Wave Strength Options Weekly editor Adam Lass says Washington is lying through its teeth about the state of the US economy. It’s also cooking the books on unemployment and GDP figures.

This from Adam:

According to the U.S. Labor Department, 6.1% of Americans are now unemployed.

The job-loss figure being bandied about - 84,000 in September - is roughly 12% higher than expected. Indeed, this is the third month in a row when our nation’s best and brightest underestimated the size of monthly job losses.

Economists across the country are pointing to this figure, declaiming that it is most surely an indication of recession. Maybe it is and maybe it ain’t. But what I can tell you is “what we know we don’t know”: That employment number is a total fraud. Has been for the better part of a decade.

Here’s how the con works: The slide rule kids at Labor regularly add and subtract entire cadres of unemployed workers based more on whimsy and the command of their patrons than any sort of true logic. If a group of workers’ chances of becoming employed anytime soon are deemed insufficient, they are deducted from the unemployed rolls.

Yeah, that’s right. If you really, really need the job, because you’ve been out of work for a while now, the bills are backing up and the bank is threatening to take your house, you may very well not be “unemployed” according to the Feds.

To them, you are just a deadbeat. A mental loser. A whiner.

There are a few brave souls who have attempted broader measures of unemployment. They are coming up with numbers double to triple the Labor Department’s 6.1% figure.

Wait, it can’t be a recession, because we “know” that GDP supposedly advanced in at a 3.3% annual rate in the second quarter of 2008.

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Unfortunately, there are a few things here that we know we don’t know here, too. Washington is supposed to adjust GDP with something called a “deflator.” This allows us to understand the GDP figure in supposedly constant dollars.

According to the Feds, inflation only grew at 1.33% in the second quarter. If that were true, it would be the lowest quarterly inflation figure in the past five years.

And since we know that inflation is growing at a record pace right now, then the GDP number is totally cooked. Oh wait. Even that inflation number can’t be trusted anymore… because back in the days of wily Bill Clinton, they invented a brand-new way to calculate growth in prices.

Let’s say you buy a computer. And that computer costs twice as much as last year’s computer. Inflation? Naaah! The bean counters would simply declare that it was four times as valuable, and actually tot it up as a price drop in the big list.

Over the years, they’ve worked the same magic on all sorts of things: cars, planes, Bermuda shorts. If they are somehow better, then their increased prices don’t count as inflation. So even the deflator Washington uses so liberally is itself a total piece of fiction.

In fact, Washington has done such a botch job on bookkeeping, by this point, I don’t know if they know what they don’t know anymore. I certainly know my head is spinning - and I read this junk for a living.

But if we try hard enough, we can sort out a few usable facts:

• Production and consumer costs are climbing at a record rate.
• Roughly one in ten Americans is out of work, and a boatload more are underemployed.
• Banks are foreclosing on homes at a rate like that of the Great Depression.
• Credit card defaults are a record high.
• Bank profits are down 83% year over year.
• More banks have gone under in 2008 than in the past decade. Currently, 117 additional banks are on the Fed’s deathwatch.
• Corporate profits for anyone who ain’t named Wal-Mart (WMT:NYSE) are in the toilet.

Source: The Facts As We Know Them (and a Couple of Really Ugly Conjectures)