Your Humble Blogger Had a Naive Moment

Even though I pride myself on being a constitutional cynic, truth be told even I harbor a wee bit of optimism. For instance, even thought I regularly write about how Things Are Going to Hell, Fast, I privately assume I am a pessimist and maybe a bit of a crank too, so things might not really be as bad as I think they are. Then real grownups who’ve seen Bad Stuff at close range confirm my worst views, so I know things really are dire. Darn.

I had naively assumed that the goosing of government stats practiced by the Bushies might abate, at least temporarily, with Team Obama in charge (I’ll confess I got tired of watching the non-farm payrolls birth/death adjustments and the like, and figured I’d leave it for the hard core investment oriented sites like the Big Picture).

But I thought for at least the first year of so of the new Administration we might get more or less truthful government stats (well as truthful as they can be, given the limitations and quirks of their data gathering and models). Why?

Obama has everything to gain by making the economy look like a basket case now. The first six months or so of results can be attributed to Bush. The worse things look, the more impetus for heroic measures, and the lower the baseline against which improvement can be measured.

But weirdly, the Obama crowd (I assume they are nudging the statistician/beancounters) is releasing figures with Bush-beating “seasonal” adjustments that make results look better! If I were in their place, I’d want the numbers tweaked to look grimmer than reality.

So what gives? Is this an effort to keep “confidence” (aka markets) up? I’m mystified as to the logic.

From Alan Abelson’s column in Barron’s:

It’s a comfort in this wildly spinning world to find some things remain the same. We had feared that with the change in administrations, we’d have to revise our long-standing mistrust of government statistics. But, though it is still early days, the initial evidence gives us reason for hope. The numbers flowing out of Washington seem as dubious as ever, and so are the inferences being extracted from them by more than a smattering of investment strategists, money managers and, it pains us to say, even journalists.

The misleading figures cut across a wide swath of the economy, encompassing housing, manufacturing, employment — you name it. The leading agent of deception, unintentional or otherwise, has been that old sly villain, seasonal adjustment. As it turns out, the seasons don’t need adjustment as much as the adjustors need seasoning.

As Merrill Lynch’s David Rosenberg (who, incidentally, is planning to do a bit of adjusting himself and moving back to his native Canada; our loss, Canada’s gain) points out in a recent commentary, the official keepers of the books have been unusually aggressive in constructing seasonal adjustments for February’s economic data.

To illustrate, the seasonal adjustment for new-home sales was the strongest since 1982; for durable-goods orders, the strongest since they were first released in 1992; the retail-sales figures for February were flat (or, as David says, flattering) after such adjustment, but unadjusted fell 3%, the biggest drop on record. He also notes dryly that the 40,000 raw non-seasonally adjusted housing-start total for February “all of a sudden becomes a headline-adjusted annual rate figure of 583,000.”

Which makes David think that come the inevitably sharp downward revisions of such distorted data, first-quarter real GDP is likely to suffer a 7.2% drop. Which, together with the 6.3% skid in the fourth quarter of 2008, would be the worst back-to-back contraction in the economy in 50 years.


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  1. Russ

    This business as usual on stats is all too typical of the Obama administration. It violates his clear politcal interest as Yves said, and it’s also a small example of Obama’s general betrayal of the mandate he recieved in the election.

    (An electoral mandate, BTW, is not just a matter of political capital. It really is a moral obligation.)

    It’s unbelievable by now. Obama campaigned promising “Change”, and the electorate clearly voted for strenuous change. The republicans were on the ropes, demoralized and adrift. Obama could have come in and essentially declared “we’re at rock bottom, Bush and the Reps have led us to disaster, and now I’m launching a program of radical change, and if the disgraced miscreants resist we’re gonna roll right over them.”
    Then he could’ve gone ahead, and blamed anything that went wrong on the lingering effects of Rep mismanagement and crime.

    This would’ve had a good chance of at least political success.

