John Williams continues:
“Indeed, the ‘recovery’ is an illusion that has been created as a direct result of methodological changes in government inflation reporting of recent decades. Those methodological changes have resulted in an artificial lowering of official rates of inflation. The faux growth problem is in the use of understated inflation estimates in deflating a number of economic series.
Major economic series that have no underlying pricing base—such as housing starts, payroll employment and consumer confidence—correspondingly do not require inflation adjustment to put them on a consistent theoretical basis with the concept of real (inflation-adjusted) GDP.
Those series confirm a history of business activity in recent years that shows a plunge in the economy from 2006/2007 into late-2008/mid-2009, followed by a period of protracted, low-level stagnation, or bottom-bouncing, instead of a “recovery.”
Following are two graphs reflecting the latest GDP information. The first graph shows the real GDP level, as deflated by the official IPD. Note the recent recovery of activity versus pre-recession levels. The second graph is inflation-corrected.
http://goo.gl/nVvnR
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