s, after the Information Technology Agreement of 1997 sharply cut the duties on IT equipment. "At least a portion of the productivity improvement in the late 1990s ought to be attributed to falling import prices," says Feenstra of UC Davis, who along with Slaughter and two other co-authors has been examining this question.

What does phantom GDP mean for policymakers? For one thing, it calls into question the economic statistics that the Federal Reserve uses to guide monetary policy. If domestic productivity growth has been overstated for the past few years, that suggests the nation's long-term sustainable growth rate may be lower than thought, and the Fed may have less leeway to cut rates.

In terms of trade policy, the new perspective suggests the U.S. may have a worse competitiveness problem than most people realized. It was easy to downplay the huge trade deficit as long as it seemed as though domestic growth was strong. But if the import boom is actually creating only a facade of growth, that's a different story. This lends more credence to corporate leaders such as CEO John Chambers of Cisco Systems Inc. (CSCO ) who have publicly worried about U.S. competitiveness--and who perhaps coincidentally have been the ones leading the charge offshore.

In a broader sense, though, the problem with the statistics reveals that the conventional nation-centric view of the U.S. economy is completely obsolete. Nowadays we live in a world where tightly integrated supply chains are a reality.

For that reason, Landefeld of the BEA suggests perhaps part of the cost cuts from offshoring are being appropriately picked up in GDP. In some cases, intangible activities such as R&D and design of a new product or service take place in the U.S. even though the production work is done overseas. Then it may make sense for the gains in productivity in the supply chain to be booked to this country. Says Landefeld: "The companies do own those profits." Still, counters Houseman, "it doesn't represent a more efficient production of things made in this country."

What Landefeld and Houseman can agree on is that the rush of globalization has brought about a fundamental change in the U.S. economy. This is why the methods for measuring the economy need to change, too.
http://www.businessweek.com/magazine/content/07_25/b4039001.htm

[blogslut]

1. Recommendation

A PBS program titled "Affluenza"

http://www.pbs.org/kcts/affluenza/
http://www.affluenza.org/

The point being that the GDP measures in terms of profits as opposed to human benefit. A person gets cancer; The GDP goes up. A family loses their house in storm; The GDP goes up. The US wages war; The GDP goes up...

[Joanne98]

3. It's a total joke. Can you believe the acting on CNBC. I swear they should

get academy awards.

[wicket]

6. It's deja vu all over again

;)

[JNelson6563]

24. Sickening, isn't it?

Basically their job is to always assure the viewers that things are great. No matter what. It's so Orwellian.

Julie

[DemReadingDU]

40. I saw that, Affluenza

It's been awhile, but it was excellent!

[Gman]

2. To read later

[Jim__]

4. Is their write-up on how import prices are calculated available online?

I looked and I couldn't find it. I' referring to: For a detailed explanation of how import price data are calculated and why the methodology is suspect, see page 34.

I'd really like to read that. If its not available online, can you sum it up?

I enjoyed this article; I'd like to read that other piece if possible. Thanks.

[Joanne98]

5. Business Week Article on Phony Government GDP Numbers

http://robertjabalos.wordpress.com/2007/06/11/business-week-article-on-phony-government-gdp-numbers/
Business Week Article on Phony Government GDP Numbers

A common theme of mine is how trade associations and government agencies skew statistics to cheerlead markets, in other words, make things look better than they are to encourage sales and investment and, of course, keep politicians in their cushy jobs.

Like those sexy babes in their tight miniskirts jumping up and down with pompons on the NFL sidelines, media and government hold hands in a deceptive dance. Both have an interest in making depressing news look good. Trade associations keep their members employed, the media gives investors and the business class optimism, and the government takes the credit for all the phony results.

I’ve given dozens of examples of media, trade association, and government cheerleading in this blog. This week, BUSINESS WEEK magazine gives excellent attention in its cover story to so-called “phantom GDP” which overstates U.S. GDP by tens of billions of dollars every year and makes job outsourcing actually look like a good idea for U.S. workers.

Thank the U.S. Bureau of Labor Statistics for this boondoggle.

The story is called “The Real Cost of Offshoring” appearing in the June 18, 2007 issue of BUSINESS WEEK and is eye-opening reading. You can see it yourself by clicking here. Be sure to check out this sidebar too called “How Those Deceptive Numbers Creep In.”

Why should you care about this as a real estate investor? The Fed uses these bogus numbers to set monetary policy and interest rates, something they have demonstrated they aren’t very good at even when using real numbers. Job offshoring is devastating whole U.S. communities with economic losses due to plant and factory closings, something that sure isn’t good for local real estate values. And as an American citizen you should care that your government is encouraging employers to move jobs overseas and then fudges the numbers to make it sound like a great idea for you—when often it isn’t.

BUSINESS WEEK has it right. Quote:

“New evidence suggests that shifting production overseas has inflicted worse damage on the U.S. economy than the numbers show.”

There is no excuse under the sun for this. NONE.

At least the football cheerleaders are pleasing to the eye. These Washington elite cheerleaders and their media hacks do more harm to America than Osama Bin Laden ever dreamed possible and, to add insult to injury, you pay their salary to do it.

Robert J. Abalos, Esq.

www.investinginland

[Joanne98]

7. Offshoring's Real Damage

http://www.theleftcoaster.com/archives/010573.php
Wednesday :: Jun 27, 2007
Offshoring's Real Damage

by Steve Soto
Those of us who have our suspicions about job offshoring will want to read this. Business Week, not exactly a liberal rag, has looked closely at the way the federal government accounts for offshoring and worker productivity since 2003. And their preliminary conclusion is that the Bureau of Labor Statistics may not be calculating the impact of job offshoring accurately. Worse yet, the BLS doesn’t dispute this.

