When politics, personal philosophy, and economics mix, you can end up with some pretty wild theories. We witnessed that yesterday with Jack Welch’s claim that the Obama campaign manipulated the unemployment rate to draw attention away form a poor debate performance.
That’s just one of many theories that people adhere to with near religious zeal, regardless of the facts.
These are the claim, theories, and flat out falsehoods that just won’t die.
Origin: Jack Welch recently resurrected the theory that government is gaming unemployment statistics for political advantage.
Rebuttal: The BLS numbers are put together by career civil servants with no political input. The BLS' assumptions and surveys don't change based on who's in office, let alone after a poor debate performance by the incumbent.
The BLS deliberately and carefully set up to prevent any manipulation by the White House, and there's no evidence that this particular survey is in any way unusual.
As for the adjustments Welch finds so objectionable, here's what seasonal adjustment actually is, according to the BLS:
Over the course of a year, the size of the Nation's labour force, the levels of employment and unemployment, and other measures of labour market activity undergo sharp fluctuations due to such seasonal events as changes in weather, reduced or expanded production, harvests, major holidays, and the opening and closing of schools. Because these seasonal events follow a more or less regular pattern each year, their influence on statistical trends can be eliminated by adjusting the statistics from month to month. These adjustments make it easier to observe the cyclical and other nonseasonal movements in
the series. (see the BLS for their methodology)
It's a statistical technique, and it's reasonable to quibble with the accuracy of the BLS' seasonal adjustment formula. For example, Matt Yglesias raises the idea that movement to the Sun Belt means winter disemployment is less than it used to be. However, criticism of the practice for pushing numbers one way or another is partisan and inaccurate.
Origin: This one's been kicking around almost since the creation of the Federal Reserve in 1913. It's the subject of a three hour documentary called 'The Money Masters'.
Rebuttal: Nationally chartered banks do hold stock in their regional Federal Reserve Banks, and receive a small portion (6 per cent of their stock) of the profits of their regional banks, which is presumably the origin of this theory.
- That stock confers no control over the Regional bank's activities.
- Last year $1.6 billion in profit went to member banks. The remaining $46 billion was remanded to the Treasury department.
Further, monetary policy is conducted by two entirely different branches of the Federal Reserve System. The Board Of Governors oversees the Regional banks and monetary policy, and is made up of 7 members nominated by the President and confirmed by the Senate. They conduct monetary policy in the interest of the public by their Congressional mandate.
The closest influence the private shareholders have on the conduct of monetary policy is through their nomination of 6 of the 9 members of regional bank boards. Those boards nominate bank presidents, who must be confirmed by the Board of Governors. 5 regional presidents serve on the Federal Reserve Open Market Committee, which oversees the principal tool of monetary policy, in service of the Federal Reserve's Congressional mandate, not regional shareholders.
Origin: Due to its use as a hedge against inflation, and the ongoing insistence that we return to a gold standard, there will always be a loud contingent of gold proponents. More recently, Ted Butler has led claims that the silver market is being manipulated by a small cabal of traders, and an organisation called the Gold Anti-Trust Action Committee claims that central and private banks works to suppress press gold prices.
Rebuttal: These groups have managed to badger the Commodity Futures Trading Commission into investigations concluded in 2004, 2008, and earlier this year. They have not found compelling evidence of manipulation in the silver market. For both silver and gold, the fact that a small group of traders holds large short positions against a particular commodity, or that the price doesn't move a particular way is not evidence of conspiracy.
The strangest part of the argument is that governments have some sort of interest in suppressing the price of gold. That's often tied to incorrect beliefs in the invalidity of fiat currency, and a wish to return to the thoroughly debunked gold standard.
Origin: This theory arose because despite the fact that GLD is physically backed, normal investors cannot redeem their shares for bullion.
Rebuttal: The entire point of the ETF is to make gold easier to invest in. Making every share redeemable would run contrary to that goal. It's cheaper and safer way to gain exposure to gold prices without holding bullion. The ETF is regulated by the SEC, and some of the largest hedge funds in the world invest in it. They probably do a decent job with their due diligence.
Origin: Former Malaysian prime minister Mahathir Muhammad accused Soros' Quantum hedge fund of engaging in speculative investment against the Ringit in retaliation for the country's support of Myanmar's oppressive government.
