Misleading Data, Censorship and Tyrants


Whether you own a small neighborhood retail store or are the CEO of General Motors, you need to know whether the economy is shrinking or growing. If it is the former, you may decide to cut staff, reduce inventories and defer updating your technology in order to conserve cash. If it is the latter you may choose to preemptively hire staff and buy machinery and equipment to grow your output capacity in expectation of future sales growth. The typical way one gleans this important trend is to study gross domestic product (GDP) statistics.

The Main Stream Media reports that US GDP has “bounced back” from its pandemic lows, growing by an unexpectedly healthy 5.7% in 2021 – its best performance since 1984 we are told - with an even more impressive growth rate of 6.9% in the final quarter. That put a smile on investors’ faces even as many stocks dove into correction territory on the Fed’s announcement that it would start withdrawing QE and raise interest rates at some unspecified time in the future. This allowed President Biden to crow that his policies are driving that growth. Here is a typical chart showing annual changes in GDP.


But what does the widely publicized “growth” on this chart actually represent? Perhaps we should withhold our hosannas for Jay Powell and Joe Biden until we know the answer to that question. To get to the bottom of this we need to sneak into the back room of the Bureau of Economic Analysis (that issues the statistic) to see how this link of statistical sausage is made.

The formula for calculating GDP is the sum of the value of final goods and services produced during a particular time period, usually a quarter or a year. It includes consumer outlays for goods and services; business outlays on plants, machinery, and inventory; government outlays, and exports less imports. For ease of discussion let us assume the US spent $1trillion in Q1 2020 for goods and services. Next assume that they purchased the exact same things in the same quantities in Q1 2021. There would be “zero” growth in GDP. But if price inflation increased the cost of those goods and services by, say, 5.7%, then “nominal” GDP will have grown by an impressive 5.7% - although “real” GDP growth would still be “zero.”

The Fed’ preferred measure of price inflation is called the “core” inflation rate. That measure omits the cost of energy and food. It justifies doing so on the basis that those prices are “volatile.” While they can be volatile from time to time, everyone must nevertheless consume them on a daily basis. To ignore them in calculating the rate of price inflation is grossly misleading. Through these and other ploys the government routinely understates inflation and therefore overstates GDP growth. It does so to keep the hoi-polloi (voters) from connecting the dots between deficit spending and money printing from the rapidly rising prices with which they have to contend.

The BEA’s published figures for GDP growth ostensibly adjust for price inflation but it uses the government’s calculations that are well below actual increases. They achieve this by using multiple “adjustments” and other statistical gimmicks that always have the effect of understating actual price increases. One example is their use of “owner’s equivalent rent” (“OER”) instead of actual housing costs. Housing consumes between 25-40% of an average household budget and is the largest expense for most people. The red line below is the government’s contrived OER; the blue line is the Case-Shiller home price index based on the actual sales prices of homes.


Another way to assess real housing costs is to review actual rental prices for given types of properties – such as one-bedroom apartments - in a variety of cities. Doing so would reveal that in thirty-four metropolitan areas, rents are currently up 15.2 to 28.2% year over year. The average rent increase in the US has been 15%. Consequently, middle and lower class workers are struggling to afford housing. In many cities they are rapidly being priced out of the market. Rising home and apartment prices result in higher real estate taxes on those properties causing the cost of home ownership and rent to spiral ever higher. Rising taxes are forcing many homeowners, who have paid off their mortgages, to move to lower cost areas. This is the severe pain that housing price inflation inflicts on both the working classes and retirees.

While housing costs are soaring, other consumer costs are rising at rates well in excess of the published consumer price index of 7%. You have no doubt experienced rapidly rising food prices and the escalating costs to heat and light your home and fuel your car. A barrel of oil cost $20 in mid 2020 and now costs $90. Trucks and autos are selling for over their sticker prices. There are many causes for these increased prices but all of them result from government actions (i.e., budget deficits, QE money printing, shutting down the economy). As we have noted before, while wages are rising, they are not rising as fast as prices, impoverishing an ever-larger population.

Another indicator of how a nation’s economy is doing vis-à-vis the world’s economy is to calculate its exports less its imports (“net exports”). If that sum is positive, wealth is flowing into the country as foreigners send their money for your goods and services with the profits remaining at home. When that sum is negative, you are sending your wealth out of the country for their goods and services and they are retaining the profits. This chart reports the decline of US net exports. It has not been a positive number for more than forty years.