The underlying problem is located in an obscure statistic: the import price data published monthly by the Bureau of Labor Statistics (BLS). Because of it, many of the cost cuts and product innovations being made overseas by global companies and foreign suppliers aren't being counted properly. And that spells trouble because, surprisingly, the government uses the erroneous import price data directly and indirectly as part of its calculation for many other major economic statistics, including productivity, the output of the manufacturing sector, and real gross domestic product (GDP), which is supposed to be the inflation-adjusted value of all the goods and services produced inside the U.S.
The result? BusinessWeek's analysis of the import price data reveals offshoring to low-cost countries is in fact creating "phantom GDP"--reported gains in GDP that don't correspond to any actual domestic production. The only question is the magnitude of the disconnect. "There's something real here, but we don't know how much," says J. Steven Landefeld, director of the Bureau of Economic Analysis (BEA), which puts together the GDP figures. Adds Matthew J. Slaughter, an economist at the Amos Tuck School of Business at Dartmouth College who until last February was on President George W. Bush's Council of Economic Advisers: "There are potentially big implications. I worry about how pervasive this is."
By BusinessWeek's admittedly rough estimate, offshoring may have created about $66 billion in phantom GDP gains since 2003. That would lower real GDP today by about half of 1%, which is substantial but not huge. But put another way, $66 billion would wipe out as much as 40% of the gains in manufacturing output over the same period.
As Business Week notes, a phantom GDP of $66 billion in the overall economy is very small, but it obliterates a large amount of our purported gains in domestic manufacturing since 2003. The net effect is that the Bush Administration has papered over the damage being done to our domestic manufacturing base with faulty reports on domestic productivty. And this damage is seemingly the result of a flood of offshoring taking place during the Bush Administration since 2003, from mainly two countries: China and India.

The effects of phantom GDP seem to be mostly concentrated in the past three years, when offshoring has accelerated. Indeed, the first time the term appeared in BusinessWeek was in 2003. Before then, China and India in particular were much smaller exporters to the U.S.

What does phantom GDP mean for policymakers? For one thing, it calls into question the economic statistics that the Federal Reserve uses to guide monetary policy. If domestic productivity growth has been overstated for the past few years, that suggests the nation's long-term sustainable growth rate may be lower than thought, and the Fed may have less leeway to cut rates.
In terms of trade policy, the new perspective suggests the U.S. may have a worse competitiveness problem than most people realized. It was easy to downplay the huge trade deficit as long as it seemed as though domestic growth was strong. But if the import boom is actually creating only a facade of growth, that's a different story.
There already is a bipartisan concern that offshoring companies are abusing the L visa process to dump American workers and then replace them by importing cheaper replacements into the states from India. India has the gall to tell Dick Durbin and Chuck Grassley that they can’t mess with them through immigration legislation, and that only the WTO and Bush’s trade agreements cover them. But if it is true that the administration has downplayed the damage done to our manufacturing base and enabled the slaughter through these trade agreements, then Democrats should be ready to jump on this for next year.
http://www.theleftcoaster.com/archives/010573.php

[Deja Q]

48. India is biting the hand that feeds them.

Which means corporations may find other places to offshore to. And I don't believe India is churning out more engineers than anyone else either...

[Joanne98]

8. BUSH IS A LIAR!!!!!!!!!!!!!

[cutlassmama]

42. About that and SO MANY other things eom

[Anywho6]

9. I have a hunch that all the economic numbers are fabricated...

...and we are hanging on by a thread. This regime is corrupt to the core. I believe they've manipulated economic statistics from the beginning.

Peace...

[Joanne98]

13. "The fruit of the poisonous tree" If you corrupt the base numbers..

Then all the caluations taken from them are wrong. This is what Elaine Chao has done. She should be thrown in prison for this. Everything is ENRON now.

[DemReadingDU]

41. Enron?

I've often thought that our government is beng run like a giant Enron, and could implode at any time.

:(

[Jane Eyre]

10. My Story, or How I Unwittingly Helped Reagan Win In 1980

My first job out of college in 1978 was with a major international business information firm. This firm, whose name most people would recognize as a purveyor of business credit reports, was the sole source of information pertaining to the number of business bankruptcies. At the time, there were perhaps 80-100 offices across the country and each office was supposed to send a representative to the nearest federal bankruptcy court once a week to collect information on each business bankruptcy case filed.

After a few weeks on the job, I was called in to the boss's office for a special assignment. I was told that I was going to have the assignment of courthouse correspondent whose job it was to check for business bankruptcies, a position that no one had done in that office for many years. Why was it not being done? Two reasons: first, it was not seen as part of the company's "bread and butter" business of producing credit reports and second, no one had been checking to make sure it was being done. Apparently the second part of that had just changed since word had spread that the internal auditors had just started checking to make sure that bankruptcy information was being collected.

I was instructed to go to the courthouse and pick up as many of the missed bankruptcies as I could during a morning's work. As a guideline, I was told to ask for the past three years' worth of bankruptcy cases which would be a good start since no one knew how long it had been since the information had been collected. So I went in and asked to see the past three years of bankruptcy cases. And I was nearly laughed out of the office as the clerks pointed to huge stacks of files covering the walls of the office. So I meekly copied down information from the past couple of weeks and left the office after a few hours to report in, and I visited the bankruptcy office on a weekly basis for about a year until someone else took over the assignment.

Fast forward to 1980....the Reagan-Carter presidential race is on and I am reading a copy of TIME Magazine about how business bankruptcies have increased exponentially during the Carter era. They had a graph showing a huge run-up in the number of business bankruptcies starting exactly in 1978. Want to guess where they got their information?

[Demeter]

47. That Would Be Hysterically Funny, If I Weren't Crying My Eyes Out

Data? We don't need no stinkin' data!

