I’ve often spoken of, in this blog, in the many things we believe that are untrue. For example, many financial metrics in which we blindly believe, reported by the mainstream news, like inflation, GDP and unemployment statistics are patently false and not even close to being reflective of reality. This holds true not just in the financial world but also extends to many other beliefs that have been sold to us as facts in the academic setting, but simply are not facts. The things we believe that are untrue, depending on our critical thinking skills, may range from nearly all of, to the majority of, to the minority of our beliefs. Even societal constructs like institutional academics as the only viable choice for education can be a construct in which we believe that is patently not the best option for us.
For example, how many among you know that gravitational force is just a fabricated theory to explain the attraction between two masses but that is no more observable than the fictional force of Jedis from the fictional movie Star Wars? Most people, since we are erroneously taught that gravitational force is a fact in school classrooms, just blindly accept this statement, even though there is no scientific evidence to back up this claim. The concept of gravitational force is very different from electromagnetic force, which is an observable and measurable force of repulsion or attraction caused by two magnets. To explain the reasons why gravitational force is not a fact would require many pages of additional exposition, so I am not going to explain it here for the sake of brevity, but one can buy books that explain in detail why the concept of gravitational force is not only not a fact, but a theory that has been thoroughly debunked for more than a century. To explain it simply, for many decades, gravity is widely believed to be a curvature in the fabric of the space time continuum.
Regarding financial news, if you search the internet, you can find many stories of global recession on the horizon as early as 2018, but now in 2020, we find the exact same stories that ran a couple of years ago that claimed we were on the brink of global recession. I will explain why the belief that we are not in a global recession as of the start of 2020 is very likely among the things we believe that are untrue. Recession is defined as two consecutive quarters of negative GDP, which financial analysts state has not yet happened in widespread regions of the world. Thus, no global recession. What is far less reported is that equations have been constantly meddled with and changed to avoid GDP calculations that fit the definition of global recession. For example, in 2015, Indian government officials completely changed the way they calculated their GDP, and viola, overnight, India became the fastest growing economy in the world, outpacing growth in the previously fastest growing Chinese economy. Furthermore, there are massive differences between real and nominal GDP, with real GDP subtracting inflation rates to determine if real economic growth has occurred. However, many government officials use whatever numbers make the GDP numbers look the best, regardless of their accuracy or truth. And since real GDP numbers rely on “official” inflation numbers calculated by governments that are highly inaccurate, even real GDP numbers are not “real”!
Russian economist Simon Kuznets developed the concept behind GDP in the 1930s and even won a Nobel Prize in the early 1970s for standardizing this measurement. Simply speaking, the aim of the GDP statistic was to measure the total national currency value of all goods and services produced in that nation, an enormously difficult task in which the difficulty of calculating this statistic should be self-evident. In addition, since the “standardization” in the calculation of the GDP statistic, the calculated of GDP by nations worldwide has morphed into something that is anything but standard. And of course, with no standardization in how this metric is calculated, comparing GDP figures from different nations is an activity with almost no use, as there is no point in comparing apples to bananas to figs.
After the 2008 global financial crisis, government officials meddled with the calculation of GDP most strongly, including prior excluded black market activities, like wild estimates of the revenues created by illicit activities like prostitution and drug trafficking to their annual GDP estimates. It was widely speculated that the inclusion of illicit activities by Italy in their 2014 GDP calculations deferred the need of their politicians to admit that they had entered an economic recessionary period. In fact, the International Monetary Fund (IMF) estimated that inclusion of illicit activity revenues, which many countries started doing after the 2008 global financial crisis, would increase the US GDP by 14% to 16% and increase the GDP in emerging market nations by a whopping 35% to 44%. So the fact that a nation’s GDP, depending upon factors included in the calculation could be transformed overnight from a depression-like -8.8% to a screamingly positive 9.8%, depending on how it is calculated, is massively problematic as being the basis for whether or not global recession exists.
Finally, since many Western nations now include illicit activities in the calculation of their GDP, a positive GDP rate doesn’t even translate into positive economic conditions as it did many decade ago. If activities like drug trade and human trafficking are being included in the GDP data, obviously the impact upon these activities as a whole in the economy are enormously negative, and many not even be spent in the nations in which the revenues from such activities are being included, if the beneficiaries of these illegal activities do not live in the nations in which they commit crimes, which is often the case.
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