Perception: Personal income, stocks, home prices, precious metals, GDP, Federal revenue per capita and per employed person have all outpaced reported inflation.
1970 – 2020
- Annual Average BLS reported inflation 1970 through 2020 4.03%.
- Average growth in U.S. Personal Income 5.51%
- Average increase in Median home prices 5.25%
- Average increase in the S&P 500 8.63%
- Average increase in Gold 9.81%
- 1970 -2020 average increase in Federal revenue per capita by 4.99%
- Average increase in Federal revenue per employed person by 4.53%
- Average annual growth in GDP per capita by 5.14%
- Average annual growth in the GDP per employed person 4.70%
- 2021 has a higher percentage of the population employed than 42 out of the last 52 years.
From 1970 through 2021 Personal income grew by an annual average of 5.51%% outpacing reported inflation by 1.48%, if personal income was pegged to inflation it would have been $29,714 in 2020 versus $59,642.
Median home prices have appreciated by an annual average of 5.25% outpacing reported inflation by 1.22%. If home prices were pegged to inflation they would have been $192,671 in 2020 versus $336,950,
The S&P 500 appreciated by an average of 8.63% outpacing reported inflation by 4.83%. If the S&P was pegged to inflation it would have been 705.41 in 2020 versus 4,063.04,
Gold has appreciated by an annual average of 9.81% outpacing reported inflation by 5.78%. If gold was pegged to inflation it would have been $315 in 2020 versus $1,867.
GDP per capita & per employed person
From 1970 through 2020 average annual growth in GDP per capita was 5.14% outpacing reported inflation by 1.11%. If pegged to inflation GDP per capita would have been $38,551 in 2020 versus $64,443.
Annual growth in GDP per employed person averaged 4.70% outpacing reported inflation by 0.67%, if pegged to inflation GDP per employed person would have been $108,190 in 2020 versus $151,103.
In March 2021 45.19% of the U.S. population was employed, a higher percentage than 42 out of the last 52 years, 45.19% is 1.60% from the 52 year high of 46.79% set in 2000 and 10.84% from the 52 year low of 34.35% set in 1971. Yet the official unemployment rate in March 2021 was 6.10%, a 6.10 % unemployment rate is higher than 30 out of the last 52 years.
Federal revenue, per capita & per employed person
Over the last 52 years per capita average annul growth in Federal Income was 4.99% outpacing reported inflation by 0.96%, Federal revenue per capita if pegged to inflation would have been $7,159.71 in 2020 versus $10,319.60,
Growth in Federal revenue per employed person averaged 4.53% outpacing reported inflation by 0.50%, if pegged to inflation it would have been $20,093 in 2020 versus $24,196.86,
With growth in personal income, homes, assets all outpacing reported inflation, you’d think the quality of life for a U.S. citizen would be at or near an all time high, that citizens would be able to retire debt, have large post inflation gains on their homes and even greater post inflation gains in their portfolios.
With per capita Federal revenue outpacing reported inflation, a higher percentage of the U.S. population employed and paying taxes now than 42 out of the last 52 years you’d assume the U.S. would be running budget surpluses, paying down debt and working towards restoring their credibility along with their AAA debt rating.
In 2021 the U.S. finds itself in yet another financial crisis that’s justified 10.107 trillion in Federal spending and 5.655 trillion in new Federal debt.
10.107 trillion is equivalent to the total government debt of the United Kingdom, Canada, Australia, Mexico, Russia and India combined.
5.655 in new Federal debt is 742 billion dollars more than the entire fiscal cost of World War 2. (Total Fiscal cost of World War 2 between 1941 and 1946 was 291.18 billion according the BLS this translates into 4.913 today)
Justification, Covid-19, the facts
A person with no preexisting conditions according to WHO and CDC had a 10 times greater chance of dying in 2020 from a road injury or diarrhea than Covid-19.
Using a pandemic to have another print and spend party to further monetize US debt is a new low even for the Federal government.
Debt monetization = dollar devaluation this is what’s pushed assets and personal income higher, it certainly hasn’t been the glowing economic fundamentals or fiscal restraint of the 21st century.
The dollar’s decline hasn’t been against currencies of other countries just as addicted to spending and debt as the U.S. but quality stocks, precious metals, real estate and nearly every tangible asset.
Federal spending from 1970 through 2020 averaged 130.75% of annual Federal revenue, in 2020 – 2021 it’s running at 219.23% of total Federal Revenue.
Federal revenue as a percent of total Federal debt in 1981 was 60.24%, 28.69% in 2007, in 2021 a mere 11.16%.