[Joanne98]

11. Goodbye to the City on the Hill By PAUL CRAIG ROBERTS

http://www.counterpunch.org/roberts06252007.html

And to Its Fabled Economy
Goodbye to the City on the Hill
By PAUL CRAIG ROBERTS

"We shall be as a city upon a hill. The eyes of all people are upon us."

--John Winthrop

America is being destroyed. Many Americans are unaware, others are indifferent, and some intend it.

The destruction is across the board: the political and constitutional system, the economy, social institutions including the family itself, citizenship, and the character and morality of the American people.

Those who rely on the Internet for information are aware that the Bush regime has successfully assaulted the separation of powers and civil liberty. Both Bush and Cheney claim that they are not bound by laws that impinge on their freedom of action or that interfere with their ideas of the power of their offices. Bush has issued presidential directives that permit him to make himself a dictator by declaring a national emergency. Cheney asserts that his handling of secret documents is not subject to oversight or investigation or bound by a presidential order governing the protection of classified information.

The foundation of social organization--marriage, family, and parental control over children--is disintegrating.

Mass unassimilated and illegal immigration has destroyed the meaning of American citizenship and forced large numbers of Americans into unemployment. For example, Steve Camarota at the Center for Immigration Studies reported on June 20 that state employment data show that in the first six years of the 21st century 218,000 high school graduates in the state of Georgia have been employment-displaced by immigrants. Moreover, wages have stagnated, putting the lie to the claim that there is a shortage of workers. If there were a labor shortage, wages would be bid up and rising.

Many Americans are unconcerned that the US government in behalf of an undeclared agenda has invaded two countries, killed hundreds of thousands of foreign civilians, produced 4 million Iraqi refugees, rejected the Geneva Conventions and reverted to medieval torture dungeons. It does not trouble them that their government blocked ceasefires and UN resolutions so that Israel could bomb and murder Lebanese civilians and destroy the country's infrastructure.

Americans, whose ethical behavior toward others was once reinforced by having to look oneself in the mirror, now have a different ethos.
Many cannot look themselves in the mirror unless they have pulled a fast one and advanced themselves at someone else's expense. It is not only crooked prosecutors, such as Michael Nifong, who get their jollies from destroying their fellow citizens.

A google search will call up enough information to make the case for these points many times over. However, the destruction of the US economy, though far advanced, is still largely unknown. It is to this subject that we turn.

For a number of years Charles McMillion of MBG Information Services and I have documented from BLS nonfarm payroll jobs data that the US economy in the 21st century no longer creates net new jobs in tradable goods and services. In the 21st century, job growth in "the world's only superpower" has a definite third world flavor. US job growth has been limited to domestic services that cannot be moved offshore, such as waitresses and bartenders and health and social services.

These are not jobs that comprise ladders of upward mobility. Income inequality is worsening, and education is no longer the answer.

The problem is that middle class jobs, both in manufacturing and in professional occupations such as engineering, are being offshored as corporations replace their American workforces with foreigners. I have called jobs offshoring "virtual immigration."

The latest bombshell is that even those professional jobs that remain located in America are not safe. There is a vast industry of immigration law firms that enable American corporations to replace their American workers with foreigners brought in on work visas.

For years Americans have been told that work visas are only issued in cases where there are no Americans with the necessary skills to fill the jobs. Americans have been reassured that safeguards are in place to prevent US companies from using the work visas to replace their American employees with foreigners paid below the prevailing US wage. Now, thanks to a video placed on "YouTube" by a US law firm, Cohen & Grigsby, marketing its services, we now know that it is easy for US companies to legally evade the "safeguards" and to replace their American employees with lower paid foreigners.

The video shows Lawrence Lebowitz, Vice President for Marketing for the law firm of Cohen & Grigsby, together with a panel of the law firm's attorneys, explaining to an audience of employers how to use loopholes in the laws governing the work visas to hire foreign workers in place of Americans. Lebowitz says, "our goal is clearly, not to find a qualified and interested US worker."

Cohen & Grigsby's legal experts describe the strategy for ensuring that no American firm has to hire an American. The advertising requirements can be met by advertising the job in obscure or ethnic newspapers in locations where there are no likely job candidates. If a qualified American candidate turns up, "have the manager of that specific position step in and . . . go through the whole process to find a legal basis to disqualify them for this position--in most cases there doesn't seem to be a problem."

The "prevailing wage" requirement is evaded, for example, by making the offered salary and raises contingent on receipt of the green card, usually 3 or 4 years away, or by disguising the job by understating the job requirements. For example, a job requiring an advanced degree can be listed as requiring a bachelor's degree, but filled with a foreigner with a higher degree. As the higher degree is not listed as a job requirement, the employer is able to secure the foreign employee below the prevailing wage.

University of California computer science professor Norman Matloff has an excellent presentation available at his online site about the lack of impediments to the ability of US firms to replace their American employees with foreigners. Matloff says to keep in mind that Cohen & Grigsby "is NOT a rogue law firm." The advice provided by Cohen & Grigsby is the standard advice given by the hoards of immigration attorneys who are personally cleaning up by putting Americans out of work.

Except for Lou Dobbs on CNN, the US TV and print media have so far ignored the astounding story. Where are the headlines: "US Jobs: No American Need Apply"?

Chances are high that economists will ignore the story also.
Economists have made fools of themselves with their hyped claims that jobs offshoring is a great benefit to America and that any attempt to stop it would bring hardship, failed companies, and lost American jobs. When a profession gets egg all over its face, it closes ranks and goes into denial.