The Dollar’s Slow But Steady Demise

During World War II the US sent huge quantities of military equipment and food to its allies. They paid for those supplies with gold, which flooded into the US. Following the war and reconstruction of Europe, the US had amassed over 20,000 tons of gold reserves - the largest gold hoard in history. By the time of the Johnson-era’s Viet Nam War and social spending spree, gold was rapidly flowing back out of the US. The US Treasury claims to still hold 8,000 tons of gold although it has refused for decades to allow an audit of it holdings. Much of what remains is not in .999 fine “deliverable” form because it is coin melt resulting from FDR’s 1933 Executive Order 6102 forcing citizens to turn in their gold coins under penalty of imprisonment.

When inflation began to roar in the 1970’s gold, which is priced in dollars, started to rise as foreigners, particularly the French, began to lose faith in the value of the dollar. The US convinced the UK to join its so-called “London Gold Pool.” The purpose of the pool was to sell gold in large quantities to keep the price of it from rising. Prime Minister Gordon Brown agreed to sell off virtually all of the UK’s gold in furtherance of this idiotic scheme. The US sold off much of its own. Finally realizing they were fighting a losing battle, the Gold Pool dissolved and the price of gold rose from its “official” price of $35 per oz. to the current $1800 per oz. The important take away from this is: the price of gold did not rise because it became rare (mines produce tons of it each year) or because it was improved with buzzy new features like bigger RAM memories or Bluetooth capability. It was simply because the dollar has lost virtually all of its value. During just the last twenty years the dollar has lost 40% of its value


One way to follow the demise of the dollar is to track the growth of the US National Debt. So-called “debt ceilings” are set by Congress but then raised every time the ceiling is reached. If not, the nation would default on its debt obligations or be unable to pay its bills including government salaries and social security. The US just hit $30 trillion of national debt.


This endless monetary debasement reveals “Gresham’s Law” at work. This is an economic theory from 1860 stating: “Bad money drives out good.” History proves that when a debased currency is put into circulation, people will hoard the old, better currency and deal daily in the debased currency. Up through 1963 US dimes, quarters, half dollars and dollars were made of 90% silver and 10% base metals (for durability). At that time, the US government realized that due to its persistent debasement of the paper dollar, the value of the silver in these coins was about to exceed the face value of the coins. That is, people could soon make money melting down the coins and selling the silver for a profit. Thus, in 1964 the US mint began issuing all-alloy coins with no silver content but a silver-looking nickel finish. Almost overnight, people hoarded the silver coins and they ceased to circulate in commerce. The “bad” money had driven the “good” money out of circulation. By 1982 the US Mint had to discontinue making copper pennies because it cost well more than a penny to mint one. Pennies are now zinc alloys and nickel coins are no longer primarily made of nickel.

The Roman Empire went through a similar process. As Rome looked for a way to spend money it could not raise in taxes or tribute, it began debasing its coinage. The Roman denarius was the standard silver coin from its introduction in 211 B.C. It was 98% pure silver. Around 85 AD its silver content was reduced to 93%. By 214 AD it was only 48% silver and by 274 AD it was just 5% silver. This allowed the government to mint more coins with the same amount of silver to pay for the increasing expenses of its vast but fading empire. Today central banks are keen on the idea of issuing their own crypto-currencies. If adopted, they can create money at will at zero cost. This would be great for governments, but not so great for anyone expecting their currency to function as a store of value.

The Changing Workforce

The US labor force (percentage of people working or actively looking for work) has declined for more than twenty years even while the US population has continued to grow through immigration – both legal and illegal.


This decline in the labor force is most acute for the category of men. One out of eight working age men are not employed. There are many causes for this including the influx of women into the labor force and the “aging-out” of male Baby Boomers who retired over the years or were let go during the Covid shutdowns and either not asked to return or who decided not to return.


Another factor affecting the participation rate is the increase in the number of working age people receiving federal disability payments. The percent has doubled over the past fifty years, from 2.2% in 1977 to 4.3% in 2021. The workplace has not become more dangerous over that time but far less so. So something else is at work. One factor could be that the aging workforce became more afflicted with degenerative diseases. Another is a growing abuse of the disability system. Whatever the causes, a declining workforce has two consequences. First, it produces less goods and services absent a dramatic increase in productivity. Unfortunately, capital expenses intended to increase productivity have fallen over the last two years, as most businesses were loath to expand in the face of the ongoing Covid shutdowns. The second negative is that very few people out of the workforce have saved sufficiently for their retirement. They will become financial wards of the state causing municipal, state and national social welfare budgets to blow out.

