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Policy by Playskool

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Good craftsmanship depends on good tools. The orthodox conception of economics holds that government can craft better outcomes than we would have if the rabble were left to their own devices.

Tools can be divided into two broad classes: working tools and measuring tools. First (and second, if you follow the maxim) the craftsman must measure. Then he cuts. Without good measurements, the quality of the working tools and the skill of the craftsman are moot.

The Federal government has legislated itself and enormous toolchest. The Executive Branch (including the Treasury Department) and the Federal Reserve are the craftsman wielding the tools Congress creates. The skill of the craftsmen and the quality of the tools by which they work the economy deserve doubt. If for no other reason than they never seem to get what they want. One doesn’t pay a carpenter to build a house, one pays for a finished house.

Perhaps driven by a need to appear masterful where skill is lacking, the current lead carpenters of the U.S. economy seem to be adjusting the measuring tools to make their work appear plumb. GDP, the figure used to measure growth and recession, is subject to many manipulations. It is founded on the value of the dollar, a scale upon which Bernanke, Geithner, and Obama can all put a thumb.

I’ve written about measures of employment that hide many knots and splinters. The Treasury’s daily reports are a measuring tool that’s tough to manipulate. Maybe that’s part of the reason the real figures in those reports are crafted into statistics.

And with data from the government increasingly bearing the Quality Control stamp of approval of the Beijing Communist Party, there is much doubt in store courtesy of an administration which will stop at nothing in its competition with China as to who can blow the biggest asset bubble the fastest, data integrity be damned. Undoubtedly, of all government released data, the most important is, and continues to be, anything relating to unemployment. This is precisely where the government's propaganda armada is focused.

That’s Tyler Durden, of the blog Zero Hedge. He’s found another anomaly between the unemployment data and the unemployment statistics:

Compiling the monthly data of Treasury Disbursements for Unemployment Insurance Benefits and then superimposing it with the total number of people receiving Insurance Benefits as disclosed by the Department of Labor is a useful exercise, as the two series have historically correlated with an R2 of well over 0.90.

That means that benefits paid track unemployment almost perfectly. That’s how it is supposed to work, plumb and square. In February of 2009, something went akimbo:

What becomes obvious is that a correlation which used to be almost 1.000 has diverged massively, and now the relative outlays surpass what the government highlights are the number of people actually collecting benefits by 32%! This implies two things: either the average unemployment monthly paycheck has surged, which is not the case, or there is some gray unemployment area which is not disclosed by the government, and which accounts for a shadow unemployed insurance economy.

Underlying data shows the Federal government is paying 32% more in unemployment benefits than the statistics call for. The Treasury says the money has been paid. To whom? For what? Given this, when the unemployment rate is used as justification for policy, does Barry and the gang even know what they’re measuring?

Comments

If our present general contractor followed the carpenters maxim and measured twice, that would give everyone time to notice that the blueprints were drawn up by Bo (the first dog.)