Unlike the post-depression generation of US economists, recent generations of economists have been indoctrinated with confidence in business. They believe that business knows best and that the free market will prevent or correct any mistakes. Many economists today are well paid shills for special interests. Others, simply careless, have assumed that statistical measures of high rates of US productivity and GDP growth were indications of the benefits that offshoring was bringing to Americans.

Only a few economists, such as myself and Charles McMillion, noticed the inconsistency between alleged high rates of productivity and GDP growth on one hand and stagnant real median incomes and rising income inequality on the other. Somehow the US economy was having GDP and productivity growth that was not showing up in growth in the incomes of Americans.

Thanks to economist Susan N. Houseman and the March 22 issue of Business Week, we now know, as I reported in the print edition of CounterPunch (June 1-15, 2007) and on online at vdare.com, that much of the growth in US productivity and GDP was an illusion created by statistics that mistakenly attributed productivity gains achieved abroad to the US economy.

With the ladders of upward mobility for Americans dismantled by offshoring and work visas, with the very real problems in mortgage and housing markets, with the very real stress put on the US dollar's reserve currency role by Bush's trillion dollar war that is financed by foreigners, with the downward revisions in US GDP and productivity growth that are now mandatory, and with a variety of other problems that I haven't the space to deal with, the fabled US economy is a thing of the past.

Just like America's prestige. Just like the world's goodwill toward America. Just like American liberty.

The eyes of all peoples are still upon us, only for different reasons. Whom will we attack next? When will we be bankrupt? What good is the American consumer market when the mass of the people are employed in third world jobs? How much longer will those trillions of dollars held by foreign governments be worth anything? How long before Americans will be knocking on European doors claiming political asylum.

Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions.He can be reached at: [e-mail]
http://www.counterpunch.org/roberts06252007.html

[AX10]

12. K & R!

Businessweek is a much better resource on business news than propaganda rag Forbes.

[The Backlash Cometh]

14. Now you know why they protect hedge funds.

They need real money circulating in the system, so, in order to get the trickle down effect to work, they make unnecessary promises of low risk investments to get the uber rich to circulate that money.

The rest is phony money, and you can only circulate that so much without getting caught. After a while, it's hard to miss that foreclosures are up over 500%.

[Joanne98]

15. The Crisis in Hedgistan

The Crisis in Hedgistan
By MIKE WHITNEY

Two columns of black smoke can still be seen rising over the New York skyline.

Terrorism?

Not quite. The plumes of smoke are all that's left of two major hedge funds which blew up just weeks ago leaving nothing behind but a few smoldering embers and a mound of black soot.

The compiled assets of the Bear Sterns High-Grade Structured Credit Strategies Fund--nearly $20 billion--have vanished into the miasma of cyber-space soon be joined by $1.4 trillion of other, equally worthless, Collateralized Debt Obligations (CDO).

If you look closely, you'll see the mangled bodies of the CDOs, the CDSs (Credit Default Swaps), the RMBS (Residential Mortgage Backed Securities) and the other shaky debt-instruments being pulled from the wreckage and tossed on the bonfire.

Is this how it all ends? Will the sudden spike in subprime defaults send all the funds in "Hedgistan" crashing to earth?

No one knows--yet.

According to Bloomberg News, Bear Sterns announced last week that there's "little value left" in one of its funds and "no value left" in the other.

Nothing, nada, zippo.

The news has left Wall Street in a state of shock.

What does it all mean?

Does that mean that the entire hedge fund Empire"which is built on a foundation of dodgy loans and quicksand---may be headed for the crapper?

We don't know. But a cloud has settled-in over downtown Manhattan where gloomy-looking men in pinstriped suits are waiting for the other shoe to drop.

The hedge fund industry is based on the bizarre notion that one does not have to produce anything of value to make boatloads of money. You don't even need assets any more---just a risky subprime loan that can be transformed into an investment grade security (CDO) through the magic of "securitization" a sprinkling of Wall Street snake oil.

Abracadabra---presto-chango!

It's like wrapping up broken bottle-glass and selling it as the Hope Diamond. Until Bear went under, no one really noticed. But they are paying attention now. When these toxic CDOs went to auction, no one bid for them. Now that's scary.

"No bids" means that $1.4 trillion in investments have no discernable market-value. The CDOs were graded "mark to model" which translates into "mark to fantasy". It means that the investment bankers and hedge fund managers simply got together over Martinis one night and pulled a number out of a hat.

Now no one wants to buy them. They're worthless.

And that's just half the story. There's trillions of dollars in derivatives riding on these shaky CDOs. That's enough to bring down the whole market if interest rates rise or liquidity dries up.

This illustrates an important point, though. It shows what it takes to be a good hedge fund manager:

Take a shabby sub-prime mortgage; chop it into "investment", "mezzanine" and "equity" tranches. Bundle it with other equally suspect mortgage backed securities (MBS). Decide (arbitrarily) what the CDOs are worth Tell your banker. Leverage at a ratio of 10 o 1. Take 2% "off the top" plus salary for your efforts. Buy a summer home in the Hampton's and a Lexus for the wife. Wait for the crash. Then repeat.

Congratulations: you are now a successful hedge fund manager!

Oh yeah; and don't forget to prepare a few soothing words for the investors who just lost their life savings and will now be spending their evenings squatting beneath a nearby freeway off-ramp.

"We're so very sorry, Mrs. Jones. Can we get you some cardboard-bedding to keep off the rain?"

The problems that are appearing in the stock and bond markets all started at the Federal Reserve when Fed-Chief Alan Greenspan opened the sluice-gates in 2003 and lowered interest rates to 1%. (Way below the rate of inflation) Since then, trillions of dollars have flooded into the markets creating multiple equity bubbles in real estate, stocks and credit.

Serial bubble-maker Greenspan is to finance-capitalism what Wrigley is to chewing gum. The greatest flim-flam man of all time.