The inevitable results of a shrinking labor force are higher taxes for those still working and more price inflation as governments print money to pay swelling social welfare obligations. A recent analysis in the UK found that the long-term tax bill faced by households with an annual income of more than £60,000 ($80,400) now stands at £1.1 million, ($1,474,000) meaning they will have to work the equivalent of 18 years just to pay the taxman. That does not leave much time to save for their children’s education and their own retirement. In December, price inflation rose in the UK to 5.4% and to 5% in the Eurozone. Germany hit 6pc in November, and 6.4% in December, the Netherlands is 6.4pc and in Spain is 6.7pc. The Bank of England warns that UK inflation will surge to 7% by April. Unlike the US and UK, the ECB has not discussed raising rates for fear of sending its southern tier nations into recession and default on their bonds that the ECB bought in quantity. Thus, the ECB is as vexed as the Fed. No rate increases will result in continued inflation but raising rates may bring on a recessionary collapse.

When push comes to shove, all central banks will choose more inflation over precipitating a financial collapse that will sweep the insiders (including themselves) from power. Our Magic 8 Ball predicts that to prevent insurrections by voters from rising inflation, welfare benefits will be increased and we will once again be put through the wringer of price controls followed by inevitable shortages of essentials.

These are not just American, UK and Eurozone problems. Jared Dillian writes,
The labor force participation rate in Argentina dropped to 38.4% in 2020, during the pandemic. Now it stands at 46.7%. A labor force participation rate below 50% means that less than half the country is working—and supporting the other half that is not. It enlarges the welfare state and creates generations of institutionalized dependency that is difficult to reverse. Generations of Peronism has destroyed the culture of work that once existed in Argentina. The country’s problems aren’t simply economic, a matter of a rapidly depreciating currency and high inflation. They’re also deeply rooted in cultural norms around work.
The Ongoing Covid Debacle

Noted epidemiologist Neil Young has taken Spotify to task for allowing Joe Rogan to interview Dr. Robert Malone, an early pioneer working on mRNA technology, who expressed his opinion that the Covid vaccines are not as effective as represented by politicians and drug manufacturers and have the potential to cause harm to many people. Three highly regarded front-line physicians with deep experience in the treatment of Covid patients - Joni Mitchell, Prince Harry and Megan Markle – joined Young in his criticism of Spotify. Ms. Mitchell declared, “I’ve decided to remove all my music from Spotify. Irresponsible people are spreading lies that are costing people their lives. I stand in solidarity with Neil Young and the global scientific and medical communities on this issue.” They all demanded that “misinformation” about the virus and vaccines be banned from the airwaves and that the public have access only to authorized (government approved) information.

Bear in mind that not one of these people has any scientific training or knows anything about the issue. One might wonder why they felt compelled to speak out on a subject about which they know nothing. Perhaps their expressions of “misinformation outrage” are simply desperate efforts to be relevant in a world that has long since passed them by. Regardless of their motives, they raise an important point – it is just not the point they intended to make. It forces us to consider, “What should be censored and who should be in charge of doing it?” In the ever-evolving treatment of medical conditions, what is accepted today as good care and accurate information is always subject to revision tomorrow. For example, Thalidomide was approved for use and accepted as a proper treatment for nausea during pregnancy. That is, “the science” of its day supported its use. The use of leeches to draw blood was once an acceptable medical treatment. If Neil, Joni, Harry and Megan were to have given the issue a moment of serious thought they would have realized that physicians continuously learn as they practice their crafts, continuously alter treatment protocols as additional information becomes available and routinely share that information with other physicians. That is a process we should vigorously encourage rather than discourage.

Let’s take a trip back to the 1700’s and the “Age of Enlightenment” (also known as the “Age of Reason”). It was during this period that intellectuals developed a new method of ascertaining truths about nature. They developed what became known as the “Scientific Method.” This was a dramatic departure from earlier efforts to unravel the mysteries of nature. It calls for the development of a theory to explain a phenomenon followed by experiments designed to test the truth or falsity of the theory. If the experiments appear to support the theory, the scientists publish their results inviting others to test the theory with the same or different experiments. Through the rigorous use of this methodology, scientific knowledge quickly blossomed to the universal benefit of humankind.

