Wednesday, January 13, 2010

Lies, Damn Lies and Statistics

Government officials lie about all kinds of stuff. Even data. Why data? The most boring sort of things, right? Wrong.

Everybody in one way or another relies on statistics. Are we going broke? Well, that depends of income, debt service, and future incomes, right? That's statistics. Is inflation increasing or decreasing? That's important in setting prices of products, wages, and the foreign exchange markets adjust your currency up or down depending on future inflation, interest rates move. That's statistics.

So, an important European country such as Greece is caught lying, that's serious. Read the report here.

If you think that's outrageous. Let me tell you about Argentina, a country I like for its culture. The current president didn't like the inflation numbers (in double digits) a couple of years ago, she decided to fire the director of statistical bureau and then closed it down. She set up her own bureau, a team of several people, in her presidential office, to supervise the distribution of economic numbers. Not surprising, her numbers show only single digit inflation.

How long can she keep fooling everyone? Well, few I met in Buenos Aires got fooled. Most transactions now are done only in US$. Retailers adjust their product prices on the basis of double digit inflation.

So market didn't fooled. Guess who is the bigger fool?

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