The Fed has tried to conceal the massive increase to the money supply, but the evidence is everywhere. (Many analysts now calculate that inflation is running at roughly 13%) Food and energy have skyrocketed. Housing prices have soared. Everything has gone up except the cheapo imports which the Fed uses to manipulate the inflation statistics.

The gigantic housing bubble is mostly Greenspan's doing. After printing-up mountains of cash and creating artificial demand through low interest rates; he promoted his product-line with the typical huckster sales-pitch. "Maestro" advised us that the extension of loans to all-God's creatures, creditworthy or not, is a good thing.

Here's a clip of Dear Alan praising subprime lending in a speech on April 8, 2005:

"With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. . . . As we reflect on the evolution of consumer credit in the United States, we must conclude that innovation and structural change in the financial services industry have been critical in providing expanded access to credit for the vast majority of consumers, including those of limited means. . . . This fact underscores the importance of our roles as policymakers, researchers, bankers and consumer advocates in fostering constructive innovation that is both responsive to market demand and beneficial to consumers."

Yes, of course, with all these "advances in technology" and new-fangled "credit-scoring models" why would we need to verify a loan-applicant's income or require that he scrape together a measly $5,000 for a $450,000 mortgage?

That's all so 20th Century!

Now that foreclosures are mushrooming at an unprecedented rate, the Fed is trying to distance itself from the problem by blaming the banks for their shoddy underwriting practices. But the guilt lies with the Central Bank. Its all part of their whacko plan to crush the dollar and create a police state.

It may be trite, but "inflation is theft". Unfortunately, inflation is also part of the ruling class' strategy to rob the poor, fuel the stock market with cheap credit, and move jobs overseas. It is the autocrat's method of "social engineering"---shifting wealth from one class to another by simply printing more money and pumping it through the system via low interest rates. Bankers know that people will ALWAYS borrow money if the money is cheap enough. At 1%, the Fed was basically losing money on every transaction, but persisted anyway.

The effects of the Fed's low interest rates can be seen everywhere. Consumer credit rose last month by a whopping 12.9%---credit card debt by 9.8%! Since housing prices have flattened out, homeowners are no longer able to tap into their dwindling equity (Mortgage Equity Withdrawal; MEWs) so they've switched over to plastic even though rates are sky-high.(18%)

But the real damage is showing up in the subprime market where the number of defaults continues to soar. (Check out this mortgage delinquency map.)

A correction in real estate is not really enough to bring down the whole economy. Unfortunately, the contagion from the subprime meltdown has spread to the stock market, the insurance industry, and the major investment banks. Everyone on Wall Street is now concerned that we may be seeing the beginning of a global credit crunch. Not even Fed-master Ben Bernanke is claiming that the subprime problems are "contained" anymore. In fact, just last week, Bernanke admitted to Senators on the Hill that the housing market has "deteriorated significantly".

It's about time. If anyone still has any doubts about the troubles in housing, they should look over these graphs which tell the whole story.

The collapse of the Bear Sterns hedge funds indicates that the problems in the subprime market have crossed over to the bond market and are likely to inflict major damage. This could have been avoided with proper government regulation.

In our new deregulated environment, the banks don't have to rely on savings anymore to make the loans. They simply originate the loans, take their commission, and sell the debt as CDOs. They're even allowed to sell the risk of default through credit default swaps (CDS) which are a form of insurance that minimizes the banks exposure. These weird innovations have spawned riskier and riskier loans and increased the likelihood of damage to the broader market.

Economics correspondent, Stephen Long, explains it like this:

"The problem that arises from the subprime mortgage collapse is that it creates a toxic cycle of debt. Banks originate loans or bundle up loans that mortgage companies have made and sell the risk on to the hedge funds. Then the hedge funds say, Hey, we've got this product that has an investment grade rating so we'll borrow against it from the banks.' (oftentimes leveraged at a ratio of 10 to 1) Now the hedge funds are trying to buy the original loans to stop them from going into default." (The hedge funds are forced to slow the rate of foreclosures so they won't go bankrupt.)

So, what happens when these shaky CDOs are "downgraded"?

Will the hedge funds fall like dominos just like the subprime mortgage-lenders? Will we see liquidity evaporate in the broader market triggering a plunge in the stocks and a massive sell-off in the bond market?

CDOs were conjured up with the idea that vast amounts of money could be made on very meager assets through a complex expansion of leverage. They were promoted as "limiting risk" by spreading it to a greater number of investors and providing extra protection through derivatives. Mortgage Backed Securities were sliced and diced into "more risky" and "less risky" tranches depending on investor appetite. Only now"to everyone's surprise---"collateralized debt obligations with stellar Triple-A ratings have been getting hit by the subprime market's woes." (Wall Street Journal, "Bernanke revises subprime outlook") On top of that, the ABX derivative index "has started showing pronounced weakness at the top of its ratings structure." (ibid WSJ, 7-19-07)

In other words, even the VERY BEST of these multi-trillion dollar investments are beginning to falter. The contagion is spreading through the entire market. The CDOs are worthless. No one wants them. In fact, the whole new regime of exotic debt-instruments which emerged from 2000-on, is barely hanging on by a thread. One minor downturn in the stock market and the hedge funds will go freefalling through open space.

