Archive for April, 2014

symbols

If you want to tell a lie to the masses, use statistics.

If it can be quantified, then the qualitative may not matter.

Change the numbers – change reality, change the world

Please see my earlier post on this subject for more thoughful context

These two articles highlight further recent developments which have changed our understanding of economic reality. Some of the changes are quite stark – the size of the UK and Nigerian economy is much higher than previous understood – the reason: the measurement has changed.

Everything we thought we knew about the economy is wrong

Nigeria re-bases GDP to become Africa’s largest economy

Much of what we thought we knew about not just the past few years but probably even the past few decades will be swept away. Thousands of books and research papers will become obsolete, as will hundreds of thousands of news stories. Correlations and connections we thought existed will vanish, and it will be fascinating to see what exactly happened to the recession, subsequent recovery and the much-debated productivity shortfall.

 

Dominic Frisby gives his insight into the effects of inflation and how those charged with controlling and measuring it, are failing on a number of counts – either intentionally or otherwise.

The most important part of this article is the fact that conventional measures such as CPI/RPI do not measure all the causes of inflation – the most important factor being the supply of money itself.

Research by Positive Money shows that only about 10 per cent of newly-created money has gone into the kind of consumer goods tracked by CPI. So all CPI does is measure the effects of about 10 per cent of money creation.

Positive Money’s research shows that 13 per cent of newly-created money has gone into real businesses that create jobs and boost economic growth; 37 per cent into financial markets and 40 per cent into residential and commercial property.

If you want to understand business/economic cycles – look at the what’s happening to the money in circulation, this will give the clearest view.

 

money-pyramid

 

Defining what money consists of in any economy enables the attemp to monitor and control its supply. Money takes varying forms such as physical and electronic (bank deposit, central bank reserves, etc) and so the question on how much money is in circulation will depend on what the user wishes to define as money.

This link gives an overview of the varying definitions of M0 – M4, and anything inbetween. It also shows how a number of countries measure this slightly differently and how their supply has changed over time – all of them seem to be steep ascending mountains (keep in mind Money = Debt)

http://en.wikipedia.org/wiki/M0_(economics)#M0

Useful knowledge to understand some more of the technical aspects of this field. Further research is recommended.