Governments Playing with Numbers


QUESTION: Hi Mr. Armstrong.
I’ve learned more reading your blog last 4 years than working in finance for 20 years. As you say, the average employee in finance hasn’t got a clue about what’s going on.
Question: There’s one thing that has bothered me for a long time; uncertainty about numbers regarding GDP, unemployment and so forthcoming from governments; are they trustworthy?
The reason behind the question is what happened during 2007 to 2009, where banks, rating companies as Fitch, Standard & Poor, Moodys, SEC, and all who are supposed to be reliable were lying about the real situation for several months before the bubble popped. Subprime loans didn’t get downgraded for several months even though there were severe defaults all over.
Are the key numbers revealed trustworthy when we know what the finance sector is capable of regarding lying/hiding, and now there are the government’s own bonds at stake?
Best regards
FF

ANSWER: Thank you. They just do not teach international analysis anywhere. It is the foundation of hedge fund management. It is also why we have the largest international client base anywhere. I have been asked now by three universities to teach. I just do not have the time. I keep telling myself I should do a textbook. I think I will get to do it in my next life perhaps. There never seems to be enough time.

Regarding the numbers, I have two factual encounters that have formed my conclusion. Because I have been an international adviser, I had to look at the numbers globally. What I discovered back in the 1980s was that every country had its own formulas. Comparisons were not realistic. I was asked if I would debate the top economist in Canada because my comments on economics were different from everyone else’s. I said sure. I debated him in Vancouver and it was hosted by Michael Campbell. The economist kept trying to compare GDP and inflation for Canada and the USA, and I would just respond that the formulas were completely different. He knew that, but economists only have the government numbers to play with. After I corrected him several times, he lost his cool on stage and said, “I am sick and tired of you Americans coming to Canada and telling us what to do!” At that moment, Mike Campbell stood up and ended the debate. After that, the AAP in Australia asked me if I would debate the top three economists in Australia on national TV. I said sure, why not. They all declined.

I hired a staff member, Lynn, who worked for me before she got married back in the 1980s. She was fantastic. Her job was to analyze the numbers of every country (below is one of her notes on inflation). We tore apart every country and created our own set of numbers that allowed us to actually do real-world comparisons to identify global trends. By the end of the 1980s, I was named the Top Economist in America all because we had the real numbers and not the government’s fake numbers they like to play with.

Going into 1980, just about everything was indexed to inflation basis the CPI. Even private contracts for rents were typically indexed to the CPI. The government discovered that if they could change the formula to reduce inflation, they could reduce expenditures. The CPI revisions began removing real estate and replacing it with rents on the theory that real estate was an investment — not your cost of living. They then reduced the sample to rents where they were controlled, which further reduced inflation. They have altered the number so many times that it is IMPOSSIBLE to ever get inflation based on the CPI back to the 20% level of the late 1970s.

One day Lynn came to me and asked me to review her work for she could not find a mistake that was so obvious. In GDP, the government calculates total government spending as a component. They also add total personal income. The mistake stared us in the face. It appeared that GDP was counting workers for the government TWICE: (1) total spending, and (2) total personal income. We searched every calculation to try to find where they were accounting for this blatant era. I knew the top people at the BEA (Bureau Economic Analysis) so I called, explaining the error, and asked for assistance in showing me where it was backed out. They said they would check and get back to me. Several weeks passed and no return phone call. I called my friend again. His response: “No comment.”

Using government numbers is Pandora’s Box we dare not rely on. Zeus presented Pandora a box/jar as a gift and when she opened it, sickness, death and many other unspecified evils and plagues were then released into the world. The only thing which did not escape before she tried to close it was hope.


Notes for our 1986 research project: (N.S.A = not seasonally adjusted: S.A = Seasonally adjusted)

Inflation  11/21/86

 

What to say?  US has many measures.  WSJ more or less picks up most of them but seems to emphasize s.a. change in a month.

Best to use year over year for int’l comparisons, probably.  Do we or don’t we have seasonal adjustment problems then?  IN U.S. we get month over year ago n.s.a.

What about the compound annualized rate for calculation of real interest rates? This way we’d have two forward-looking rates.  It’s probably a good idea to work with an average for three months

If we want to talk about GNP growth and consumer price inflation in the same breath, be sure the percentage changes are figured in the same direction: annualized forward, or compared with the same period in the prior year.

