Harry Potter and the Bureau of Statistics (L-O-N-G)

Unfortunately, this is not the latest installment of the wildly popular series—this is the first and only installment of how economic wizardry pulls some serious wool over all our eyes.

Before I delve too deep into metaphoric jargon (my second language), I’ll lay out a legend for you: Harry Potter represents the unsuspecting American citizen, and any references to wizardry represent the manipulation of economic data, and any references to art represent the picture we’re supposed to see rather than what’s on the canvas underneath it.

I’ll have you know that this little ditty rolled me out of bed at 6:30 this morning, and of course, I had to write it down and publish it before I lost it entirely. I guess I haven’t completely run out of mental spark yet.

Okay—on to the tale.

Each month, the Bureau of Statistics (where we all ought to keep our socks and underwear, mind you) releases “economic data” to the news wires, who then report it to the Harry Potters of the world, using leading and lagging indicators. These indicators are supposed to paint a certain picture of how our economy’s doing and gauge how we feel about the economic world we live in—this is called “consumer sentiment.”

Every time we hear a report of things like “housing starts,” or “unemployment claims,” or CPI (meant to indicate core inflation—another misnomer in itself), we’re supposed to go out and shop to match our mood. This generates the “retail sales” numbers—another indicator of how we’re feeling about our economic world and the future of it.

Where the wizardry comes in: statistics can say anything you want them to say, as we all learned in math class. The Bureau knows this, and uses it effectively to paint a rosy picture for us to carry in our heads as we shop. When these so-called “indicators” were created, certain things that could prove worthy of true economic representation have been conveniently left out—heaven forbid the rosy picture begins to dim.

Take the purported savings rate in this country for example—the things that AREN’T included in the calculation wizardry are the places we’re most likely to put our short-term money: savings accounts, checking accounts, CDs, and money market accounts. Home equity and retirement accounts aren’t even figured into this spell as it is chanted every month. Poor Harry is slated as a negative saver because he doesn’t buy Treasury bonds and notes!

Re-jigger this spell with some reality, and I assure you Harry is the positive saver his colleagues know he is.

Now, on to unemployment: As Harry and his crowd know it, unemployment is a bad thing—no job means no food on the table and no rent paid. But the Bureau and Wall Street see it as a good thing (called a contrarian indicator) because the lower the company payroll, the lower the overhead and the higher the profit to shareholders. They actually celebrate higher unemployment claims while more of Harry’s friends shuffle off to shelters and food banks. Again, re-jigger this with some reality, and the picture starts to fade.

Housing starts, or the number of building permits pulled to begin construction, is supposed to be a measure of productivity in this landscape—since the only thing we still produce for ourselves is houses, this should go without saying, right? But housing can only go on in certain seasons in certain regions before it becomes too cold or too hot to build, so Harry ought to be shown actual timesheet numbers vs. work completed, or so we think. The grand wizards at the Bureau only want the average, so they go for an occupation that only has “average” employment throughout the year. Again, add reality and the numbers would be very different—especially accounting for all those temps, H-B1 visa workers, and illegal immigrants, which currently don’t enter into the equation.

Core inflation (potholders please, ‘cuz this one is HOT!) , another method of economic wizardry, is the worst of all, because it doesn’t include any reality at all for the consumer. It only measures inflation as it occurs from raw materials to wholesale suppliers and businesses, which is miniscule at best when you consider the retail markup. This “core” doesn’t have anything to do with purchasing the finished product, and doesn’t include what consumers buy most often: food and energy. Why is this? S-U-B-S-I-D-I-E-S. Uncle Sam subsidizes food and energy like there’s no tomorrow, and he would be counting his own efforts and neutralizing those of private industry (which wouldn’t take much, considering that Uncle Sam is the largest domestic contractor we have)--he can't count money he's moved from one pocket to the other.

Each month, the music gets turned up, the dancers dance, the grand wizards release their incantations, and none of it matters a jot except to would-be broom buyers. Meanwhile, the artists dab on some more sunset rose color to the canvas for the passers-by to see and celebrate their genius.

Meanwhile, none of them has stopped to consider that the canvas is actually a paint-by-numbers one, carefully drawn out, and the hue shades planned in advance. The numbers have been carefully manipulated so the artist’s palette doesn’t include colors of the somber truth like olive greens and charcoal grays.

The grand wizards at the Bureau may as well be nothing more than street magicians with their shell games and the smoke-and-mirrors booth. The Fed chairman may as well be David Copperfield, who comes from a place where things (like good faith and credit) are simply pulled out of the air.

Pay no attention to that man behind the curtain, for he holds no control over you or your money. You work, you spend appropriately, and you know what color your picture is—that’s economics without a wand. Take away all the hot air and floating balloons of government and Wall Street, and we'd be left with an economy the size and state of Iraq's--reduced to simple buy and sell in a market stall--for all to see clearly. THAT'S what's under the careful paint-by-numbers map.