>Your confidence in the reliability of official numbers is inspiring,
>Doug. But I persist in believing that the glowing federal data
>regarding US economic health in recent years owe much to the
>principle of Garbage In, Garbage Out. See Gretchen Morgenson's
>column in the NY Times today, "Scandal's Ripple Effect: Earnings
>Under Threat," e.g.:
>
>"'All of these mechanisms that were designed to present a company's
>financial condition in the best possible light are now going to meet
>a very much higher standard of review and disclosure,' said Jonathan
>Cohen, portfolio manager at JHC Capital in Greenwich, Conn., and
>former chief of software and Internet research at Merrill Lynch.
>'Undoing these mechanisms is going to take air out of the dirigible
>that has been inflated over the course of many years.'"
One reason I take the offiical stats seriously is that I talk to the people who put them together pretty often. They aren't stupid, and they read the newspapers too. BEA has already revised down initial numbers through 1999. And revising down numbers on profits, meaning the income side of the national *income* and *product* accounts, has no effect on the product side, which is the featured, more reliable set of numbers, and has always been regarded as such. The deceived - and often self-deceived - were the Wall Street people who believed earnings reports (or if they didn't believe them, believed other people believed them).
What really matters here is whether investors' faith in the numbers is fatally shaken. If it is, the stock market could languish for years.
Doug