Previously, scientific advancement was an uphill fight against embedded misconceptions. In 1543 mathematician and astronomer Nicolaus Copernicus published his studies proposing that the sun rather than the earth was at the center of the known universe. This challenged entrenched dogma. However others were able to test and confirm the correctness of his theory. Note that his theory markedly deviated from accepted beliefs. If scientists were barred from challenging accepted beliefs, there would be no scientific advancements. If scientists could be “cancelled” (or executed) for challenging an existing belief, we would still be living in the dark ages. This concern contributed to George Orwell’s 1984 in which he ridiculed a fictional government department called the Ministry of Truth. He recognized that granting the government (or other censor) the power to define “the truth” is a horrendous mistake that leads to disaster.

Today we have a large number of people with zero training and experience in health care who, nevertheless, hold strident opinions on the subject of Covid and feel compelled to not only forcefully express them to all who hold contrary opinions but to demand that the latter accept their opinions as enlightened gospel. We are unsure whether to be amused by the above Four Horsemen of Censorship or appalled by them.

To them and others who relentlessly insist that we “listen to the science” we recount the following public pronouncements:
Joe Biden:: “You’re Not Going To Get COVID If You Have These Vaccinations.”

Dr. Fauci: “You Become A Dead End To The Virus [if you are vaccinated].”

Rochelle Walensky (CDC Director) : “Vaccinated People Do Not Carry The Virus — They Don’t Get Sick.”

Albert Bourla (CEO Pfizer): “Our COVID-19 vaccine was 100% effective in preventing #COVID19 cases in South Africa. 100%!”

Bill Gates: “A key goal [of the vaccination program] is to stop transmission.”

Rachel Maddow (Liberal political commentator): “Now we know that the virus stops with every vaccinated person.”

Brian Stetler (CNN host of “Reliable Sources”): “The newspaper [USA Today] describes ‘America’s fourth Covid-19 surge,’ noting this ‘didn’t have to happen,’ since vaccinations are so widely available. The headlines are followed by a call to action: ‘Let’s end it now.’”
All of these people have been wrong for two years. We now know that they relentlessly spread “misinformation” to the public. Why is the Main Stream Media not taking them to task? Why are Neil, Joni, Harry and Megan not raising hell about their false statements? The reason is that debate about Covid care and other important issues of the day is no longer permitted. If you disagree with official diktat you are not just wrong - you are evil. It should not be hard to see that this represents a complete repudiation of scientific inquiry for which we will all pay the price.

In a “Good Morning America” appearance, the above referenced CDC Director Rochelle Walensky finally admitted, “the overwhelming number of Covid deaths, over 75 percent, occurred in people who had at least four comorbidities.” That is what we have pointed out for almost two years after the initial age-related CDC mortality data came out. Government efforts should have focused on protecting vulnerable and elderly populations (i.e., not sending COVID-positive patients from hospitals back into nursing homes as was done in NY by governor Andrew Cuomo) and allowing normal activities to continue for extremely low risk populations (keeping schools open).

While it is aggravating that politicians and government officials have overstated the benefits and understated the known risks of the Covid vaccines, it is absolutely criminal what they and the Main Stream Media have done to censor those who voice concerns about the vaccines or suggest other means to treat Covid. A board-certified group of internists in a Detroit suburb have been treating patients with viral infections for more than three decades. They started with the logical premise that the healthy human body has the natural ability to overcome viruses. Were this not so, our species would have been eliminated tens of thousands of years ago. Thus, their focus has been on helping their patients strengthen their immune systems to forestall infections and to combat them if infected. Their decades-long protocol includes encouraging healthy eating and exercise coupled with doses of vitamins A, C and D and iodine for all patients - with elevated doses together with nebulized hydrogen peroxide and iodine for sick patients.

They have treated over 800 virus patients. Of that total, only eleven have been hospitalized and there have been no deaths. They published their findings in a peer-reviewed medical journal. The thanks they received for their efforts came in the form of a letter from the Federal Trade Commission ordering them to cease reporting their results under threat of prosecution by the Department of Justice. A First Amendment attorney told them they could spend the next several years litigating the issue with the government or they could spend that time treating their patients. They chose the latter. By barring these doctors from sharing their data, all doctors are deprived of the opportunity to test their results. If a natural vitamin and mineral therapy proved to be more effective than a “leaky vaccine” (one that does not prevent Covid or keep you from spreading it) and with known side effects (including myocarditis, menstrual complications, miscarriages, strokes, Graves’ disease, shingles and more), which would you want your doctor to prescribe to you? NOTE: we make no judgment on the efficacy of the vitamin protocol. We only assert that physicians should be able to learn of it and test a variety of treatment plans in order to identify the superior one. Anything that stands in the way of that process is “anti-science” by definition.