A speech by Robert Rodriguez of First Pacific Advisors (CFA) gives us a good idea of the enormity of the money involved in these investments. In his "Absence of Fear" address in Chicago on June 28, 2007 he states:

"Since 2000 hedge funds have more than doubled in number, while their assets have tripled. They too are using elevated levels of leverage, as are PE (Private Equity) firms and investors in highly leveraged fixed income securities. These funds are heavy users of derivatives. The Global derivatives market grew nearly 40% in 2006--the fastest pace in the last nine years--to $415 trillion, per the Bank of International Settlements. The amount of contracts based on bonds more than doubled to $29 trillion. The actual money at risk through credit derivatives increased 93% to $470 billion, while that amount for the entire derivatives market was $9.7 trillion. The International Monetary Fund, in its April 2006 Global Financial Stability Report, estimated that credit-oriented hedge fund assets grew to more than $300 billion in 2005, a six-fold increase in five years. When levered at 5-6x, this represents $1.5 to $1.8 trillion deployed into the credit markets. Fitch, in their June 5, 2007 special report, "Hedge Funds: The Credit Market's New Paradigm," says that despite the upward trend in maximum allowable leverage, "notably, no prime broker reported raising margin requirements in response to historically tight credit spreads and growing concerns about the general level of risk-complacency in the credit markets."

If Rodriguez's "eye-popping" numbers are accurate and the market slumps a mere 5%, "the value of a hedge fund's assets could lead to a forced sale of as much as 25% of its assets". If the market falls just 10%, the fund would get a 50% haircut!

That just shows how over-exposed the industry really is.

As the requirements on mortgages gets tougher and the subprime market continues to languish; bankers will naturally become more hesitant to loan zillions of dollars to hedge funds and private equity firms. When credit gets tighter, the hedge funds will begin to nosedive which will send the stock market in a long-term swoon. That's what happens when a market is this over-leveraged. It's unavoidable.

The markets are now perfectly poised for a full-system breakdown. FDIC Chairman Sheila Bair expects a CDO time bomb. She summed it up like this:

"Its going to get worse before it gets better. How much worse, I don't know."

Mike Whitney lives in Washington state. He can be reached at: [e-mail]
http://www.counterpunch.org/whitney07212007.html

[The Backlash Cometh]

17. It's worse than I ever imagined.

But, even if someone just needs a loan to get into the hedge fund investment circles, isn't that loan tied to collateral of some kind?

[Celebration]

16. Agree, but will this make the market tank, really?

I am not sure about that. They are throwing as many dollars as they can out into the marketplace. So it could be market=good, economy=bad.........not sure how it will play out. Think hyperinflation down the road.

[Joanne98]

18. Elaine Chao saz: American workers are angry and smelly!

http://unionreview.com/we-are-angry-and-smelly-workers-according-us-secretary-labor

Isn't it great to have a US Labor Secretary who insults workers in the country - telling us in a recent issue of a widely-read magazine that we lack skills and discipline? In her infinite wisdom, Department of Labor Secretary Elaine Chao lectures workers on how we can stop losing our jobs to foreign workers: "American employees must be punctual, dress appropriately and have good personal hygiene," she says in Parade Magazine. In other words, we smell, have a horrible wardrobe and are less than on time!

In the article, "How Safe Is Your Job?" which I am unable to find a copy of online to share with you, and probably because of my less-than-fantastic skill-set, Chao says that workers could lose their jobs to a foreign worker, but not because he's cheaper, but because he has better workplace skills and discipline. "They need anger-management and conflict-resolution skills, and they have to be able to accept direction," Chao says.

I thought to myself, well, I must be able to find this article online --people should read exactly what Chao says... I just need to try some different search words - that should do the trick. So, I go searching in other languages I know with the mindset that the article must have been linked at other sites published out of the country where the skill-set of the worker far exceeds my own. But alas, I must be doing something wrong as I am not coming up with any site that has a link to the Parade article. I tried the three languages I have relative fluency in, but ... nada, I simply can't find it anywhere.

To make matters worse, I grew very frustrated and angry. I began to swear at the computer before kicking my desk. That's when it hit me: Oh my word, Chao is right, I need better anger-management skills! I thought; let me check my benefits and see if those are offered. So, with my sore foot I go on a new mission searching for my benefit package in the very desk I just kicked … when.... NEWS FLASH... stupid stupid me, what am I thinking ... I am one of the 47 million American workers that doesn't have health insurance ... & so now what will I do? I need my anger-management skills! I am so frustrated I can't even string these sentences together any longer. Well, let me ask my boss today to see if he will have ideas for me to hone in on my anger issues because I can't solve this conflict on my own ....

It is good to have fun with the Labor Secretary's moronic statements - but the reality is that these statements come from the same Labor Secretary who led the fight to cut overtime pay in 2004, allowed meetings between DOL officials and anti-union consultants and virtually transformed the agency charged with protecting American workers' rights into a compliant corporate lapdog. Chao even went after her own workforce when she attempted to outsource 250 DOL jobs to nonunion contractors.

So, while she attacks my hygiene and skills I believe it is safe to say that I think she stinks - really stinks.
http://unionreview.com/we-are-angry-and-smelly-workers-according-us-secretary-labor

[Deja Q]

49. Bollocks. Wait, I'll be mature: Utter bafflegab!

The only question is, why flat insults instead of constructive criticism? Never mind how she figured out any given American workplace smells like sweat and feces baking in the sun... :crazy:

[Rockholm]

19. K&R.

[roamer65]

20. You want to see the REAL numbers...here they are...

http://www.shadowstats.com/cgi-bin/sgs/data


Notice the divergence between the reported and real numbers in the early Raygun years. That's where Reagan's cronies started to fiddle around with the indices and the divergence has gotten worse ever since.

M3 money supply growth is particularly worrisome. We haven't seen that level of M3 growth since the 1974-75 inflationary recession. They're debt monetizing all the bonds the Chinese are dumping.

