https://www.goldmoney.com/rese…and-statistical-delusions
I can prove anything with statistics, except the truth
-- Lord Canning, c. 1819
Does Canning’s aphorism still hold true, given that data collection and statistical analysis have progressed beyond all recognition in the last two hundred years? This article tests that proposition.
It is still true, because of the interests for which statistics are deployed. We know, or should know, that CPI indexation of prices fails to reflect the true rate of decline in the purchasing power of fiat currencies. That is at least a simple case of governments saving money on indexation. But being economical with the statistical truth is a far wider practice encompassing input suppression, misleading deployment, and their use to support beliefs and preferred outcomes instead of backing up properly reasoned economic and monetary a priori theory.
This article finds that the application of all these methods corrupt monetary statistics, including the three principal components of the equation of exchange. This analysis is sparked by recent changes to the definition of M1 money supply in the US.
Introduction
Monetarists have long held that there is a relationship between changes in the quantity of circulating currency and the general level of prices. It is not the only factor governing the relation, but it has been generally established to be true. So persuasive is the theoretical case, that no one — not even modern monetary theorists — deny it. We generally assume that the monetary statistics, the sheet anchor to the equation of exchange that emerged over a century ago, are reliable. But even monetary statistics whose components drop out of accounting identities end up being sliced and diced at the behest of the authorities, raising the question as to what we should regard as money at a time of unprecedented peacetime global monetary expansion. And the monetary policy planners moving the goal posts question by their actions the macroeconomic habit of relying solely on statistical evidence for predicting outcomes.