This 11.16% revenue to debt ratio makes it impossible for the U.S. to accurately report inflation, normalize interest rates or any Federal expense whose increase is pegged to reported inflation such as Social Security, Medicare, Military or Civilian employee pensions.
As Federal debt soared inflation and real rates of return magically disappeared
From 1970 though 2007 Treasuries had an average annual yield of 8.70% and paid an average 3.99% more than reported inflation (-3.99% real rate of return),
The average yield since 2008 2.67% paying 0.94% more than reported inflation.
The current average Treasury yield is 2.01% paying 2.19% less than inflation.
Ask yourself, does make sense to have inflation hitting a historic low at the same time spending, debt and the creation of money is hitting a new historic high?
Federal spending from 2008 through 2020 exceeded 55.319 trillion dollars, new Federal debt 17.930 trillion.
17.930 trillion in new Federal debt is greater than the total debt of the United Kingdom, Ireland, Greece, Norway, Russia, Australia, China, South Korea, Taiwan, Canada, Mexico, Argentina and Nigeria combined.
Federal debt has gotten so heavy, US. rates and debt rating so low the U.S. has been unable to sell enough Treasuries in the open market to cover spending.
To avoid and insolvency the Federal Reserve has to created net total 7.922 trillion dollars from and backed by nothing, 7.151 trillion of the 7.992 trillion since 2008, 3.757 trillion in the last 16 months.
3.757 trillion is 363 billion more than the total the Fed created from between 2008 and 2019
Of this 7.922 trillion 2.795 went to buy bad bank debt, the majority of this bad debt was from the same banks that caused the 2008 financial crisis, the Fed still owns the over 90% of this junk debt.
5.128 trillion to buy Treasuries the free market wouldn’t because the Federal government can’t afford to pay a higher enough rate to attract buyers in the free market to buy their debt.
The 7.922 trillion is on top of the 1.241 trillion in operating profits the Federal Reserve forfeited to the U.S, Treasury between 2008 and 2021.
Fed’s contribution before and after 2008
From 1913 through 2007 the Federal Reserve’s total contribution to keep the U.S. economy solvent was net 771 billion dollars.
Since 2008 the Fed has contributed 8.392 trillion in created money and operating profits to keep the U.S. solvent the majority of this 8.392 trillion went to buying Federal debt the free market wouldn’t.
Over the last 58 weeks M1 has spiked 385.35% higher from 4.774 trillion to 19.156 trillion.
Ask yourself how can you have
A higher percentage of the population working and paying taxes in 2021 than 42 out of the last 52 years.
Average Federal revenue per capita outpacing reported inflation by 0.96% and 0.50% per employed person for 52 years
Average GDP per capita outpacing inflation by 1.10%, per employed person by 0.67% for 52 years
And end up with this
A record 26.5 trillion in new Federal debt
Require 9.7 trillion in Federal Reserve bailout to keep the U.S. solvent
Require the central bank to create a net 5.128 trillion to buy government debt because the free market won’t
2 debt downgrades with more on deck
148.084 trillion in unfunded liabilities
By process elimination the only explanation is reported inflation is fictional.
Average reported Inflation 4.03%
Per capita annual growth in Federal revenue 4.99%
Per capita average annual growth in Federal spending 6.82%
Per capita Federal Revenue in 2020 $10,319
Per capita Federal spending in 2020 $22,879
Per employed person average annual growth in Federal revenue 4.53%
Per employed person annual growth in Federal spending 6.51%
Per employed person revenue in 2020 $24,196
Per employed person Federal spending in 2020 $53,647
$53,647 in Federal spending per employed person was equivalent to 89.95% of Average Personal Income in 2020 of $59,642.
To appreciate how absurd BLS reported inflation has become compare the total cost of Roosevelt’s New Deal and total fiscal cost of World War 2 to what BLS inflation calculations tell us they would cost today.
Total cost of the New Deal from 1933 to 1939 was 41.70 billion , according the BLS this translates into 836.77 billion in 2021 or 10.96% of what the Federal government spent in just 2020, 17.91% of what the Federal Government spent pre pandemic in 2019.
During the new deal Federal debt per capita increased from $179.14 dollars to $308.14 dollars up $129.00 . According to BLS inflation calculations this translates into an per capita increase in 2021 dollars from $3,594.79 to $6,183.27 up $2,588.48.
In the last 16 months Federal debt per capita increased by $16,831
What the New Deal did and funded
- Jobs for a total of 8.5 million Americans, 6.39% of the population.
- The majority of the jobs trained unskilled men to learn a new profession as they carried out public works infrastructure projects.
- Built or modernized more than 55,000 civilian and military buildings
- Built 32 navel vessels, many played key roles during World War 2.
