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Ripple Effect

Lies, Damn Lies, and Government Statistics

Loading ...Addison Wiggin

July 30, 2025 • 48 second read

CPIgovernment statisticsstatistics
Lies, Damn Lies, and Government Statistics

Every day, millions of investors make decisions in part on economic data.

This morning, markets are digesting the news that GDP rose at a 3% annualized rate in the second quarter of 2025 – a sharp reversal from the negative read in the first quarter.

However, government statistics tend to get revised. Worse, today, an increasing amount of data that goes into those statistics isn’t even accurate – it’s an admitted guess:

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Government statistics are increasingly based on guesswork, not facts.

In this instance, CPI, which drives inflation, is usually based on the costs of about 90,000 goods across the economy. But with one-third of the data now based on an estimate — or worse, a guesstimate — it makes CPI data suspect.

This makes other measures, like PPI, suspect, making it impossible for the Fed to accurately determine inflation or its trend.

~ Addison

P.S.  As always, your reader feedback is welcome: feedback@greyswanfraternity.com (We read all emails. Thanks in advance for your contribution.)

Disorderly Conduct

July 31, 2025 • Addison Wiggin

The Personal Consumption Expenditures (PCE) Index is the Fed’s favorite inflation gauge. Economists expect it to rise from 2.3% to 2.5% as tariff pressures bleed through. Core PCE, which strips out food and energy, is widely expected to hold at 2.7%.

Earnings season update: We’ll also hear from Apple, Amazon, Mastercard, Coinbase, Ferrari, and S&P Global, among many others. It’s a crucial read on whether this earnings rally has legs—or if it’s a sugar high.

Retail investors are likely to respond when the indexes move in a clear direction up or down. We suspect it’s going to take an exogenous event to make record retail investor sentiment come down off market euphoria.

In other words, the market remains a bubble in search of a pin… ‘cept earnings seem to be keeping a few key stocks aloft.

Disorderly Conduct
“Free Money” – And Other New Age Delusions

July 30, 2025 • Addison Wiggin

The Bureau of Labor Statistics changed the way it calculated productivity. It began to look at what it called a “hedonic” price index that took into account not just the price of computer equipment, but its computational power.

On the surface, this makes some sense. If a dollar buys twice as much computational power one year as the next, it is as if the price of computing power had fallen in half. The third quarter of 1995 was the first time this change took effect. It miraculously transformed $2.4 billion in computer spending into $14 billion of output, instantly boosting GDP by 20%, lowering inflation, and increasing productivity (output per hour).

The number for the fourth quarter, to repeat, was spectacular. Incredible. It was revised later to an even more incredible 6.9%. The only trouble was that it was not real.

It was, like the New Era that supposedly made it possible, a fraud. More computational power is not the same as economic growth. And being able to turn out more computational power for each hour of labor input is not the same as an increase in labor productivity.

“Free Money” – And Other New Age Delusions
A Tsunami Warning

July 30, 2025 • Addison Wiggin

Margin debt just hit a record $1.01 trillion, jumping $87 billion in June alone—the largest monthly increase in history. That surpasses the peaks seen before both the dotcom bust and the 2008 crisis. Relative to M2 money supply, it’s the highest since 2018. Risk appetite is off the charts.

Meanwhile, in the real economy: housing defaults just hit their highest level since 2011, and credit card defaults at small lenders are at record levels.

These pressures explain Trump’s desperate push for rate cuts… but if Powell resists, the fallout could be swift and severe.

A Tsunami Warning
The Crack-Up Boom – Part II

July 29, 2025 • Addison Wiggin

Never in the history of man had any people been able to get rich by spending money  .  .  .  nor had investment markets ever made the average buy-and-hold investor rich  .  .  .  nor had paper money, unbacked by gold, ever retained its value for very long.

In the late 1990s, however, all these things seemed not only possible, but inevitable. Everything seemed to be going in Americans’ favor. Then, suddenly, at the beginning of this new century, everything seemed to be going against them.

How could US consumer capitalism, which had been phenomenally successful for so long, fail them now? It can’t, they will say to themselves. Why should they have to accept a decline in their standards of living, when everybody knew that they were getting richer and richer? It cannot be.

Besides, said Americans to themselves in early 2003, if there were problems, they must be the fault of others: terrorists, greedy CEOs, or policy errors at the Fed.

The Crack-Up Boom – Part II