BLS says that to look at the trend, it’s best to look at s.a. numbers.  If we want to know about actual prices we’re paying, unadjusted numbers are best

Japan’s CPIs seems to be n.s.a.  UK RPI is n.s.a.  German cost-of-living indexes are n.s.a., but we have s.a. in Supplement on S.A. Economic Data.

Remember that consumer price inflation in Latin American countries is typically reported as changes between the current period and previous period seasonally adjusted at compound annual, rates… i.e. as forward-looking rates.  But there’s another twist. They usually say something like “bringing cumulative inflation to 67% so far in 1986.”

 

Political Corruption & Trump Impeachment


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QUESTION: You have been silent on the Trump impeachment proceedings. What is your opinion?

HT

ANSWER: It is just a dog and pony show all intent upon trashing Trump for political reasons. In doing so, they are trying to indirectly to pretend what Joe Biden did was ethical,  which it was not. Biden admitted he personally withheld $1 billion in loan guarantees unless they fired the prosecutor investigating the company that hired his son. To say Trump should be impeached because he withheld aid unless Ukraine investigated Biden is really amazing. Clearly, Biden personally said he would not provide aid unless they fired the prosecutor investigating the company that hired his son to gain influence with the Obama Administration shows this is all about politics. This was not a decision Obama made, but Biden personally when his family was involved. If Trump should be impeached for asking Ukraine to “investigate” when Biden demanded to end an investigation, then shouldn’t Biden have been impeached as well?

Welcome to the political corruption which has engulfed the world.

Sunday Talks: Congressman Lee Zeldin Discusses “Where we go from here”….


Rep. Lee Zeldin (R-NY) discusses the upcoming drafting of a partisan report derived from witness testimony and the likelihood of an independent minority report.   Unfortunately Rep. Zeldin, just like Adam Schiff and House leadership, is not sure what comes next (other than Thanksgiving).

Sunday Talks: Representative Elise Stefanik -vs- Maria Bartiromo…


Representative Elise Stefanik appears on Fox News with Maria Bartiromo to discuss her perspective on the impeachment inquiry.  As with all other republican members, including ranking member Devin Nunes and interim member Jim Jordan, Mrs. Stefanik has no idea where the Pelosi, Schiff and Lawfare goes from here.   Everything seems up-in-the-air.

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Having listened to three interviews with Adam Schiff today as well as Shiff’s little toady, Eric Swalwell; and watching them also say they don’t actually have an outlined plan of what will come next from their “impeachment inquiry”, it all seems rather odd.

It appears Democrat leadership are taking a climate assessment of the electorate before returning to the next, and final, House session on December 2nd.  Pelosi, Schiff et al  previously committed themselves to a semi-formal process in the House resolution that began the impeachment inquiry.  However, they no longer discuss that process.

Blackmail Confirmed, Navy Secretary Richard Spencer Removed by Defense Secretary Mark T Esper…


If you’ve followed our CTH review, research and analysis of the issues at hand, you will understand our position was that this situation, if true, had a very clear command expectation from U.S. Defense Secretary Mark Esper.

It has just been announced that Secretary of Defense Mark Esper has requested the resignation of Navy Secretary Richard Spencer (pictured below) for violating the unified chain of command, blackmailing the President of the United States with an ultimatum, and hiding the threat from the Secretary of Defense.

WASHINGTON – Defense Secretary Mark T. Esper asked for the resignation of Navy Secretary Richard V. Spencer on Sunday after losing confidence in him over his handling of the case of a Navy SEAL accused of war crimes in Iraq, the Pentagon said.

Spencer’s resignation came in the wake of the controversial case of Chief Petty Officer Edward Gallagher, a Navy SEAL who was accused of war crimes on a 2017 deployment. He was acquitted of murder but convicted in July of posing with the corpse of a captive.

Esper asked for Spencer’s resignation after learning that he had privatelyproposed to White House officials that if they did not interfere with proceedings against Gallagher, then Spencer would ensure that Gallagher was able to retire as a Navy SEAL, with his Trident insignia.

Spencer’s private proposal to the White House — which he did not share with Esper over the course of several conversations about the matter — contradicted his public position on the Gallagher case, chief Pentagon spokesman Jonathan Hoffman said in a statement.