    But instead right from the start Obama and crew sought to appease them, and in most signifcant ways, especially the bailouts and the GWOT, Obama is determined to carry on the fundamental Bush policy. changing only details.

    By now in economics and war we have to call this the Bush/Obama policy.

  2. 1 currency now

    No, I think to the extent that they really want to change the reporting they have not yet had time to do it.

    The Democrats are only just now waking up to the shock that the Reagan revolution is bankrupt.

    The first statistic that must be changed is calling consumption production.

  3. eh

    Perhaps you were expecting a bit too much “change”.

    Note how the dollar is now well off the high it reached just after the Fed said it would buy treasury debt.

  4. Anonymous

    I agree with Russ. If 1 currency now was right, we’d have very different actions being taken by the PTB over the last 3 months when in fact the only thing Obama has done is perpetuate many of Bushes policies.

    The Bush/Obama administrations are a train wreck. It’s only a matter of time before the general populace wakes up to this fact.

  5. esb

    The Friday meeting between Obama and the representatives of his masters was telling.

    The representatives informed Obama that they were going to return the taxpayers’ money unless Obama consented to complete freedom of motion for the top 20 banks.

    The Obama response appears to be something like, “please do not return the money, masters, you may continue to do whatever you wish with impunity.”

    What has gone wrong with Obama defies rational explanation.

    Or perhaps the explanation is that this is what happens when you pluck someone off of the street and make him President and the “names” tell him “you’re one of us now.”

    In any even, the man certainly fooled me. He is nothing more than a con man totally lacking in integrity,

    a Bush with superior verbal skills.

  6. Anonymous

    Why would anyone think that Obama would bring change? Just because he said so? Even if he wanted to make changes, just look at who’s advising him: essentially the same people from the previous administration are still in the key positions of finance and defense. A bunch of others are from the Clinton years. Have not heard from Hillary anything in the long while. Seems like she is even less important than Condoleezza. At a closer look, finance has been run by the same people since Clinton the president. And even the so-called neo-con are back! Or good old times…

  7. john

    I think the main reason for the phoney stats is try to build confidence so fools will open their wallets. this is going to lead to a huge letdown when reality rears its head. After three months I am still amazed that there still are true believers in the Obama change. It is very sad to see.

  8. Timo

    Most economists are one-trick-ponies, are not able to see beyond their “rational consumer”-crap. Friggin naive jokers.

    This is not an economic crisis, for USA this is political one. Late-stage democracy turned into plutocracy and now crashing big time.

    Meaning: There will be no USA within five years because the system is rotten to the core and will crash big time soon. But as usual, economists will see that as “unexpected” turns of events. Earth is still flat, according to economists…

  9. russell1200

    Naive is a word I always have a hard time spelling, it just doesn’t seem to look right.

    Alan Abelson’s line in the article where he notes that ever since he read Dante he has been dying to go to hell, and now someone is shown him how – is truly Worthy.

    I was also surprised by Obama. I thought he might have problems because of a lack of inexperience, not that he would simply be more of the same.

  10. Anonymous

    Hey Folks, the question is, how would the average person sort out who to vote for in the next election cycle. After all, everyone who voted for Obama was looking for change. If the promiser of Change didn’t deliver, then how could the populace do better the next time? It does pain me to say it, but the only candidate to took on entrenched powers and kicked out the ruling oligarchy in their own party was…
    Sarah Palin taking on the corrupt members of her own party in Alaska.

  11. Anonymous

    >If the promiser of Change didn't deliver, then how could the populace do better the next time?

    I think someone in Congress will get start acting populist in a big way, and make a run at Obama. Perhaps someone like Brad Sherman who can speak well and has been beating the drum for haircutting bondholders.

  12. Anonymous

    Yves,I shared your hope that the Obama administration would be more competent and act with at least some intelligence.Cheer up,and enjoy the fame that comes to those who write bestsellers and look like supermodels!

