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Last Friday was anything but good for news on the economy. The Bureau of Labor Statistics (BLS) released a dismal jobs report that missed expectations by fifty percent. This followed a press conference two weeks ago by Federal Reserve Chairman Janet Yellen during which she indicated rate hikes might not come as soon as expected because “room for further improvement in the labor market continues.”

Yellen’s statement would be fairly unremarkable if it were not for one troublesome fact: the U.S. economy is supposedly at “full employment,” according to the measures the Fed uses to guide their interest rate policies. The Bureau of Labor Statistics has it at 5.5% as of today. That is the rate most economists consider full employment for the U.S. economy and we’ve supposedly been there since February.

How could there be room for improvement in the labor market if we’re at full employment? There can’t be. But everybody knows real unemployment is much higher than the manipulated BLS statistics represent. Janet Yellen knows it. The markets know it. Tens of millions of unemployed Americans know it.

Yet everyone keeps talking about the BLS unemployment rate as if it were true.

The BLS can stop counting your out-of-work brother-in-law as “unemployed” if he gives up looking for work, but that doesn’t make him any more productive or him or anyone else any richer.

The other major index the Fed uses is just as phony. The BLS had core inflation at 1.7% for February. Core inflation excludes food and energy prices, so falling crude oil and gasoline prices are not part of that number. If the core inflation number is accurate, then inflation is actually under the Fed’s target rate of 2% per year. This is dangerous, according to a theory the Fed has pushed for over a decade. Inflation under 2% risks a deflationary depression.

If all of that is true, then why would the Fed even be considering raising interest rates, if it would be dangerous with the CPI at 1.7%?

The answer, of course, is that the CPI is just as phony as the unemployment rate and everyone knows that, too. Yellen knows it’s phony. The markets know it’s phony. And the millions of Americans paying higher prices for everything from school supplies to medical care know it’s phony.

Incidentally, those plunging oil prices might not be a completely good thing. Yes, some part of the price deflation can be attributed to new supplies of oil, from fracking and new domestic discoveries. But are we supposed to believe there has been no drop in demand from those millions of not-technically-unemployed-but-still-not-actually-working Americans?

In reality, oil prices are acting a lot like they did during the 1930s Depression.

So, we’ve arrived at a bizarre place where a central bank supposedly bases its policies on government statistics it and everyone else knows are false. Nevertheless, the Fed goes through the motions of having meetings to pore over them and schedules press conferences to issue tortuously ambiguous statements on how these phony statistics are guiding its policy.

Then, regardless of what the statistics indicate, it just goes on inflating the currency at an unprecedented rate. That’s because the Fed knows if it tightens, it’s going to pop the bubble it’s blown up and the phony recovery is going to come to a very abrupt and ugly halt.

Deep down, everyone else knows that, too. But no one wants to say it out loud. It’s surreal.

In reality, we’re in a depression. If we measured unemployment the way it was measured in the 1930s, it would look very similar to the 1930s. Food Stamps and HUD have replaced soup kitchens and Hoovervilles, but it’s still a depression.

It had the same initial cause as the Great Depression: Federal Reserve inflation, followed by Federal Reserve deflation. It continues for the same reasons, too: Federal Reserve and federal government interventions have prevented the natural economic correction that would have occurred otherwise.

That’s not the official story, but we all know it’s true, just like we know unemployment isn’t really 5.5%.

What if we just admitted it?

What if we acknowledged the Fed has painted itself into a corner, with another crash virtually inevitable? What if we stopped believing the Fed was going to engineer some sort of “soft landing,” even though it has never done so in its entire history? Would it help?

We can’t avoid a correction in the markets. They’re overvalued and should correct. We can’t avoid the effects of the inflation the Fed has created or the massive government debt it has facilitated, either.

But we can at least resolve not to do the same thing after the next correction and expect a different result. Let’s take the reins of the economy out of the Fed’s hands and subject it to a full audit. A little reality can do nothing but help.

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