[Joanne98]

23. Wow! Thanx...

U.S. Dollar Woes Broaden Rapidly / Systemic Liquidity Shows Some Cracks / Bernanke Makes Case For Fudging Inflation Data as Fed Fumbles Its Figures / Oil Pushes Record Highs as Economy Continues Tanking / Stock Market Turmoil, Dollar Sell-Off and Gold Boom Move Ever Closer / Against the backdrop of intensifying inflationary recession, the dollar has started taking some early and heavy blows. The sub-prime mortgage difficulties have gained media prominence, but they are just the beginning of difficulties for mortgage and other asset-backed securities. Meanwhile, the Fed keeps sitting on its hands, whistling a tune that inflation is not a problem so long as the public does not see it. At the same time, the U.S. central bank appears to be having trouble tracking the balance sheets of commercial banks. With ongoing annual M3 growth at 13%, alternate CPI at 10.3% and alternate GDP down about 2.2%, apparent complacency by the Fed and euphoria in the record-topping and increasingly volatile equity markets are surreal. Growing recognition of the disconnection between government numbers and economic reality should have even the Wall Street Pollyannas a little bit on edge, as heavy dollar selling and a booming gold market begin moving perhaps a little too close for comfort.

[ProfessorGAC]

25. I'm Part Of The Analytic School That Develop Models Like These

We used to publish these same sort of alternative models and graphs in the pre-internet age.

By the way, i don't agree that the M3 is an issue. There is no causative model to suggest that it is an indicator of economic drag. You are correct that debt definitely is, but i think the more concerning thing is that we're not doing anything to alter course because so few people who actually do this type of "take off the rose-colored glasses" work are ignored by media.

Mostly it's the academics who DON'T teach at U of C who do this work.
GAC

[Joanne98]

26. Hi Professor!

:hi:

[ProfessorGAC]

27. Hey There, Yourself!

Three of us are working on a new set of models. We're hoping to publish sometime in 2009. The goal is to show the true leverage points of the macroeconomy over the last 30 years, and debunk at least some of the common myths and expose the normal "leading" indicators as the useless rubbish they are.

We'll see how things go. But, they're busy digging, collecting and compiling and i'm busy building models and analyzing. They'll write most of it. I don't have the attention span to write much of it. But, i'll not just do the modeling. I'll provide the pretty pictures, too.
GAC

[Joanne98]

30. Good. We need some real models. Thank you for your service!

You're a hero to me!

[roamer65]

28. Time will tell...

but the M3 growth is remarkably similar to the period just after Nixon closed the "gold window" in 1971. Gotta pay for this war somehow...either higher taxes or debasement of the currency. I think they've chosen debasement.

BTW, good luck on the models. I'm sure they'll be more accurate than the rigged ones from the gov't.

[ProfessorGAC]

31. I Guarantee They'll Be More Accurate

Whether they get any attention is a completely different issue. I'd love to be on CNBC someday just trashing one of the conventionalists.
GAC

[Joanne98]

21. Elaine Chao's husband Mitch McConnell takes a trip to Uranus (video)

http://www.youtube.com/watch?v=xM093mwbGgE

[Exiled in America]

22. You can usually count on BusinessWeek for the truth. (serious.)

[Kurovski]

29. K&R.

:kick:

[Strelnikov_]

32. ..

[bbgrunt]

33. This is just another instance of how they

have corrupted truth and scientific investigation from the top down.

[Hydra]

34. Hmm...been cooking the books have they?

I'm SO surprised :sarcasm:

I'm sure most of us here knew something was being tinkered with, if not what exactly, especially about the offshoring. Can anyone tell me why it's a good idea to send our good jobs away so we can buy low cost imports while working part-time service jobs with no benefits?

Shrub continually harps on the supposed strong economy, while others point out that by inflation measures, even the Dow is looking sickly.

Wheelbarrows full of deutchmarks, anyone?

[Joanne98]

35. Lies, Damned Lies, Statistics…

http://www.1115.org/2007/07/27/lies-damned-lies-statistics/
Lies, Damned Lies, Statistics…
by sarabeth at 10:50 am on July 27th, 2007 in Hank Paulson, Economy, Bush Man Date
The endpoint of that logical progression is the Bush administration’s economic statistics.

The Bureau of Economic Analysis has just — quietly, without much blowing of trumpets — revised downwards the real GDP growth estimates for each of the last three years.

Estimates, you may remember from elementary statistics, are subject to random error. And the thing about random error is that it’s randomly positive or negative. Random error doesn’t lead you to consistently misoversestimate. So when you find initial estimates consistently higher than they should be, the ugly word that raises its head to replace “random error” is bias. Bias is a very bad word to economists and forecasters. It’s pretty much the economic forecast equivalent of perjury.

Here’s a WSJ summary of the press release put out by the BEA this morning:

The economy grew at a 3.4% in the second quarter, in line with economists’ expectations, but growth was slower than previously estimated in each of the last three years, the Bureau of Economic Analysis said.

The changes lowered the average annual growth of real GDP to 3.2% from 2004 (sic, should be 2003) to 2006, 0.3 percentage point less than the earlier figures. The 2006 growth rate was revised down 0.4 percentage point to 2.9%, driven by downward revisions to investory (sic) investment, personal consumption expenditures for durable goods, state and local government spending and exports. The rate in 2005 fell to 3.1% from 3.2%, and the 2004 rate dropped to 3.6% from 3.9%

The BEA’s annual revisions are made each July to incorporate new and more comprehensive data. The downward revision to spending could add some doubts to already softer numbers from the latest report. Real personal consumption expenditures increased 1.3% in the second quarter, down from a 3.7% increase in the first quarter. Durable goods were up 1.6% vs. 8.8% in the first quarter, while nondurable goods dropped 0.8% compared to an earlier increase of 3%.

So the real GDP growth for the last three years is not 3.9%, 3.2% and 3.3% as last reported. The real real GDP growth turns out to be 3.6%, 3.1% and 2.9%.