  13. Anonymous

    Bloomberg: Geithner Says Banks Need to Take Risks to Spur Economic Revival

    U.S. Treasury Secretary Timothy Geithner said that in order for the U.S. economy to recover from the recession, banks need to show more willingness to take risks and restore lending to businesses.

    “To get out of this we need banks to take a chance on businesses, to take risks again,” Geithner said today on the ABC News program “This Week.”


    Geithner is clueless or lying. The big banks are insolvent. They cannot afford to take risks or they risk not being able to service their debt. The only way the banks will be able to afford taking risks is if they are recapitalized, either by pouring a couple trillion dollars into them or by converting a portion of bondholders claims into equity.

  14. S

    The most telling statement and one I read as utter desperion was his almost desperate plea during the recent inquisition that it is merely a case of will –“all we need is will.” He went on to say that we “will stay at it until it works.”

    It would be interesting to put a side by side comparison of his comments at the Bear Stearns hearings when he was roundly applauded for his obfuscation and what are clear in hindsight grey area lies.

    Geithner hedistated when asked about his meetings with Goldman Sachs and whether he coordinated with them (and others) before launching the alphabet soup programs.

    Geithner is just not equipped. He was obviously a good bucket boy for the Rubin crowd when operating in the shadows but the sunshine is having a perverse effect. Obama must be weighing what the opimtal mileage point is to cut bate and hang this albatross of programs and strategy around Geithners neck. Then again the news about Volker moving aside is not reassuring.

  15. Anonymous

    My favorite distortions are:

    1.) Real estate only goes up!

    2.) We are in the longest bull markets–since 1945!

    3.) “I don’t see any inflation, do you see any inflation?”

  16. john bougearel


    Along the same lines of skewing govt stats to lull the masses that things are not so bad as they really are…

    on Friday, when Obama sat down with the banksters to ask them hat in hand for their help in this crisis ABA president Edward Yingling complained about the villification of the banksters, about the negative comments about the economy. Specifically stating that “We need people to be talking more confidently and not talking everything down all the time.”

    A few generations ago, Americans could be spoken to plainly and honestly and handle anything. Today, there has been a shift to mollify, placate, deceive, manipulate and lie to the American public. This is in part a result of the science of economics trying to manipulate consumer and investor expectations to help drive desired outcomes. It is a sad commentary that the powers that be have had to resort to veiling reality to shape outcomes.

    And Yingling and others of their ilk should be shamed for their misguided behaviors and intents.

    And in another distorted soundbite from Geithner on ABC News program “This Week”, BN reports “To get out of this [depression/recession] we need banks to take a chane on businesses, to take risks again. The great risks is that we do too little rather than too much” to revive credit.

    Asked if the treasury were to run out of bailout money (only 135 billion left) if he would ask conress for more money, he said “if we get to that point, we’ll go to congress and make the strongest case possible (read fear-mongering) and help them understand why (bilking taxpayers) this will be cheaper over the long run to move aggressively.

  17. john bougearel

    By urging banks to take risks again and a chance on businesses, Geithner misunderstands half of the equation.

    This crisis is not simply banks unwillingness to lend but businesses not yet wanting to take risks in this economy.

    Geithner’s failure to appreciate the full equation should be worrisome to Americans precisely because it leads to the same prescription of what got us in this mess, reckless lending and credit creation.

    The fools on the hill need a whiff of smelling salts.

  18. Independent Accountant

    I never had your naive moment. Obama is every bit as much owned by the Wall Street Power Brokers as Bush.

  19. Anonymous

    This Week: Geithner, End ‘booms and busts'”

    NBC’s David Gregory asked [Tiny Tim] if consumption will change.

    “I think people will be living within their means more, which is helpful,” Geithner said. “We want end this pattern of having booms and busts … with the kind of frequency you’ve seen.”

    “We want to have sustainable growth,” Geithner replied. “We don’t a recovery which is going to be artificial and short-lived – just produce the seeds of the next crisis. We want to have a durable recovery, based on a stronger foundation that has a stronger, more productive economy … whether the gains are more broadly shared across the economy as a whole.”