Rebuttal: The accusation rested on an unsubstantiated link between Soros' hedge fund and his Open Society initiative. While Soros' hedge fund did bet against currencies like the Thai baht, they did not speculate against the ringit. This was part of the Prime Minister's popular crusade in the aftermath of the crisis. Accused of policy failure, he blamed speculators and Soros for his country's problems, and even attempted to ban currency trading.
Origin: This rumour was started by the inimitable Rush Limbaugh. He claimed, in the fall of 2008, that New York Senator Chuck Schumer started a run on IndyMac to create a financial crisis, allowing Barack Obama to be elected and him and his Democratic cronies to enact a plan to nationalize America's industries.
Rebuttal: Chuck Schumer did write a letter expressing his concerns about Indy Mac which helped precipitate a liquidity crisis. However, the assertions that his action was a cause of the financial crisis and that it was part of an intentional plot are ludicrous. It took years of policy and regulatory failure by both parties and a credit bubble many years in the making to cause the crisis. Schumer neither instigated or could have averted it.
Origin: There have been only three visits to Fort Knox's gold depository since its creation in 1935. The length between the visits sparked a conspiracy theory that the gold was not there. Ron Paul recently attempted to pass a bill to have the vaults audited. Some people think that the bars have been drilled out and replaced with tungsten.
Also popular among the aforementioned people who think there's a conspiracy to suppress gold prices.
Rebuttal: In the first visit to the depository since a Congressional delegation went in 1976, Treasury Inspector General Eric Thorson had the lock to the vault opened in front of him and went inside. He emerged fully convinced of the gold's presence, and the absolute security of the vault. He testified in front of Congress to that effect. If you're still not convinced, the Treasury will announce the results of an audit of the gold held at the New York Fed, in which they drilled into the bars to test purity.
Origin: The Rothschilds are a powerful banking family, who were particularly influential in the 19th century, with the English branch almost single handedly funding Britain's war against Napoleon. Some believe that the family continues to influence global affairs and the banking system.
Rebuttal: The primary public activity of the Rothschild family is philanthropy. The size of their enterprises is nothing near what it was in previous centuries, and there is no evidence that they secretively control governments. There are many branches of the family, not a singular monolith, and no family members even sit on the board of the largest remaining fund. The basis of the conspiracies appear to be ignorance and anti-semitism.
Origin: This was a popular conspiracy theory in the run up to the Iraq war, that the real reason was not to find WMDs, but to secure oil supplies.
Rebuttal: The reasons for going to war with Iraq may have been shaky, but we don't get all that much oil from the country. Our largest oil trading partners are (by far) Canada, Saudi Arabia, and Mexico. Further, Iraqi crude production really started ramping up as US was leaving, and our imports from Iraq have not increased dramatically since the war.
The origin: Treasury yields are low, but there's a record supply of them, there must be some sort of massive manipulation going on. We've seen this recently in a Jeff Nielson post at The Street in which he claims that Ben Bernanke is counterfeiting US dollars to prop up the market.
Rebuttal: Refer to this post for more detail, but there's no conspiracy here:
Treasuries are being issued at record levels because the government is spending money at record levels. And this record amount of government spending goes into the private sector, where all the dollars eventually wind up in banks, and in other accounts where Treasuries are purchases. So you don't need evil Bernanke in the back room printing up dollars. It's the dollars that the government is spending that match the Treasury issuance. Mystery solved.
Origin: This conspiracy originated, or at least was spread by a widely circulated email. It claims that:
...of the 789 dealerships closed by the federal government 788 had donated money, exclusively, to Republican political causes, while contributing nothing to Democratic political causes. The only 'Democratic' dealership on the list was found to have donated $7,700 to Hillary's campaign, and a bit over $2,000 to John Edwards. This same dealership, reportedly, also gave $200.00 to Obama's campaign.
Rebuttal: The list was compiled by Chrysler and based on sales, market share, and location. Further, the proportion of Republican closures on the list is representative of car dealers in general, which tend to be a particularly Republican subset of the population. The email also cites (as evidence) the fact that Obama's car czar was married to a former DNC official and had access to secret campaign donation records. Those records are available to the public.