Search This Blog

Saturday, January 29, 2011

Statistical Play-doh

If you've spent any time over the past 2+ years following this current global recession, then you know it is extremely easy to distort numbers and statistics for one's purposes.World governments, the financial markets and mainstream media have displayed amazing mastery in using stats to justify their assertion of 'recovery'.  Statistics are as easy to mold and shape as Play-Doh to a child.

Of course, manipulations occur in every aspect of life..  Some examples:

-  A baseball player gets a huge contract because he is a consistant .300 hitter.    Now being .300 success means 30% success.. it means 7 out of 10 times you failed.  If a ballplayer had 500 At-bats in a season, and hit .300, he Failed to succeed at the plate 350 times.

- A music artist has the top selling album of the year by selling 10 million copies in the US.  Yet America is a nation of over 300 million people.   So that means 290 million people had no desire or interest in owning the album, and only .03% of the population bought it.

Here's a real-life example of statistical distortion--

From the Wall St. Journal blog,  'Market Talk':

"The number for real final sales, which is sales minus the effect of business inventories, came in at a blistering 7.1% rate and suggested that John Q. was out there buying like crazy in the fourth quarter.  Now, set aside the number for a moment, and just ask yourself: does that sound right? Unemployment is still historically high. Companies, in fact, are still finding jobs to eliminate. Wages aren’t going anywhere appreciably, and with inflation back in our lives, you can bet they’re going to get worse, on a real basis. Housing is still in the pits. Are people really going out there and buying with both fists?

No, they aren’t. Not with their own money, at least.

But there’s that number. 7.1%. Blistering. It didn’t come from wages. Did it come from the stock market? Most people “invested” in the market are so through their 401(k) accounts. So the rising stock market may be helping to restore people’s battered retirement funds, it may be a handy rationalization for QE2, but most people aren’t seeing the benefits directly in their wallets...

So where are people finding all this money? Where else? Uncle Sam. East Shore’s Joan McCullough pointed us to this note from the BEA. Read it for yourself:

    'During the fourth quarter of 2010, ARRA provisions lowered personal taxes about $120 billion (annual rate) and raised government social benefits to persons about $60 billion, thus raising disposable personal income (income after taxes) about $180 billion.'

Catch that? ARRA, if you forgot, is the American Recovery and Reinvestment Act, the big $800 billion stimulus program from 2009, the one that everybody complains didn’t do anything. Well, in the fourth quarter of 2010, it added about $180 billion to John Q.’s wallet...

What this means is that still, today, a year and a half after the recession “ended,” three years after the recession began, more than two years after the Panic of 2008, we do not have an organic, natural economic recovery. Whatever recovery we have is still being funded by Uncle Sam, which means you..."

~ An 'organic, natural recovery' means you can find good paying work.  It means you can pay your bills without need of credit to make up the difference.  It means being able to make your mortgage payments so you don't have your home taken from you.  It means generating enough income after bills, you can put away something and start building a nest egg for something you may want to buy or do in the future.  It means the beginnings of economic autonomy where you are not dependent on anyone for your financial survival but yourself.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.