Esper said in the statement that he was “deeply troubled by this conduct.”

“Unfortunately, as a result I have determined that Secretary Spencer no longer has my confidence to continue in his position,” Esper said. “I wish Richard well.”

Spencer’s spokeswoman did not immediately respond to a request for comment.

Esper and Army Gen. Mark A. Milley, the chairman of the Joint Chiefs of Staff, learned of Spencer’s private offer to the White House when they spoke with President Trump on Friday, Hoffman said. (read more)

Allow me to reassert, this is exactly the required outcome.

The military, nor any person therein, does not get to “threaten” the President of The United States. The President is the Commander in Chief of all armed forces. It is not President Trump who would be doing “untold damage to decades of military justice doctrine“, but rather the insubordination of flag officers who are duty bound to carry out legal and constitutional instructions from the President.

The DoD inaction surrounding Lt. Col Vindman was a precursor, a visible symptom few were paying attention to; indicating a political cancer within the unified chain of command. The U.S. Secretary of the Navy threatening the U.S. President is an even more alarming symptom.

A military officer does not get to threaten his leadership with a ‘do what I demand or I will quit’ approach.  Any senior level military officer who would express such a sentiment would be regarded as unstable, compromised and unfit to hold a leadership rank.

Yes, it really is that simple.

Jennifer Griffin

@JenGriffinFNC

US official tells me when Sec Navy went to WH to ask POTUS to let Navy review board go forward he promised the board would in the end allow Gallagher to keep his Trident and rank. In other words he promised to fix the results of the board which is usually a board of peers.

Jennifer Griffin

@JenGriffinFNC

I am told Navy Secretary Spencer blindsided Defense Secretary Esper and Gen Mark Milley who had gone to the WH to defend Navy decision and ask that Trident review board be allowed to proceed. WH then told them about back deal Spencer tried to cut…

440 people are talking about this

Jennifer Griffin

@JenGriffinFNC

which did not gibe with what Spencer had told the Defense Secretary and Chairman of the Joint Chiefs. It also was counter to Spencer’s public statements. In other words Spencer was not honest with them or the public so Esper asked for his resignation.

Jennifer Griffin

@JenGriffinFNC

In the end Navy Secretary Richard Spencer was not fired for standing up for military justice but for dishonesty and undermining the military justice system, according to a senior US official. He was fired for “lack of candor.”

1,652 people are talking about this

Jennifer Griffin

@JenGriffinFNC

Official: Esper then decided that given all of the messy issues surrounding Chief Eddie Gallagher’s case that it would be impossible for him to get a fair hearing from military so he has decided to allow him to keep his Trident and retire at current rank from Navy.

Jennifer Griffin

@JenGriffinFNC

I am told by Navy source that they “can’t see a world where they go forward” with the other 3 SEALs peer review board hearing. “We need to move on.”

497 people are talking about this

Navy Secretary Richard V Spencer compromised his position within the unified command structure.  There is no room for insubordination at this level, and gross manipulation of command authority for an independent agenda that is against the expressed will of the President of the United States; the Commander in Chief of all Armed Services.

The worst, absolute worst thing, a military officer can do is to compromise the position of his leadership.   Once that compromise is identified it must be removed, with extreme prejudice.

In this type of leadership compromise the chain-of-command does not request permission from the President who -in this example- is the Commander targeted by the compromise.  The immediate commanding officer (Def Sec Esper) has a duty to remove the compromise without conversation (regarding corrective action) with his superior officer, in this case President Trump, until such time as the compromise has been relieved, and subordination issue corrected.  Then the corrective action is discussed with the President.

Defense Secretary Esper made exactly the right decision.

Esper has suggested to Trump that Kenneth Braithwaite, a retired Navy rear admiral who is currently the U.S. ambassador to Norway, be considered as the next Navy secretary.

One issue still remains, what about the compromise remaining from the conduct of Lt. Col Alexander Vindman?

Defense Secretary Mark Esper (right), with President Donald Trump.

Sunday Talks: Steve Bannon -vs- Maria Bartiromo on Political Pros/Cons of Impeachment…


Steve Bannon appears on Fox News with Maria Bartiromo to discuss the pros and cons of a partisan impeachment.  Bannon was one of the early political observers who identified the likely entry of Mayor Michael Bloomberg into the 2020 race.

