The last safe havens

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The buying power of the U.S. dollar according to the BLS.GOV has depreciated by 22.05% since the previous financial crisis starting in December 2007.

 

since the beginning of the the buying power of  the U.S. dollar has depreciated by 22.05%.

 

t the beginning of the last financial crisis in December 2008, $884.30 has depreciated in buying power by 21.95% to $690.20 in 2008 dollars.

Had you Invested this $884.30 in in December 2008 in a long-term bond fund prior to taxes it would have a value of $1,164.96 with a buying power of  $908.41. 

One ounce of gold in December  2008 cost $884.30 today it’s worth $1,743.50 with a buying power of $1,360.80 in 2008 dollars.

$884.30 invested in the S&P in December 2008 today is worth $2,910.89 with a buying of  $2,306.15 in 2008 dollars.

This is assuming you believe prices have only gone up by 21.96% since December 2008. Income and nearly every expenditure have gone up ____________ versus  the BLS.GOV  official inflation rate.

Real rates of return have disappeared along with the U.S’s AAA credit rating, the U.S. now has a lower credit rating than 11 countries and has the same credit rating  as Hong Kong and Finland.

https://fred.stlouisfed.org/graph/?graph_id=575962

In 2008 the U.S. Government discovered that they could fund bailouts, deficit spending and push interest rates to artificial lows to save trillions in debt service cost by instructing the Federal Reserve to create money with keypunch entries. From 2008 through 20 May 2020 the Fed has created 6.062 trillion dollars, 3.003 trillion of it in the last 18 weeks.

In the first 18 weeks of 2020 they’ve created another 3.003 trillion
From 2008 through 2019 the Federal Reserve created 3.058 trillion

During the same 18 weeks the Federal Reserve created this 3.003 trillion Federal debt rocketed higher by 2.780 trillion.

 

 

 

 

 

 

At the beginning of the 2007 financial crisis Total Federal Public Debt per taxpayer was $65,145 by December 2019 $149,024, up +$83,879 or +128.75%.

At the depth of the 2010 recession 130,336,750 people had jobs or 42.14% of the total population.

on the 1st of January 2020 the economy was looking healthy with an employed population of 150,935,417, 46.34% of the total U.S. population.

Enter the Covid-19 crisis 29th of February 2020

By the 9th of May 2020 the number of people who had jobs in the U.S. had dropped to 115,338,000, 35.04% of the population.

Between economic stimulus and job loss total Federal Debt per taxpayer rose by a staggering $70,098 to $219,122.

2020 still has another 2 trillion in deficit spending on deck which will bring total deficit spending for 2020 to more than 5 trillion dollars adding another $43,351 in total Federal Debt per taxpayer bringing it to $262,473.

The justification for voluntarily shutting down the economy that put over 36.66 million Americans out of work, destroyed businesses, lives and cranked up over 2.780 trillion in deficit spending during the last 18 weeks, Covid-19.

Through 20 May 2020 Covid-19 has tragically taken 327,938 lives globally, 94,507 of those in the U.S.

The worst of estimates for global deaths caused by Covid-19 are 1,350,000.

As horrific as Covid-19 is it’s dwarfed by other killers the Global community lives with every day that have had no impact on the global economy.  Each year respiratory infections kill over 3 million globally,  obesity related Illness 2,800,000 lives, hunger related diseases 9,000,000 lives.

To put this into proper perspective the 2.780 trillion in debt the U.S. has cranked up over the last 18 weeks could end world hunger for the next decade, see this link for the numbers.

Below I’m comparing Covid-19 numbers by States with Republican Governors  (red), Democratic in (blue).

Make of it what you will but there’s clearly more to this than just another virus that will kill less people in 2020 globally than diarrhea.

U.S. deficit spending has become absurd,

2009 was the previous one year record deficit, 1.809 trillion.

In just the first 18 weeks of 2020 deficit spending in the U.S. has totaled 2.780 trillion shattering the 2009 record of 1.809 trillion by 971 billion dollars.

Total projected deficit spending for 2020 is 5.163 trillion, 2.85 times the 2009 record. I’d like to point out this without the 3 trillion in additional “stimulus” the House approved in May 2020.

For any Government to spend $65,580 per taxpayer in one year when median personal income is $56,623 is beyond ludicrous.

Per taxpayer from 1996 to 2007 average annual Federal spending was $15,580, average annual deficit spending  $778.

From 2008 to 2019 average annual Federal spending was $26,348 per taxpayer average annual deficit $6,153.

In 2020, $65,580 per taxpayer generating a deficit of $44,556 per taxpayer. How would you qualify this when median personal income is $56,623?

1996 – 2007 Annual Average 
Total Federal Revenue Per Taxpayer $14,803
Total Federal Spending Per Taxpayer -$15,580
Deficit Per Taxpayer -$778
Total Spending As A Percent of Revenue 105.19%
2008 – 2019 Annual Average 
Total Federal Revenue Per Taxpayer $20,195
Total Federal Spending Per Taxpayer -$26,348
Deficit Per Taxpayer -$6,153
Total Spending As A Percent of Revenue 132.45%
Projected for 2020 
Total Federal Revenue Per Taxpayer $21,024
Total Federal Spending Per Taxpayer -$65,580
Deficit Per Taxpayer -$44,556
Total Spending As A Percent of Revenue 311.93%

From 1996 to 2007 average annual Federal spending per household was $17,891, average annual deficit per household $875.

From 2008 to 2019 average annual Federal spending per Household was $29,402, average annual deficit $6,809.

Currently median U.S. pre-tax household income in the U.S. is $63,030.

In 2020 the Federal Government is projected to spend $58,247 per household generating a deficit of $39,574.

1996 – 2007 Annual Average 
Total Federal Revenue Per Citizen $6,752
Total Federal Spending Per Citizen -$7,100
Deficit Per Citizen -$347
Per Household
-$17,891
Deficit Per Household (2.52 People) -$875
Total Spending As A Percent of Revenue 105.19%
2008 – 2019 Annual Average
Total Federal Revenue Per Citizen $8,966
Total Federal Spending Per Citizen -$11,667
Deficit Per Citizen -$2,702
Per Household
-$29,402
Deficit Per Household (2.52 People) -$6,809
Total Spending As A Percent of Revenue 132.45%
Projected for 2020
Total Federal Revenue Per Citizen $7,410
Total Federal Spending Per Citizen -$23,114
Deficit Per Citizen -$15,704
Per Household -$58,247
Deficit Per Household -$39,574
Total Spending As A Percent of Revenue 311.93%

Did you know there are two types of U.S. Federal deficits?

    • Reported budget deficits
    • Actual budget deficits

Reported budget deficits only include Federal expenditures that the House and Senate get to approve, everything else is omitted from the reported “Budget Deficit”

Using reported budget deficits Total Public Federal Debt would be at 20.181 trillion though 2020.

What’s omitted is entitlement programs such as Social Security and Medicare, as of  20 May 2020 unfunded liabilities for Social Security were 20.493 trillion, Medicare 31.686 trillion.

Reported defects 1974 – 2019 = 14.661 trillion
Actual deficits 1974 – 2019 = 22.11 trillion
Entitlement programs 1974 – 2019 =  7.450 trillion
Total Public Federal Debt December 2019 = 22.492 trillion

Total Public Federal Debt  20 May 2020 = 25.312 trillion

With the entitlement programs and projected expenditures through December 2020 Federal debt is expected to reach 28.125 by December. This without the 3 trillion in additional “stimulus” the house  approved in May 2020.

 

 

 

 

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Asset Investment Management

Family Office, Advisors