Maybe you have to be an economist to appreciate that those are significant revisions. But trust me, significant they are.

And let’s not miss the fact that the revised numbers show a declining trend, which may not please Bush or the eternally optimistic Hank Paulson too much.

Also, it’s not too surprising to see the 2006 estimate being revised in July 2007. But to see the 2004 estimate still being revised in July 2007 — and by a whopping 0.3% — boggles the mind. Frankly, it insults the intelligence.

That 2004 estimate, by the way, was last revised on December 11, 2006, down of course, from 4.2% to 3.9%.

So the estimate that was dropped to 3.6% today stood at 4.2% just eight months ago. How could it be so hideously overestimated at that point, almost two years after the end of 2004? For some strange reason, the BEA is not saying.

When the advance estimates for 2004 were released, in February 2005, this was the story:

In 2004, real gross domestic product (GDP) increased 4.4 percent, the largest increase since the 4.5-percent increase in 1999

And right there, in a nutshell, you have the truth about the Bush administration’s claims about the performance of the Bush economy. Phrases that come to mind include not just “smoke and mirrors” but also “shell game”.

But I don’t suppose anyone expected anyway that these people — who have lied so cheerfully for so long about everything else — would be telling us the truth about the economy.
http://www.1115.org/2007/07/27/lies-damned-lies-statistics/

[On the Road]

36. I Understand How Offshoring Increases Corporate Profits,

but that is a measure of net income not restricted to US sources.

I still don't understand how cheaper imports increase Gross Domestic Product.

[Joanne98]

37. DOW closing DOWN over 200 points!!! DING DING DING DING!

[onethatcares]

38. I need businessweek to tell me the U.S. economy is a fraud????

hesus on a tricycle, anyone can see through the smoke and mirrors all they have to do is look.

[Roland99]

39. Here's an "in the nutshell" explanation of why the GDP was so high last quarter >>>>>

http://www.marketwatch.com/news/story/consumers-flagging-second-quarter/story.aspx?guid=%7B3AA378AD%2D42E7%2D45FF%2DA386%2D995358D22ECE%7D

Battered by the highest inflation in 17 years and a collapsing housing sector, U.S. consumers turned in their worst performance in 12 years during the second quarter of 2007.

The weak consumer stands in stark contrast to other sectors of the economy, which picked up the slack to push growth to a 3.4% rate in the quarter after an anemic 0.6% gain in the first three months of the year.

Combined, consumer spending and residential investment contributed just 0.4 percentage points to the 3.4% growth, the lowest contribution since 1995. Business investment, government spending and foreign buyers all contributed more to economic growth than consumers did during the quarter.

[KAT119]

43. TRUST NO NUMBERS FROM THIS ADMIN. SAID EX WH Assistant!!

[Lasher]

44. Hamburgers are manufactured products

Remember when the administration tried to sell that snake oil early on, so that flipping burgers could be counted as manufacturing jobs? This was a clear tipoff that the numbers were being fudged. But after having gone through this thread I now have a better understanding of just how, and how much, Junior is lying about the economy.

Phantom GDP changes everything. For example, recent downward adjustment of actual GDP growth between 2003 and 2006 will surely make debt as a percentage of GDP look worse during Junior's tenure than it does in this graph:


http://zfacts.com/p/318.html

And as we slowly start to realize that clothing made in China probably should not be considered part of the GDP in the United States, more downward revisions are sure to follow.

The economy is booming. The tax cuts are working. Support the troops. Stay the course. We have found the weapons of mass destruction. Nobody could have anticipated the breach of the levees. The moon is made of cheese. The earth is flat.

[whistle]

52. When will Hillary start using "It's the economy stupid", "It's the war stupid",

...."It's the BushCo corruption and lies stupid"

[wiggs]

45. Fake books. Sounds like WorldCom. Bernie Ebbers is in jail, maybe our CEO should be too. nt

[carincross]

46. Susan Houseman's Paper

Dr. Susan Houseman's paper, upon which the BusinessWeek articles are based, can be found at:

http://home.comcast.net/~bruckert/ec_07_27_07.htm
Outsourcing, Offshoring, and Productivity Measurement in U.S. Manufacturing

Dr. Paul Craig Roberts has a supporting article on the importance of Dr. Houseman's findings and its implications for understanding the true cost of outsourcing at:
http://vdare.com/roberts/070612_offshoring.htm
The Truth Comes Out About Offshoring

He reminds his audience of an article he and Sen. Charles Schumer (D-NY) wrote in the NYT in 2004.

[whistle]

50. Great article which basically says the GDP and productive numbers

....which BushCo touts every month are pure BULLSHIT! Working Americans have known this since Bush was inaugurated in January 2001 because it is reflected in our pay checks, in our shopping carts at the super market, at the gas pumps and in the prices paid for necessities of everyday living. Bush lies, all of it!

[southtpa]

51. free trade

Feel free to use this it's mine. If you were the sole owner of the busiest mall in the world and the people running that mall let any one come in and sell their products for free would you be upset? Of course you would. Meanwhile you're stuck with the maintenance bills. You're screwed twice. If you are a citizen, then you are an equal share holder in what was the best shopping location in the world. If a product is made in the U.S., then at least the workers income tax goes to the maintenance of our country( our collective good). If a product comes in to our country made elsewhere, then there should be a market fee. An appropriate fee would be the difference between the labor cost of that same product made in the U.S. and where ever it was made. This would be completely fair since every country could use the same fee. Free trade makes no sense. The key to the truth is to use the fewest words possible.

[Lasher]

53. Well stated.

This free trade trickle down bullshit is all propaganda to convince simpletons that it's a great thing to further enrich the wealthiest 1% at the expense of everyone else. Amazing how many have fallen for it.