The Real ‘Goldilocks Economy’, Part I (GLD, SLV, TZA, IAU, FAZ)

Jeff Nielson:  Back in 2005, even prior to being named Chairman of the Federal Reserve, B.S. Bernanke uttered the first of his Three Great Lies: the U.S. had a “Goldilocks economy”; where markets would keep going higher and higher forever, and the dreaded “R” word (recession) was nowhere to be seen – on even the most distant horizon.

That falsehood was immediately followed by another Lie, his promise of a “soft landing”; rightafter the U.S. housing bubble had burst, and right before the U.S. economy experienced its worst crash in at least 75 years. That, in turn, was followed by the third (and most enduring) Great Lie: that the last three years of the U.S. Greater Depression has instead been an “economic recovery”. However this analysis is devoted to the first of those three, monstrous deceptions.

Nothing serves to better illustrate a principle than contrast, since it provides us with an ever more-elusive commodity in the 21st century: perspective. So before I explain/demonstrate to readers what a real “Goldilocks economy” would look like (in Part II), readers will get a long, hard look at its exact opposite – Ben Bernanke’s bogus “Goldilocks economy”.

The Bernanke myth had three planks in its foundation, and media parrots had been trained to faithfully regurgitate them: steady growth, stable employment, and muted inflation. Here an important distinction needs to be made. Those three tenets would indeed constitute a “Goldilocks economy”: not too ‘hot’, not too ‘cold’, just right. And in Part II I will show precisely how such economic parameters can be attained. The problem is that the economy which B.S. Bernanke was describing (even at that time) was the exact opposite of this.

It takes only a sentence to rebut Bernanke’s absurd forecast of “steady growth”. As noted previously, this forecast came immediately before the U.S.’s worst economic crash in at least 75 years.

With respect to the pretense of “stable employment”, it’s important that readers understand that this was a ridiculous fiction even before the Crash of ’08 occurred. Indeed, along with the permanent campaign to falsify reporting of inflation; this is the most-cherished lie of the Oligarchs who rule us. Thus the corporate media has spent over three decades perpetually feeding us disinformation – and outright lies – concerning employment/unemployment. Bernanke’s claim of “stable employment” belongs in the latter category.

As readers can see above, in “real dollars” (i.e. adjusting wages using the actual numbers for inflation) wages for the average U.S. worker have been falling continuously for more than 40 years, and that rate of decline has only steepened since the beginning of this millennium. Meanwhile, the percentage of Americans actually in the workforce peaked just before the end of the last millennium, and has also been in an ever-steepening decline in the 12+ years since.

Over that period of time, the U.S. civilian participation rate has suffered its greatest collapse in history, plummeting all the way back to levels last seen 30 years ago. That marked roughly the half-way point in the Oligarchs’ campaign to conscript women into the workforce (otherwise known as “feminism”). The goal of this voluntary conscription was diabolically clever: to simultaneously create a massive glut of workers as women flooded into the economy, while hiding the collapse in wages which that glut inevitably caused.

With the aid of the continuous blaring of the propaganda machine, the Oligarchs have been able to maintain the myth of “prosperity” – despite the fact that the average two-income family in the U.S. now produces a combined income (in real dollars) below that of a one-income family of 40 years ago. In other words, the U.S. standard of living has fallen by more than 50% over that period of time. Put in different terms, in real dollars average U.S. wages have now fallen all the way back to Great Depression levels.

As stated previously, Bernanke’s assertion of “stable employment” was literally the precise opposite of reality. At the time that remark was made (and ever since) both U.S. wages and U.S. employment have been plummeting downward at the fastest rate in history. Precisely the same accusation can be made regarding Bernanke’s third plank, the silly claim that inflation is (or ever was) “muted”.

As with the lies about growth and employment, this falsehood is also easy to rebut, in irrefutable terms. The obvious starting point is with the person/site who produces U.S. inflation numbers which are widely recognized as the ‘official’ unofficial numbers: John Williams and Shadowstats.com.

