Statistics are a wonderful part of the Mathematical Sciences but they can be equally sinister and actually are becoming increasingly so with the rise in influence of the marketing sector.This is the same marketing group that decries Global Warming and previously; the evils of tobacco.They are the darlings of big business.Once hired, they become a very biased spokesperson for a partisan point of view.The beauty of their existence is that often those who hire them are at arm’s length.
This doesn’t mean they are always biased negatively because they can and are often employed on the other side of the fence.The problem arises when a news media or other organization is using the information then disseminating it to bolster a partisan position.Further to this, the use of private sector “experts” such as bank economists who will invariably support the positions and the Canadian public is often hoodwinked; unless of course they are willing to question, and most are not or simply accepting information blindly.One has to wonder why the media have never asked the accountant of a charity for their opinion.Is it because the accountant has no knowledge of finance or the economy and therefore inexpert?
The first thing anyone should do when viewing “statistics” is ask why they exist, then if they are promoting a point of view and finally if they are complete.Next we should be asking where they came from, how and for what purpose are they are being used.
Statistics Canada regularly releases these stats items about the fabric of Canadian life.Sometimes they actually have value but more often than not they are either frivolous (Who cares how many mosquitoes live in Winnipeg) or misleading, as is often the case in establishing Cost of Living.While the statistics are not misleading, it is how they are reported that is.
Every Canadian from the poorest to the richest views their personal cost of living as to what it ACTUALLY costs them each month.In other words; Cost of Living is the impact of cost on their disposable income.In spite of this, the media consistently remove the largest contributors to inflation from their reports; interest rates, energy costs being two of the most common.To remove these items is misrepresenting the facts.For instance it was widely reported in the media that the March 2008 Cost of Living increased only 1.0% when in fact it rose 1.8% with interest rates and energy among others factored in.(This figure is questionable due to inclusion and exclusion of certain data.It could be lower at 1.4%)Depending on the media outlet being reviewed one statistic or the other was being touted.
There is barely a Canadian without some sort of debt where they are paying interest on borrowed money, and certainly only a handful of Canadians who do not use energy whether oil, gas, hydro, gasoline or diesel.It is unavoidable.These costs are reflected in their direct consumption as well as indirect through the purchase of consumer goods.
One of the largest problems in reporting the Cost of Living is the Bank of Canada itself.They set the consumables as the basis for the Consumer Price Index used by Stats Can for analysis.Some of these have to be questioned for their relevance and others for their exclusion.
Let’s start with interest rates.The Bank of Canada sets its prime rate which primarily affects the availability of credit.The banks themselves lend that money at a profit margin of 3% to its preferred customers and higher for others.As the prime rate fluctuates, so do the bank lending rates.The higher the lending rate, the more money the bank will make.Seven percent of a thousand dollars is much greater than five percent.So the higher the rates, the more the banks will make.Conversely, higher rates also tighten up credit and reduce borrowing.It becomes a balancing act for the banks to find that elastic limit where borrowing will slow down due to increased rates.Their answer is to offer low rates to its institutional customers while trying to maintain rates that will still entice the consumer.Mortgages are a major part of the Cost of Living for many Canadians.They are equally important to their institutional customers; those same people who bring you goods and services.
Next is energy cost.Many if not most Canadians do not have the luxury of public transit or if they do, it is often so inconvenient as to be moot for commuting to and from work.They drive their vehicles instead.I really don’t think there is anyone outside of the urban centers who has access to public transit.Home heating whether by gas, oil or electricity is pretty much universal so for The Bank of Canada to exclude these items of necessity from the Consumer Price Index is skewing the data.Housing costs are also affected but more so in an active market.Localized effects should not be reflective of national trends.For instance, the west has seen significant increases where other parts of the country have seen slight decreases.The disproportionate increases have skewed the national data.The problem here is a lack of critical thinking by the media in reporting.It is far easier to report what is published than to analyze, then report.
The net result of all this can come down to disposable income.Many employers depend upon the reported data to adjust wages.When the reported data is skewed then instead of keeping pace with the cost of living the consumer in fact falls farther behind.Once the first domino falls then the others will too.Mortgages and loans may not be met, the increased cost of food and energy will call for cut backs. Housing markets slow, as will other segments of the economy.Bankruptcies can increase and an economic slowdown is imminently and dangerously near.
Canadians need to be more diligent in reviewing published data and they need to be particularly diligent when it comes to holding those responsible for that data accountable for their actions.This begins at the very top with the Governor of the Bank of Canada and the Prime Minister and ends with the reporter either too lazy, insufficiently expert, or with a partisan point of view, to analyze the data before publication.
Canadians are getting hurt and the ones most affected by poor statistics are also Canada’s poorest.