Morpheaus, the mysterious leader of the human resistance in the iconic movie “The Matrix,” holds out his hands to Neo, the young seeker of truth, offering him two pills. The red one holds the truth of the world, and the blue an escape back to the carefully constructed world of the Matrix. We learn fairly quickly that the “real” world is a nightmare compared to the dream of the Matrix. You don’t need to see this movie to grasp the meaning of choosing one pill over the other.
Do we want to see the world as it is, or as we would like to be? Every day, each of us must answer this question for ourselves, as recent events reveal.
In September, the unemployment rate declined to 7.8 percent from 8.1 percent in August. As soon as the news hit the wires, accusations that the Obama administration was cooking the books started flying.
Let’s clear this up once and for all: manipulating economic data leading up to a re-election vote is one of the privileges of the Office of the President. That economic data are crafted to serve a particular world view is not, or at least shouldn’t be, a surprise to anyone. What may, however, is that the data distortion doesn’t start with the president.
The data points are collected by people with their own biases from surveys of other people with their individual realities. These numbers are then adjusted for “seasonal factors” and a birth/death model that no one really understands. And anyone who has stopped collecting, has a part-time job, or just doesn’t answer the survey isn’t counted.
What you end up with is normalized data that, for the most part, is meaningless. That anyone treats the unemployment numbers with any seriousness is a mystery. That others would be outraged that the data are manipulated tells us just how far down the rabbit hole we have gone.
Why do we choose the blue pill over the red?
That humans prefer certainty over uncertainty is obvious. Yet, it is the uncertainty underlying our reality that allows for our existence. All we need do is look at how financial markets work to understand that uncertainty, or chaos, is the foundation of our monetary systems. If the rate of return on assets was knowable, then no one would ever pay more than “par” value. Simply put, there wouldn’t be a market.
The Federal Reserve has given us a taste of what this world might look like. By guaranteeing low interest for years to come and purchasing never-ending amounts of government debt, the Fed has placed a floor under both debt securities and equities alike. Normal economic and financial indicators that would affect the price of these assets have been rendered irrelevant.