[courtesy of Shadowstats.com]

The chart above shows very plainly when the U.S. government began exaggerating/fabricating its inflation calculation (in the early 1980’s), along with how the magnitude of that deception has steadily increased over time. What needs to be explained (to newer readers) is the basis of the discrepancy between the two sets of data.

John Williams’ calculations are done using consistent methodology. Specifically, he calculates inflation over all these years using precisely the same parameters which the U.S. government formerly used itself 30 years ago – before it began “improving” its statistic. Understand that what is absolutely paramount here from a statistical standpoint is consistency. One can choose to calculate inflation (over the past 30 years) using the same methodology which existed 30 years ago; or, one can engage in that calculation (for all 30 years) using the new methodology crafted by the U.S. government’s army of statisticians. The U.S. government refuses to do either.

Instead, each time it distorts its inflation statistic with some new “adjustment” it does not recalculate the previous years using the new parameters. This is the only possible means of constructing a continuous data series.  But the U.S. government refuses to do this. Understand that every one of these “adjustments” made over the past 30 years has (very conveniently) reduced the level of inflation. So even if it calculated inflation for the past 30 years using its new-and-improved parameters it would still show what it is so desperate to hide: that inflation has been steadily (if erratically) increasing for a quarter century.

What the U.S. government does instead is to string together disconnected data series, where every interval for the past 30 years has been calculated using different methodology. None of these intervals are statistically comparable, meaning it is nothing less than an intentional lie to connect them all on a single chart and pretend that they represent a continuous calculation of U.S. inflation.

While the U.S. government has maintained “plausible deniability” regarding its systemic lying about wages and employment, no such veneer of legitimacy exists regarding the U.S.’s propaganda on inflation: this is out-and-out, deliberate lying.

We can also totally rebut the U.S. government’s inflation lies empirically. U.S. house prices roughly tripled from the mid-1990’s until the collapse of the U.S. housing bubble. Anyone who ever visits a supermarket knows that food prices have more than doubled over the past decade. Meanwhile, health-care costs in the U.S. have been outpacing even those other inflation-spirals. And every American knows where gasoline prices have gone over the past decade. Clearly the only numbers which “connect” those old prices of yesterday with the sky-high prices of recent years are the Shadowstats numbers. The U.S. CPI calculation simply has no basis whatsoever in the real world.

Why is the U.S. government willing to engage in such brazen lying about inflation? Because it is a lie on which they piggy-back to engage in all their other lying. Look again at the chart on hourly wages above. It is only by maintaining its absurd lies about inflation that the U.S. government is able to pretend that U.S. wages have remained roughly flat (rather than plummeting lower).

Similarly, this is how it’s able to pretend that there is stability in retail sales, the backbone of a consumer economy. By lying about inflation it has been able to pretend there has been “sales growth”, when all through this “recovery” U.S. retailers have (in fact) been selling less and less goods. It’s only by lying about inflation that the U.S. government can hide the real returns (i.e. net of inflation) on U.S. bonds and equities – and conceal they have been death-traps for foolish investors. Meanwhile, lying about inflation allows the U.S. government to (secretly) cut many/most of its benefits programs (such as Social Security) in real dollars since they are all pegged to the bogus CPI.

In Part II, readers will see what a real “Goldilocks economy” looks like – and how we get there.

Related Tickers: SPDR Gold Trust (NYSEARCA:GLD), iShares Silver Trust (NYSEARCA:SLV), Direxion Daily Small Cap Bear 3X Shares (NYSEARCA:TZA), iShares Gold Trust (NYSEARCA:IAU), Direxion Daily Financial Bear 3X Shares (NYSEARCA:FAZ).

Written By Jeff Nielson From Bullion Bulls Canada

Jeff Nielson is from Canada and is a writer/editor for Bullion Bulls Canada www.bullionbullscanada.com. He has a personal background in law and economics. Bullion Bulls  Canada provides general macro-economic and political commentary,  since the precious metals markets are among the most complex (and  misunderstood) in the world.

Bullion Bulls Canada also provides basic coverage of Canadian precious metals mining companies. Canada is the global leader in mining exploration, and Canadian-listed mining companies (on the Toronto Stock Exchange and Venture Exchange) are responsible for the majority of the world’s most-promising discoveries.

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