Wednesday, March 18, 2009

Another example of the media stating opinion as if it is fact

We see this all the time: people in the media stating their opinion as if it is fact. This is insidious--and dangerous.

Here is another blatant example that appeared today in the New York Post. The column was written by John Crudelle, the Post's business reporter.

(My comments are in blue)


IT used to be that the only two things in life that were certain were taxes and death. Let me add a third certainty to that list: Anything Washington tells you isn't 100 percent true.

He says, "anthing Washington tells you," not, some of the things or a few of the things, but ANYTHING. This is a blatant exaggeration.

Take one of the few pieces of recent good news about the economy: that Americans' personal incomes increased in January even as their rate of saving money skyrocketed to 5 percent - the best in nearly 13 years.

In his belief system a higher savings rate is good news without exception, regardless of how it came about. He states this to you so matter-of-factly as if to suggest you're an idiot if you were to even consider disagreeing.

Please, does anyone really believe these numbers, given there's a recession going on, jobs are being cut and everyone is using every available dollar just to get through the day?

And there it is, that famous line once again! Repeat after me (in a mocking tone, please mimic Jim Rogers' voice or that of an old prospector): "Do you believe those numbers??"

A beautiful example of cognitive dissonance here. When something seems to contradict a person's belief system (like facts) the brain must come up with something to counter this or the person's emotional state will become conflicted and stressed. For most people, like Crudelle or Jim Rogers or Peter Schiff, the easiest way to do this is to cast doubt upon the government data. Thus, the oft' heard remark, "Do you believe those numbers!!"

Well, because I didn't believe the numbers, I did a little research. And I'll let you in on a little secret.

Of course not, because it gives him stress to think his belief system may be wrong.

The folks at the Commerce Department, who put out these rosy statistics, really don't believe them, either.

He's being totally sarcastic and displays very clear annoyance at even the suggestion that something in the news might be positive.

Here's how this "good news" came about.

The sarcasm and the mocking again.

Because of the recession, the US Treasury is estimating that its revenues will be down for the coming year.

Yes, that should be pretty obvious that Gov't receipts will be down.

That's mainly because of lower (or no) capital-gains tax payments, because people will report tax losses in the stock market and, of course, because many folks have lost their jobs and paid less income tax.


If the Treasury is receiving less revenue, the Commerce Department figures this money must still be in taxpayers' pockets.

Those with income are still paying taxes. Those without income or with capital gains losses will pay less. In total the gov't will collect less.

And if it remains in the possession of taxpayers, then people must be saving some (perhaps 5 percent, Commerce figures) and spending some.

Yet did the government ever think that the money isn't reaching people's pockets, and as a result it is neither being spent nor saved?

He's totally leaving out gov't transfer payments to individuals and interest paid, both of which are rising, adding to non-gov't income. This is happening as consumption is falling. A 30-second search on Google would have given him the following accounting identity:

Pvt = (Y + NFI + TR + TI -T) - C


Pvt equals private sector savings
Y equals GDP
NFI equals net foreign income
TR equals gov't transfer payments
TI equals interest paid by gov't
T equals taxes collected by gov't
C equals consumption

With TR and TI rising and T and C falling faster than the decline in GDP, the end result is higher private sector savings. It's just arithmetic. Not that hard.

A source in the Commerce Department chuckled when I asked about these numbers, explaining that these figures "are the very first estimates," which means they are the ones "most subject to revisions."

Again, being very dismissive here and suggesting that the gov't is playing a big joke on us with the numbers and laughing at the same time. Only HE got to the person that let him in on the joke. We should be thankful to him.

And people shouldn't take them very seriously.

Opinion stated as fact. Very bad...very, very, bad.


STF said...

Good find, Mike.

From Econ 101, everyone should learn that an entire sector deleveraging (like the US household sector) IS a recession. This is the simple paradox of thrift, with a govt deficit (probably around the 5% that is reported as the increase in saving) not large enough to offset. Flow of funds accounts similarly showed that 4th quarter saving increase as a percent of GDP was the largest in 40 years.

googleheim said...

running to gold is a form of dynamic currency change or temporary shelter or mattress stuffing or increase in savings in a manner of thrift

if the price of gold drops suddenly, then the bubble will do what when it pops ?

even if you cash out ahead of time into U$D currency, if things return to what they were your gain in gold will be a loss in USD

what is the point ?

Mike Norman said...

Gold makes no sense to me at these levels. And the idea that it is "money" is ludicrous. What gov't accepts gold for the payment of taxes? Go try to buy groceries with a bar of gold. Next time you fill up your tank with gas offer to pay in Kruggerands. Sheesh! When the world goes back on a gold standard then gold becomes money. Until then gold's only real value comes from the desire by people to want to wear it around their necks!