Just in case anybody didn't read the actual whole series :lol: there's actually quite a few useful nuggets of information not covered in the summary. For instance, Chapter 16 on fuzzy numbers informs us that in "1996, Clinton implemented the Boskin Commission findings, which now have us measuring inflation using three oddities: substitution, weighting, and hedonics. To begin with this list, we no longer simply measure the cost of goods and services from one year to the next, because of something called the "substitution effect." Thanks to the Boskin Commission, it is now assumed that when the price of something rises, people will switch to something cheaper. So any time, say, that the price of salmon goes up too much, it is removed from the basket of goods and substituted with something cheaper, like hot dogs. By this methodology, the BLS says that food costs rose 4.1% from 2007 to 2008. However according to the Farm Bureau, which does not do this and simply tracks the exact same shopping basket of thirty goods from one year to the next, food prices rose 11.3% over the past year, compared to the BLS which says they only rose 4.1%... Next, anything that rises too quickly in price is now subjected to so-called “geometric weighting,” in which goods and services that are rising most rapidly in price get a lower weighting in the CPI basket, under the assumption that people will use less of those things. Using the government’s own statistics from two different sources, we find that health care is about 17% of our total economy, but it is weighted as only 6% of the CPI basket. Because healthcare costs are rising extremely rapidly, the impact of including a much smaller healthcare weighting is a reduction in reported inflation. By simply reinstating the actual level of healthcare spending, our reported CPI would be several percent higher. But the most outlandish adjustment of them all goes by the name “hedonics,” the Greek root of which means “for the pleasure of.” This adjustment is supposed to adjust for quality improvements, especially those that lead to greater enjoyment or utility of the product, but it has been badly overused. Here’s an example. Tim LaFleur is a commodity specialist for televisions at the Bureau of Labor Statistics, where the CPI is calculated. I’m guessing he works in a place that looks like this. In 2004, he noted that a 27-inch television selling for $329.99 was selling for the same price as last year, but was now equipped with a better screen. After taking this subjective improvement into account, he adjusted the price of the TV downwards by $135, concluding that the screen improvement was the same as if the price of the TV had fallen by 29%. The price reflected in the CPI was not the actual retail store cost of $329.99, which is what it would cost you to buy, but $195. Bingo! At the BLS, TeeVees cost less and inflation is heading down. At the store, they’re still selling for $329.99. Hedonics are a one-way trip. If I get a new phone this year and it has some new buttons, the BLS will say the price has dropped. But if it only lasts eight months instead of 30 years, like my old phone, no adjustment will be made for that loss. In short, hedonics rests on the improbable assumption that new features are always beneficial and are synonymous with falling prices. Over the years, the BLS has expanded the use of hedonic adjustments and now applies these adjustments to everything from DVDs, automobiles, washers, dryers, refrigerators, and even to college textbooks. Hedonics are now used to adjust as much as 46% of the total CPI." "Gross Domestic Product, or GDP, is how we tell ourselves that our economy is either doing well or doing poorly. In theory, the GDP is the sum total of all value-added transactions within our country in any given year. Here’s an example, though, of how far from reality GDP has strayed. The reported number for 2003 was a GDP of $11 trillion, implying that $11 trillion of money-based, value-added economic transactions had occurred. However, nothing of the sort happened. First, that 11 trillion included $1.6 trillion of imputations, where it was assumed that economic value had been created but no actual transactions took place. The largest of these imputations was the “value” that the owner of a house receives by not having to pay themselves rent. Get that? If you own your house free and clear, the government adds how much they think you should be paying yourself rent to live there and adds that amount to the GDP. Another is the benefit you receive from the “free checking” provided by your bank, which is imputed to have a value, because if it weren’t free, then you’d have to pay for it. So that value is guesstimated and added to the GDP as well. Together, just these two imputations add up to over a trillion dollars of our reported GDP. Next, the GDP has many elements that are hedonically adjusted. For instance, computers are hedonically adjusted to account for the idea that, because they are faster and more feature-rich than in past years, they must be more additive to our economic output. "
Martenson's solution appears to be to buy gold & silver, but of course he makes no mention of how their values are completely subjective.
I liked his section on alternative fuels (below), but found he lacked some important insights - like how distribution & use of liquid fuels probably wouldn't carry over to a new fuel type anyway, and electricity can be used in place of a liquid fairly easily. Also, he doesn't talk about how relatively easy it would be for us to dramatically increase our wind & fuel energy sources. He also doesn't give much credit to our ability to increase the net return of an energy source. Just FYI, "net energy" is the energy we get divided by the amount of energy we had to use to get that energy. Oil used to have a net energy of 100:1, but is now around 3:1, a sign that we're at Peak Oil. "And what about renewable energy sources? Methanol, which can be made from biomass, sports a net energy of about 3, while biodiesel offers a net energy return of somewhere around 2. Corn-based ethanol, if we’re generous, might produce a net energy return of just slightly over one, but could also be negative according to some sources. If we add in all the other new sources for usable liquid fuels that we just talked about, we see that they are all somewhere “on the face of the cliff.” Unless we very rapidly find ways of boosting the net energy of these options, we’ll simply find far less surplus energy for our basic needs and discretionary wants. Solar and wind are both capable of producing pretty high net returns, but these are producing electricity, not liquid fuels for which we already have an extensive investment in distribution and use. Oh, and by the way, where’s the so-called “hydrogen economy” on here? Right here! Because there are no hydrogen reservoirs anywhere on earth, every single bit of it has to be created from some other source of energy at a loss. In other words, hydrogen is an energy sink. In creating hydrogen, we lose energy, and that’s not pessimism, that’s the law. The second law of thermodynamics, to be exact. Because hydrogen is a carrier of energy, not a source, it is more accurately described like this: A battery. Now, to make an absurd argument because nobody would be this foolish, suppose Congress made the decision to, saaaaay, try and run our society on corn-based ethanol? What could we expect there? Well, if we adjust our graph to reflect that decision, we see a whole lot of red and very little green. The tax is very high, while our take-home pay is very low. By way of commentary, I find it somewhat telling that out of all the possible alternative energy sources, this is the one that Congress chose to advance. I mean, short of directly launching barrels of oil into outer space, it’s hard to imagine a more foolish idea. An important point here is that even if the government completely subsidized ethanol to the point that it only cost you a penny a gallon to buy, we would soon find ourselves ruined. And the reasons why have already been covered. With less surplus energy, less societal complexity is possible. Under an ethanol regime, we’d find many cherished job positions would vanish. Regulatory compliance specialists for food additives would have to revert to farmers. Pediatric Radiological Oncologists would become healers. Midwest Regional Communications Coordinators for the Special Olympics would, uh, have to find something else to do. And so on. If we tried to live on ethanol as a liquid fuel, we’d quickly lose nearly all of the specialized jobs that we associate with modern society, because there would be practically no surplus energy to use."
