From 1959 to 1964, Rod Serling created and directed the ground-breaking series "The Twilight Zone" which will never be forgotten by anyone growing up in the 1950's with a black and white TV. The weekly episodes revealed with ironic, perplexing and totally unexpected results, what happened to otherwise normal people whose lives were forever changed once they were transcended into a parallel world where different rules applied. This altered world correlates in many ways to the US economy today as millions of people are realizing that nothing our government says seems to be real, and the rules we thought applied, don't any more.
For example, the price indexes continue to be manipulated down with hedonic adjustments which continually change price weights to always favor lowered-priced, over higher-priced, goods. This manipulation in the price indexes virtually guarantees that GDP, which is a price-adjusted number, will grow 1.5 to 2 percent each and every year, even if there is no real economic growth at all! Moreover, the White House has created a novel way to measure how it has created or saved 640,000 jobs through economic stimulus. Only in a world where rules no longer apply would you see a big brother government claim they created 640,000 jobs when, in fact, over 640,000 jobs were actually lost in the last three months alone. The surge in the headline unemployment rate to 10.2 percent, and the broad measure of unemployment (the U-6) which hit a mind-numbing 17.5 percent, make a mockery of the economic stimulus package.
I'm also not alone in pointing out that over the past 12 months the Bureau of Labor Statistics Birth Death Model has added 850,000 mythical jobs to the Payroll Employment Survey. By all accounts, this data is false and is a stunning example of statistics created in outer space where only happy talk is allowed, and, unbeknownst to the people, psychological warfare is actually taking place against them behind the scenes.
The official numbers are so bad and inaccurate that a business has emerged to show what the real economy actually looks like. (See John Williams' excellent "Shadow Government Statistics" at www.shadowstats.com).
In this world of illusion, the government wants you to look the other way. They certainly don't want you to see that less than half of the credit losses that will need to be taken have been taken, for home mortgages, credit cards, and toxic commercial real estate loans. And that's not all. Economic statistics that show real declines (but at a slowing rate of decline) are advertised as increases, and even though new records have been set for the length of time that workers have been collecting unemployment, and filings for early retirement, food stamps and social security disability have spiked, these facts are rarely reported.
Government tricks are wearing thin and consumer confidence is waning as a massive credibility gap begins to widen between the people actually living in a real nightmare they have never before experienced, and the world as reported by government statistics and markets. This has caused concern on Capitol Hill that restive peasants may gather in the streets and go after bankers with their pitch forks when these same bankers should be contributing to PACs in the coming election year.
Past recessions were caused by an overbuilding of inventories that needed to be corrected. This recession is far worse, however, and it mirrors a 1930s-style depression that needs to purge a massive over-extension of credit. The next few years are going to be rough for many people living on the edge, and nothing, in my view, will change until new good paying jobs are created. Remember that in any recession, meaningful job growth lags the official end of the recession by 12 to 24 months, so we can expect unemployment to continue well into 2011 for sure.
It's unfortunate that Rod Serling has passed on because if he were alive today, he would be filled with plenty of ideas for a killer episode of his program, showing how propaganda and the Fed's printing press can be used to wipe out jobs, eliminate prosperity, and rob savers. The cast of characters would be played by real unemployed people playing truly heart-wrenching roles. The economy desperately needs new scriptwriters.