How to Lie With Statistics

Okay, the title here is from a very good book, a book that's not quite germane to this post, but almost. Because the book, How to Lie with Statistics is short, entertaining and essential to anyone who wants to read a newspaper or even watch TV without being schmucks.

Maybe I should have called this post the Statistician's Blues, a very good song by Todd Snider. Which I'll embed a YouTube of here:



A way I don't think Darrell Huff's great book actually covers the number one way people lie with statistics: by relying on people not checking their work.

I'm no mathematical whiz, but even I can plug in a $785 billion bailout and distribute it among 200 million (or so) adults to come up with $3925. That's how much, per person, we could get in stimulus checks if the politicians presently trying to nationalize a huge portion of our economy would just try to buy our good opinions.

I think George W. Bush's approval ratings show how well vote buying works. I've gotten two stimulus checks while he's been in office and I'd still like to see him hanged as a war criminal. From the approval ratings I've seen lately, I think it's fair to say that he might prefer my way to some of the alternatives my fellow Americans would offer.

But since we can't drag the President behind a pickup truck on a gravel road even if he deserves it, we're very vulnerable to lies such as the one in the email my Dad forwarded me today. In fairness, he later forwarded a correction.

But the email basically said the AIG bailout ($85 billion) would be equivalent to giving every adult American $297,000 after some exorbitant taxes. Your house (provided you live in a modest McMansion), car, student loans, your kids' college, etc., basically all taken care of. It's such a seductive notion.

Of course, in real life if you give every adult American that kind of money one of the things that happens is lots of them try to go buy an AMG Benz. That $200,000 car is suddenly being 'bought' by a hundred times more people (or more) than there are cars, and all of a sudden the price jumps to a half million bucks just to sort out the rabbit shit from the dog food.

The good part of such hyperinflation is if you own a house with a mortgage, and I gather that even the scary guy on the corner huffing Krylon now fits that description, you just got your house for pennies on the dollar. That hundred-thousand-dollar mortgage just became worth less than a night on the town.

So there was a postscript on the email from someone who tacked on the $700 billion bail out, making the total $785 billion. The email that claimed $85 billion divided by 200 million was $425,000 was wrong by many decimals. At $785 billion, like I say, we're talking less than four grand a head. Real money, true, but not an unrealistic and grotesque sum.

Whatever the number is, it represents the amount of nonexistent fairy dust the power-grabbing politicians figuring this deal out are pretending they have. This bubble bursting resembles, strikingly to me, the margin trading that ended up with the crash of 1929. A lot of greedy assholes figured out they could borrow at zero-risk T-Bill rates and buy mortgage backed securities and pretend they were risk free. This was almost true back when it was hard to get a bank to loan you money for a house. The bank was planning to hold the note back then, so they didn't want to originate a loan that would obviously default. Then, when the Freddie Mac/Ginnnie Mae machine got rolling, it was in the bank's interest to write bad loans and sell them quickly.

A side note: if you could borrow money from your bank at 2% and put it in a savings account at that same bank and earn a guaranteed 3%, how much money would you borrow? All of it, right? Now you understand the Wall Street meltdown that is not being explained because it would be too complex for you, the poor dupe who's going to pay for it ten times over.

Which fueled housing prices which fueled the desire for home ownership, which fueled the pressure to inflate this balloon that much more.

The good news is the bailout being proposed isn't quite as absurdly expensive as that email would make you think. The bad news is it's still expensive and the politicians grabbing for power will only make it more so. The bail out is still more of a matter of a few people taking (golden) parachutes and letting the plane that is the economy go down in flames.