Most people only read the headlines. Most of the mainstream media only report the official statistics reported by governments and government organisations. Thus most people only get a superficial view of the state of the economy, and one dependent on the truthfulness of the official statistics.

If you want to know the true state of the economy, because for example, you are an investor, then you should look more deeply than the headlines, and IMO you would be wise to question the official statistics.

The main statistics are:
1. The 'inflation' rate. This is usually reported as either the CPI or RPI.
2. The unemployment rate.
3. The GDP. How many goods and services the country created.
4. The stock market prices.

Let's put in some numbers and see what the economy looks like.
At the moment for the US:
1. Annual CPI Growth = 0%, having peaked at 5.5%, and averaged about 3% for the past 20 years.
2. Unemployment = 8%
3. Annual GDP Growth = -1%, having averaged about 2% for the past 20 years.
4. The S&P500 = 843, having peaked at 1550 in late 2007.

What do we gather from this data?
Consumer prices have stopped rising, and the trend suggests consumer prices are going to start falling.
Unemployment is well below Great Depression levels.
Annual GDP growth has been reasonably steady and positive for decades.
The S&P500 has dropped about 50% from the 2007 peak.

Is this a true representation of the US economy for the past 20 years?
This is how I think the statistics have been fiddled to show a false overall image.

First the CPI numbers are fiddled lower by the increasing use of various statistical methods, including substitution and hedonics. This means that consumer prices are rising more quickly than people will think from the official statistics. Even a small difference over many years can build to a large difference.

Secondly the unemployment statistics are fiddled to show a lower unemployment rate. There are many varied methods that have been used.

Thirdly, and this is where the lie starts to become clever, the GDP number is derived from total monetary activity minus the rate of price rises.
A simple explanation:
If an island grows 100 apples per year, the GDP is 100. But it is difficult to measure economic activity in apples, so it is measured in US$. If the apples sold for $2 each, then GDP was 100x$2 = $200/year.
If in the next year the island grow 150 apples, but the price goes up to $3 each, real economic activity is really 150 apples/year, so the monetary activity of 150x$3=$450 is adjusted by the change in prices. So $450 becomes $450 x 2/3 = $300. This is 50% greater than last year, which properly reflects the 50% greater production of apples.

But, if the official CPI is lower than the real CPI, that means the official GDP will be higher than the real one, because the monetary activity will have been adjusted down by a smaller CPI number.

So the summary of the effects of simply fiddling the CPI lower are:
1. People are led to believe prices are rising more slowly than they really are.
2. This reduces the desire and ability to demand higher wages.
3. It reduces the amount the state has to pay in CPI adjusted benefits.
4. It increases the apparent GDP, making the economy look more positive.
5. Anyone investing the stock market, if they are sensible will look at CPI adjusted numbers, and so the performance of the stock market will appear to be better than it is in reality relative to general prices.

Fiddling the CPI lower offers the government so many advantages. Anyone suggesting they have not taken advantage of that opportunity has the onus of proof on them.

Now we can look at the US economy with more realistic numbers and see how it compares with the official painted image.

The good folks at ShadowStats.com have been calculating the CPI using the original methodology used before the fiddles. This involves calculating the cost of a basket of consumer goods & services. That is all. No fiddles. The calculation is not dependent on anything else.
This is what their numbers produce:

1. The CPI = 7%/year, having averaged about 7% over the past 20 years.
2. Unemployment = 19%
3. GDP = -4%, having averaged about -1% for the last 20 years.

This paints a very different picture.

IMO it is vital to fully appreciate the difference between these two views. The implications for all investors is huge. I think any predictions can only be plausible if they are based on the true statistics.

This is why I have a page listed in the main menu dedicated to charts which show the official and true statistics:

US Economic Charts
http://www.neuralnetwriter.cylo42.com/node/9

And why I have a menu item pointing to this page, which has many charts which use the real CPI numbers:

CPI and Real CPI Adjusted Charts
http://neuralnetwriter.cylo42.com/node/200

This is my most popular page, and is IMO essential reading.