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Fuzzy Numbers

Monday, February 6, 2012, 10:10 AM
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At this (late) stage of the game, we can expect almost anything and everything in the way of statistical miracles to be used in order to sustain the illusion that everything is fine.

One of the pieces that I have long been critical of is the Bureau of Economic Analysis’ (BEA) use of their own measure of inflation, the so-called "GDP deflator," to subtract from nominal GDP growth (giving us the reported ‘real’ growth). Of course, you have to subtract inflation from the measured goods and services, or else you are actually reporting inflation as growth. 

The BEA does not use the CPI (consumer price index), which, flawed as it may be, is at least a consistently flawed measure. The deflator, on the other hand, either suffers from some sort of design flaw or is the most politically manipulated number on the planet.

 

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