Bannon notes that Bloomberg has enough money to outlast the field; however, I doubt Bloomberg can fill a venue. If there’s no connection to the base party voter, candidate Bloomberg just can’t win the primary.

Liars Club – Fusion GPS Glenn Simpson Claims He was Tricked by Russian Operative Natalia Veselnitskaya…


It would appear U.S. Attorney John Durham digging into the origin of the ‘vast Russian collusion-conspiracy’ has the founders of Fusion-GPS getting twitchy.  The “Mamet Principle”of pretending not to know things was on full display today during a Meet the Press interview with Fusion founders Glenn Simpson and Peter Fritsch.

For obvious reasons fellow traveler Chuck Todd avoided the most damning lines of questioning including why they hired Nellie Ohr, why Simpson lied to the House intelligence committee, and why Glenn Simpson invoked the fifth amendment in refusing to testify to the House Judiciary Committee.

It was demonstrably evident that Glenn Simpson was working with Russian operative/lobbyist Natalia Velelnitskaya in a 2016 effort against the Trump campaign. However, during the interview today Glenn Simpson takes the defensive position that he was likely tricked by the Russian.  WATCH:

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While Fusion-GPS founder Glenn Simpson was domestically working with Russian lobbyist Natalia Veselnitskya. A little reported Russian Deputy Attorney General named Saak Albertovich Karapetyan was working double-agents for the CIA and Kremlin.

Karapetyan was directing the foreign operations of Natalia Veselnitskaya, and Glenn Simpson was assisting her inside the U.S.  Glenn Simpson managed Veselnitskaya through the 2016 Trump Tower meeting with Donald Trump Jr. However, once the CIA/Fusion-GPS operation using Veselnitskaya started to unravel with public reporting… back in Russia Deputy AG Karapetyan died in a mysterious helicopter crash.

Additionally back in 2018 Simpson claimed in testimony to the House Permanent Select Committee on Intelligence that he did not have contact with any FBI or DOJ officials regarding the infamous Steele dossier until after the 2016 election. But Bruce Ohr’s emails show that he and Simpson were in contact as early as August 2016.

On Page four of the HPSCI memo (pdf here) under point #3 we see the relationship between Fusion-GPS and the FBI as outlined in contacts between Bruce Ohr (DOJ), Nellie Ohr (Fusion GPS), Chris Steele (Dossier Author) and the FBI:

3) Before and after Steele was terminated as a source, he maintained contact with DOJ via then-Associate Deputy Attorney General Bruce Ohr, a senior DOl official who worked closely with Deputy Attorneys General Yates and later Rosenstein.

Shortly after the election, the FBI began interviewing Ohr, documenting his  communications with Steele. For example, in September 2016, Steele admitted to Ohr his feelings against then-candidate Trump when Steele said he “was desperate that Donald Trump not get elected and was passionate about him not being president.” This clear evidence of Steele’s bias was recorded by Ohr at the time and subsequently in official FBI files-but not reflected in any of the Page FISA applications.

a) During this same time period, Ohr’s wife was employed by Fusion GPS to assist in the cultivation of opposition research on Trump. Ohr later provided the FBI with all of his wife’s opposition research, paid for by the DNC and Clinton campaign via Fusion GPS. The Ohrs’ relationship with Steele and Fusion GPS was inexplicably concealed from the FISC. (link to pdf)

  • Glenn Simpson is in contact with Bruce Ohr on August 22nd, 2016
  • Christopher Steele is meeting with Bruce Ohr in September 2016.
  • The FISA Application was October 21st, 2016.
  • Nellie Ohr passed on research to her husband Bruce, who passed on to the FBI.

Now take a look at the testimony of Fusion GPS head Glenn Simpson about contact between Fusion GPS and the FBI.

(LINK to pdf Testimony)

Question:

You’ve never heard from anyone in the U.S. government in relation to these matters, either the FBI or the Department of Justice?

Simpson Answer (under oath):

After the election. I mean during the election, no.

That’s a direct lie to congress.  Hence Mr. Simpson took the fifth amendment position against self incrimination and refused further testimony to the House Judiciary Committee.