    Geithner is clueless or lying. Obama and Bernanke are using inflation, quantitative easing, illegal gifts to banks, and legal subsidies to infrastructure and alternative energy in hopes of having an alternative energy bubble. They are absolutely hoping for another bubble. And if they manage to create another God help us deal with the aftermath of the next bubble.

    Hopefully, Bernanke and Obama’s easy fiscal and monetary polices fail massively due to the public increasing savings and inflation that goes into consumer goods prices and not another asset bubble.

  20. Anonymous

    This week: Geithner, Rangel's wrong about me

    Stephanopoulos: The irony is you've never worked for a Wall Street firm.

    Geithner: Thanks for saying that .(laughing) … I've worked all my life in public service. I've spent my entire professional life helping this government and this country do a better job of dealing with financial crises and helping protect the economy… I would not spend a penny on helping a bank for the purpose of helping a bank. Everything we're doing is for the people who depend in this financial system.

    When Stephanopoulos asked him why he urged the Senate to reject a clawback provision that would have stopped AIG from granting bonuses, he said, "We are a nation of laws," adding that it would have been counter-productive to spawn "an ongoing fear that the government would change existing contracts."


    Geithner is lying on 3 counts. First, Geithner was not working at government agencies; he was working at public/private hybrids that pay executives like employees of medium size banks. Geithner was paid about $400,000 a year at the Fed, whereas career staff in the US government agencies top out at GS-14 at $100,000. Second, Geithner claims he is saving big banks because he is trying to save the system. Nonsense. The financial system can be saved without saving the big banks. Community banks and regional banks can do everything the big ganks can. And prop trading can be moved to funds, and M&A and securities advisory services can be moved to boutiques. Third, Geithner claims he couldn't stop AIG bonuses without breaking the law. Nonsense. AIG was insolvent, so creditors and arguably holders of preferred stock in AIG can sue executives to recover bonuses on grounds of fraudulent conveyance. Additinally, the government could have conditioned any injection of financing into AIG on AIG offering a choice of being fired or paid like public-private hybrid entities, like the Fed.

    Geithner must think the american people are low grade morons for him to tell lies like this.

  21. rootless cosmopolitan

    Yves, I don’t understand your point with the seasonal adjustment. Are you saying the seasonal adjustment of the released data, e.g. of the new home sales, is chosen arbitrarily as it fits in some agenda of the government at the moment? I have assumed there is an established algorithm (X-12-ARIMA?) of calculating those seasonal adjusted data, which is consistently used. Are you saying that’s not the case?


  22. Anonymous

    Not to throw stones but the Democrats had been controlling Congress recently just shows it’s a one party system, the party of liars.

    It ain’t goin’ happen but less talk of bailouts and more talk of tax or payroll tax holidays with less spending would be nice.

    For the naive, there is always along with and many other sites where the current events are no surprise.

  23. rootless cosmopolitan

    “For the naive, there is always along with and many other sites where the current events are no surprise.” is even less transparent than the government statistics. Where is the guy of supposed to get all the necessary raw data from so that he were able to provide reliable alternative statistics?

    I would say, these websites are for the ones who want to believe. Just in someone else.


  24. Anonymous

    Rootless Consumption

    Haven’t you heard of the quote, “lies, damned lies and statistics?”

    If you still trust Govt figures you must be hopelessly naive. Do you still believe America won the war in Iraq in 2003? Do you still in Santa Claus? Heck even Nixon wasn’t really a crook was he?!

    The statistics are damn rotten and dirty. Anyone reading them has to take them with a MINE of salt.

  25. Anonymous

    > is even less transparent than the government statistics. Where is the guy of supposed to get all the necessary raw data from so that he were able to provide reliable alternative statistics?

    shadowstats' methods transparent, but too simplistic to be useful. If you hunt around on his site, you'll find that his method for each stat is to calculate the state before and after a change in official methodology. He takes the delta and adds that to the new statistic. And voila, he claims to have the statistic absent the change in methodology. Obviously, shadowstats method is useless because the change in methodology won't cause a simple arithmatic difference in the official statistics. Sometimes a much, much bigger delta, and sometimes a much much smaller delta.