Beyond the above-recited official misinformation, it is the petty and stupid rules that government officials delight in imposing on us that really boils the blood. The UK Telegraph invited its readers to write in with examples. These are examples of why we increasingly hold government officials in contempt.
“Church yesterday. Wafer but no wine for communion. Service followed by wine and biscuits to mark the vicar’s retirement.”

“The one where you can work in a control room with multiple people for 12 hours then be breaking the law if you sit on a bench drinking coffee with one of them.”

“Forming a socially distanced queue at the airport before being sardined into a packed plane with the same people for hours.”

“Pubs with no volume on the TV.”

“Two people are allowed to go for a walk on a golf course. If they took clubs and balls, it is a criminal offence.”

“The one-way system in my local pub, which meant that to visit the loo you had to make a circular journey through the building, ensuring you pass every table.”

“People falling down the escalators on the Underground because they were told not to touch the handrails.”

“Rule of Six. My wife and I have three children so we could meet either my wife’s mum or her dad, but not both at the same time.”

“How about not being allowed for months – by law – to play tennis outdoors with my own wife? We’d have been further apart from each other on court than in our own home.”

“It was illegal to see our parents in their back garden, but legal to meet them in a pub garden with lots of other people.”

“Having a flask of tea or coffee on a walk meant it was classified as a picnic – and thus verboten.”

“My 12-year-old had to sit alone at her grandfather’s funeral – her first experience of one – even though we drove there together and hugged outside.”

“We could only go outdoors once a day for exercise.”

“In Wales, supermarkets were allowed to stay open, but the aisles containing children’s clothing and books were taped off. Because buying a baby’s jumper is so much more perilous than picking up a pint of milk.”

“Residents of care homes forgetting who they were during the long months when family were not allowed to visit them.”

“Dying alone. How many died alone? How many?”
Finally, we are forced to endure the hypocrisy of our jailers. (Prime Minister Boris Johnson ordered his countrymen and women to shelter at home and have no social contact even with dying relatives while he and his staff celebrate his 56th birthday with a drinking bash at 10 Downing Street; AOC caught Covid partying with friends in Miami.)

The Darker Side of Government Responses to Covid

When we view the arc of history, we see that governments do not voluntarily relinquish power over their citizens. Over time power is always shifted from the people to the government. This is known as the “ratchet effect.” The control always gets tighter, never looser. As Rahm Emanuel advised President Obama, “Never let a good crisis go to waste.” He meant that during a real or imagined crisis people are willing to give up their rights for soothing assurances that they will be protected by the government. Following 9/11 America enacted the “Patriot Act.” George Orwell would have gotten a good laugh at the name of that legislation. It essentially revoked the Fourth Amendment prohibiting unreasonable searches of the public’s communications. Most people shrugged their shoulders saying, “I have nothing to hide.” And thus, the government becomes ever more powerful and the people become ever less free.

We need to be cognizant where this path leads. If your government can force you to get multiple shots of an experimental vaccine that has a growing list of health risks why can it not force those with co-morbidities, such as obesity, to diet and exercise daily? C.S. Lewis observed, "Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive... those who torment us for our own good will torment us without end.”

Porter Stansberry writes,
A free society recognizes a fundamental truth of nature: We are not the same. We do not have the same strengths, the same ideas, the same histories, or the same goals. [Thus], there's no such thing as "The Public Good." There's a myriad of competing interests, as Adam Smith explained in The Wealth of Nations more than 200 years ago.

What we do share, however, is a common philosophy that champions the rights of the individual and limits the power of the State. We do not exist to serve the State. The State exists to serve us. That distinction lies at the very heart of what it means to be an American, and I think our leaders have completely forgotten this fact.
David Stockman concurs,
The state is a ceaseless usurper of private liberty, relentless aggrandizer of its own functions and authority, and the sworn enemy of constitutional government: Even the robust form of it by which the Founders in their wisdom sought to shackle what they knew to be the risk of another Leviathan rising from their victory over the despotic King George.
If we fail to push back against the incessant overreach of those in political power, we will pay a heavy price. Bill Bonner warns us,
Tomorrow doesn’t always bring the future you want or expect; more often, it brings the future you deserve.



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Important Message: The foregoing is not a recommendation to purchase or sell any security or asset, or to employ any particular investment strategy. Only you, in consultation with your trusted investment advisor, can select the strategy that meets your unique circumstances, investment objectives and risk tolerance.