House Calendar Doesn’t Align with Speaker Pelosi Talking Points, and House Resolution on Impeachment…


Within the only impeachment resolution put forth by Speaker Nancy Pelosi to open an “impeachment inquiry” the resolution outlined a process.  With only eight legislative days left in 2019; and considering the resolution as adopted; the calendar doesn’t match the democrat talking points.  Here is a walk through of the timeline:

Congress returns from the Thanksgiving break on December 2nd and recesses again on December 12th.  That leaves eight days in December to accomplish all the House tasks.

Democrats have said they anticipate an impeachment vote in mid-December, but a review of the House impeachment resolution calls for a transfer from HPSCI “inquiry” (Schiff) to HJC “investigation” (Nadler) as an outcome of a report from Adam Schiff’s intelligence committee.

Even if we assume the HPSCI report is being written during the Thanksgiving break by HPSCI/Lawfare staff there would still need to be a period where the report is reviewed by the congress members on the committee.  Normally there would be a minority section to the report; and under all committee processes there would be a vote to advance the report.

Again, there’s only eight days in December and presumably HPSCI committee members would need to review the report prior to advancing it to the House Judiciary Committee (HJC).  Once the report lands in the HJC, again – according to the prior resolution, that’s when President Trump would be able to call rebuttal witnesses and have White House counsel challenge and cross-examine HJC witnesses.

As noted above, in previous comments by Democrat leadership they have said they are targeting an impeachment vote for mid-December.

There is absolutely no-way the HPSCI can generate a report, have members authorize the report, transfer the report to HJC, schedule witnesses in coordination with the White House, organize opposing counsel, complete a HJC inquiry, assemble articles of impeachment and hold a House vote on those articles in eight days, mid-December.

Even with the partisan railroading on overdrive that schedule is an impossibility. Remember, they still have to pass a budget because they punted a continuing resolution into December.

The best the House could hope for would be a HPSCI report completed and a House vote to send the report to HJC in December; changing the process from an official “inquiry” into an official “investigation”.  If accurate (more sensible) that puts the HJC impeachment process into January 2020.

Given the need for Chairman Nadler and the HJC to coordinate schedules with White House lawyers and rules, etc. etc.   HJC hearings would be mid to late January under the best of circumstances; and article assembly with a House Impeachment Vote in late January to early February 2020.

[Keep in mind throughout this Dec/Jan process the Democrats will be getting pummeled by President Trump and the GOP in media and that will show in polling.]

So now we’re into February, and here comes the Senate…. and things will get even slower.

Senators Bernie Sanders, Elizabeth Warren, Kamala Harris, Cory Booker and Amy Klobuchar would now be removed from the campaign trail until further notice (likely six to eight weeks).  That leaves the “three B’s” (Biden, Buttigieg and Bloomberg) with complete free reign on the campaign trail, while the Democrat Senators are stuck in DC.

[Über-cynically, perhaps that scenario is by design.  Perhaps the DNC Club wants to eliminate the far-left wing-nuts through a process of cooperation with Pelosi on the schedule.   Biden, Buttigieg and Bloomberg are definitely the DNC donor class favs.]

However, a Feb/March/April impeachment effort is just plain silly from an electoral perspective.  The presidential election is only six months away.  The effort would look like abject stupidity, it just doesn’t make sense.

Walk it through on paper, the legal impeachment process just doesn’t match with the House Speaker’s talking points.   Yet, if they don’t complete the impeachment process in the House it’s arguably worse.  By the end of the year they will have spent four months on this fiasco…. How can they not have a vote?…. and yet what would they be voting on?

…..This schedule just doesn’t add up.

And then consider the legal challenges on a parallel track:

Nancy Pelosi and House Judiciary Committee Chairman Jerry Nadler need a full House authorization vote to gain the authority for the HJC to penetrate the constitutional firewall that protects the separation of power in the “official” impeachment investigation.

Any loss in three currently pending cases will undermine the validity of the prior impeachment inquiry…. that’s obviously an issue.   There are three cases, each of them appears heading to the Supreme Court; one is already there.

♦The first case is the House Oversight Committee effort to gain President Trumps’ tax returns as part of their impeachment ‘inquiry’ and oversight.  That case is currently on-hold (10-day stay) in the Supreme Court.  Written briefs soon, arguments perhaps in early December? Outcome pending.  There is a very strong probability Pelosi will lose this case because Oversight doesn’t have jurisdiction and the case began back in February.