    There is proprietary research that does a much better job of trying to cut through governmental perversion of economic statistics. However, the services are much more expensive because it takes a lot more work than shadowstats puts into it.

  26. Anonymous

    Well, anyone have a better idea?

    If the administration goes “open kimono” with the rest of the world about the true state of our debt (and the realistic limits on growth and servicing that debt) then you can kiss the dollar goodbye even faster.

    You think things suck now? How about waking up and discovering that the oil-exporting countries no longer accept payment in dollars?

    The (political, rather than financial) advantage to issuing false numbers and trying to keep the banking sector liquid is that it gives the U.S. a chance of suckering our foreign “partners” into buying so much debt that they have no choice but to work with us.

    If your primary concern is human suffering and stability, far better to work through a long slow de-leveraging than engage in trade wars, and possibly followed by real wars.

    This empire is over. The only question left: do we end with a whimper or a bang?

  27. rootless cosmopolitan

    @Anonymous, 1:16 PM:

    “Rootless Consumption”

    The strengths of this argument is impressive. Like the rest of your posting.

    What was it again you say that makes a reliable alternative to government statistics, and not just a website to con people who are foolish enough to subscribe to it?


  28. Carlosjii

    Count Zaroff
    Ray DeVoe Jr. wrote a financial newsletter about Count Zaroff, the protagonist of ‘Most Dangerous Game’, who, in order to attract human prey to his island, re-arranged the warning lights around the island’s shoals and rocks so as to purposely cause ships to crash. Mr. DeVoe likened the current financial environment of the Fed and the Bush administration to the infamous Count in that manipulating all manner of ‘facts’ and figures’ will inevitably lead the US economy to crash on the shoals of mis or dys-information. Some of these mis-es include the birth-death model of ‘employment gains’, bogus CPI calculations, purposeful intervention in the markets to paint the averages – akin to driving the wrong way down one-way streets while turning the ‘one way’ signs upside down to point in your direction, debt monetization by fictitious entities, suppression of commodities prices which normally act as arbiters of value outside a world of paper, etc.

  29. Anonymous


    As I recall we had to read “How To Lie with Statistics” in my Econ education. Whatever the current version of that is should be required reading for all. Then we need to rework UI, CPI and other numbers to mean something again. We don’t have statistics now, we have carefully massaged propaganda.

    I have wondered textually in comments over the past year if Obama was going to be fascist lite and the continuing financial fascism we have validates the first part of my claim and with the numbers being thrown around maybe the lite attribute is a bit short sighted.

    I haven’t given up on Obama entirely. I think he has good instincts but has been deluded by the unfetterd free market kool-aid. We the people need to make enough of a statement to bring him around to a more honorable direction. I think that other world leaders at the G20 will encourage him as well to go in a more humanistic direction in this next week.


  30. Anonymous

    So why aren't the Democrats using this opportunity to "stick it" to the Republicans?

    It's simple… they have brushed politics aside for the moment and are concentrating on something that is far more personal & critical to them.
    How many in Congress are invested in these "toxic" investment vehicles that are now almost worthless?
    My guess is… a HUGE number.

    That's why now their effort is NOT in trying to revive the US economy, but rather in trying to revive these "toxic" assets.

  31. Namazu

    These are the same people who are trying (and possibly succeeding) at manipulating the market with tricks like allowing the banks to talk up their “profitable” January and February results. Stop looking for love in all the wrong places.

  32. rootless cosmopolitan

    Here is the release from the U.S. Census Bureau for the new home sales data in February:

    It clearly says the seasonally adjusted 4.7 increase from January to February is not statistically significant, because of the margin of error of +/-18.3%. And now compare how the report and the month-to-month increase were hyped as “good news” in the media and by the markets after the release. Take any report in the news media. It’s not so much that the administration deliberately deceives the public with those data, it’s the public who deceives itself. It shows to me to what degree there is still wishful thinking out there regarding housing and economy.


  33. Anonymous

    Well today the CEO of GM was forced out by Obama as part of the bail out. How many bankers have been ousted? How many have been investigated? Now you can see who are the true masters of this country…

  34. Anonymous

    Well today the CEO of GM was forced out by Obama as part of the bail out. How many bankers have been ousted? How many have been investigated? Now you can see who are the true masters of this country…


    Word on the street is a finance guy with no auto experience will take the reigns. What a country.

  35. jbmoore

    I can’t find the exact page on , but Obama and Clinton got quite a bit of their campaign funding from the Finance Industry. Given that Summers and Geithner hail from the Clinton Administration, and there’s a lot of insider dealings that marginalize people like Volcker. Add to that mix a Congress that doesn’t want to kill its cash cow (Wall Street) and one can see that the road we are headed down ends in a cliff over a huge chasm.

    On the other hand, the Republicans helped get us into this mess, and they are offering little in the way of advice on how to get us out of this mess. Not that there’s a whole lot of difference in how either party operates. Perhaps if the esteemed Washingtonites had to sleep out in the streets for a few days with the homeless, they might wake up and smell the coffee and actually do something besides throw other people’s money at the problems of Wall Street, when structural changes need to be made.

  36. Anonymous


    Then real grownups who’ve seen Bad Stuff at close range confirm my worst views.

    Separating the gold grains like Johnson’s article from the tons of tailings in the mass media is one of your strengths.

    I had naively assumed that the goosing of government stats practiced by the Bushies

    I agree. Very naively.

    I’d date the Happy Facing of govt econ stats back to the Ford Administration myself. It’s been enthusiastically practiced on a bi-partisan basis by every adminstration since then to present their favored policies as successful. If it makes you feel better the Ford Admin was a pre-Bush Admin sort of entity. Cheney was WH Chief of Staff and Rumsfeld was Sec/Def then, too. And George H.W. was Director of the CIA.

    The many Clinton retreads in Team Obama are well-experienced in generating Soviet statistics American style. They will certainly not abandon the practice.

  37. Anonymous


    “Naive” is not the word. You are a complete moron if you believed a word the uber-Marxist said. Doll, what planet are you from?

  38. Yves Smith

    It looks like most of you did not bother reading the entire post.

    It very clearly said that it would be in Obama’s self interest to at least for the first six month produce “cleaner” numbers (or even designed to be worse than reality #s) and show the economy to be in shit shape thanks to Bush.

    It’s no different than a new CEO who takes tons of writeoffs in his first year to make the comparisons down the road look a ton better.

    The fact he didn’t do that suggests:

    1. Lack of control over bureaucratic apparatus. I deem that as doubtful.

    2. Having his policy team decide they’d rather not scare the markets That suggests that they both spend too much time hanging out with finance perps (which we already know), and are overly confident in the success of their programs (as in they lack sufficient self preservation instincts).

  39. Anonymous

    Gee, it’s a total lack of confidence in reported numbers, ya can’t or won’t even believe in re-construction of past formulas discarded by the government so cost-of-living payouts can be avoided, among other things.

    In general the math for factional reserve banking shows it exhausting soon and due for a new/old system again or a reset. Much destruction at the end of the run.

    Can’t blame anyone for not believing in anything anymore lest being considered naive.

  40. Shadow Explorer

    Hi Yves,
    could it be that they are trying to make it seem like things are better than reality, because they ran a campaign on hope and if that hopes goes away the whole house of cards falls?

  41. Avl Guy

    speaking of econ stats & politics: lyrics from the #1 record on the radio charts 30 years ago, April 14, 1979 :

    “What a fool believes, he sees.
    No wise man has the power to reason away.
    What only ‘seems to be’ is always better than nothing…when there’s nothing at all.”

    Killer Line:
    “She….had a place in his life. He…never made her think twice”

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