Chief Justice John G. Roberts, Jr. granted the administration’s request to stay the federal appeals court ruling against Mr. Trump until “further order” — for now — as the high court decides whether or not to hear the president’s challenge.

[…] Douglas Letter, general counsel for the House Committee on Oversight and Reform, had sent a letter to the court, agreeing to a brief 10-day stay while the parties filed their court papers debating the need for an injunction while the case is being considered.  (link)

Probability of loss to Pelosi 90%.

♦The second case is the House Judiciary Committee (HJC) effort to gain the grand jury information from the Mueller investigation.  The decision by DC Judge Beryl Howell was  stayed by a three member DC Appellate court.  Oral arguments were November 12th, the decision is pending. [Depending on outcome, the case could will also go to SCOTUS]

[…] the appeals court in a brief order said it would not immediately release the documents “pending further order of the court.” The court also asked the House and the Justice Department for more briefings and set a Jan. 3 date for another hearing.  (link)

Probability of SCOTUS 100%

♦The third case is the HJC effort to force the testimony of former White House legal counsel Don McGahn.  Issue: subpoena validity.  The HJC has asked for an expedited rulingJudge Ketanji Brown Jackson has announced she will deliver her ruling on Monday November 25th.

The House’s letter to federal Judge Ketanji Brown Jackson in Washington points out that it is considering impeaching Trump for obstruction of justice, for which McGahn would be a key witness since he spoke to special counsel Robert Mueller for the obstruction investigation, and for lying to Mueller, after testimony at Roger Stone’s criminal trial raised questions about Trump’s written answers to investigators about Russian interference in the 2016 election. (link)

Probability Appeal 100% – Probability SCOTUS 90%

Pelosi, Schiff, Nadler and Lawfare are hoping a full House vote to authorize impeachment will help them retroactively in any judicial decision (court, appeals or SCOTUS).  The only case where that seems possible is the last one; and that has a long way to reach SCOTUS.

Remember, the Supreme Court has not yet ruled on any ancillary case that touches upon the validity of the unilaterally declared House impeachment process.  The Supreme Court has not ruled on any case that touches the impeachment “inquiry”.

The issue at stake is whether the legislative branch can penetrate the constitutional firewall which exists within the separation of powers.

If the House loses the Tax case in SCOTUS (likely), and/or either HJC case in appeals or SCOTUS it will mean there was no constitutional foundation for the “impeachment inquiry” upon which they have built their legal arguments.

Without the constitutional recognition of the judicial branch Pelosi and Schiff’s HPSCI status as a constitutional impeachment process would be fatally flawed. The product from all of that effort could be considered invalid; and possibly the Senate could ignore any House impeachment vote that uses invalid evidence gathered in the fatally flawed process.

Pelosi and Schiff are racing the court for their legal foundation; and simultaneously facing the IG FISA report release which will likely challenge the foundation of their narrative.

No Defense for Trump? “Almost Everyone” Believes Trump Did It


148K subscribers

Visit our friends at The Patriot Post: America’s News Digest : http://bit.ly/2MRVeV2 —– Who will defend Donald Trump in his Senate trial if the House passes articles of impeachment, and how? That’s the question posed by former Reagan speechwriter Peggy Noonan in the Wall Street Journal, who says Trump will face “charges almost everyone will believe are true.” Does any Republican think that President Trump would not do what the witnesses say he did? Or are Republicans willing to concede the facts, but simply deny they merit impeachment and removal from office. Perhaps Senate Republicans should hire Bill Whittle. Bill Whittle Now with Scott Ott comes to you five times weekly thanks to the Members at https://BillWhittle.com

 

Navy Secretary and Former Goldman Sachs Executive, Richard Spencer, Denies Threatening President Trump…


The Secretary of Navy, former Wall Street global banking executive Richard V Spencer, holds a press availability to deny threatening the President of The United States.

Secretary Spencer denies a report he threatened to resign if President Donald Trump intervened in the case of Navy SEAL Edward Gallagher, and said he works at the pleasure of the president. He also refuted a report that Rear Adm. Collin Green also threatened to resign.