- 4,026 new schools, the majority are still open today
- 130 new hospitals, including Fitzsimons , Allegheny General & Jersey City Medical Center.
- More than 29,000 new bridges and tunnels including the Lincoln Tunnel, Throgs Neck and Golden Gate bridges.
- Scores of Dams including Hover and Shasta, the majority still produce Hydro Electric Power today.
- Built or modernized over 180,000 miles of Highway, including the Los Angeles Freeway and Overseas Highway.
- Built or modernized more than 150 airports including La Guardia and Midway.
- Built or modernized nearly 9,000 miles of storm drains and sewer lines.
New Deal Programs provided more than Infrastructure
- The laborers of the New Deal programs worked in schools serving more than 900 million hot lunches to hungry children during the depression.
- Operated 1,500 nurseries enabling childcare so parents could work.
- Funded over 225,000 concerts and thousands of plays.
- The New Deal cultural programs produced more than half a million works of art including Jackson Pollock’s 17A which sold for 200 million in 2016.
- The New Deal Writers’ Program featured pieces from soon-to-be famous Authors like John Steinbeck, Steinbeck went on to win the Pulitzer Prize in 1940 for his novel The Grapes of Wrath.
Compare Roosevelt’s New Deal did for the United States versus what politicians (on both sides) have done with the trillions they’ve already spent.
Fiscal Cost of World War 2 to what BLS inflation calculations tell us it would cost today.
61 countries participated in World War 2 to protect the world from Hitler’s Socialist agenda, Mussolini’s Fascist and Hirohito’s aristocratic oligarchy.
The U.S.’s participation from 1941 to 1945 had a total fiscal cost of 291.18 billion dollars.The BLS.GOV tells us 291.18 billion in 1942 translates into 4,912.54 billion today or 64.37% of what the Federal Government spent in 2020.
From 1941 through 1945 Federal debt per captia esculated from $383.61 to $1,839.33 up $1,455.72, the BLS tells us this translates into $6,555.45 to $31,432.01 up $24,876.56. Since 2017 U.S. Federal debt per capita has increased by $25,389.99.
The BLS tells us the combined fiscal cost of the new deal and world war 2 would be 5.749 trillion in 2021 dollars equivalent to 75.34% of what the Federal Government spent last year.
Purpose of reporting fictional inflation
Lower inflation equates into trillions in contained costs on all Federal expenditures pegged to the official inflation rate such as Social Security, Medicare, Military and Civilian Employee Pensions.
Impact on Federal debt service cost.
From 1970 through 2020 total Federal debt increased from $380.91 billion to $26,880.92 billion up 8,098.94%.
Federal debt service cost during the same period increased from $34.64 billion to $538.45 billion up 1,454.25%.
From 2008 through 2020 total Federal debt increased from $8,950.75 billion to $26,880.92 billion up 200.32%, annual Federal debt service cost during the same period increased from $411.21 billion to $538.45 billion up 30.91%.
From 1970 through 2007 annual medicare expenditures per capita increased by an average of 10.73% reported inflation during the same period averaged 4.70% annually.
From 2008 through 2021 annual medicare expenditures per capita increased by only 4.37% reported inflation during the same period 1.90% annually.
Total medicare expenditures are estimated to come in at 732.50 billion in 2021 and are expected to increase to 925.51 billion by 2025.
According to the 2020 Social Security Trustees Report all medicare reserve funds will be entirley depleted by 2026.
Kaiser Family Foundation (KFF) examined the sources of Medicare funding in 2018. Medicare recipients may be surprised to learn that payroll taxes accounted for only 36% of monies spent, the federal government’s general fund 43%, and premiums a mere 15%. The remaining revenue came from transfers from states, Social Security benefit taxes and earned interest.
From 1970 through 2007 annual Social Security Benefits paid per capita increased by an average of 7.30%, reported inflation during the same period averaged 4.67% annually.
From 2008 through 2021 annual Social Security Benefits per capita increased by 4.32%, reported inflation during the same period averaged 1.90%.
Total Social Security Benefits are estimated to come in at 1.156 trillion 2021 and are expected to increase to 1.445 trillion by 2025.
Despite more money being paid into Social Security fund than any other time in history it will stop running a surplus this year, at which time the Federal Government will need to repackage existing debt currently in special issue securities to pay retiring beneficiaries.
According to the 2020 Social Security Trustees Report retirement/survivor and disability reserves will be entirely depleted on or before 2035
Adding to the current debt crisis the Federal Government has borrowed all the reserves out of every Government Pension & Trust replacing these reserves with “special issue securities” these non marketable securities earn a non competitive rate with duration between 1 to 15 years
Non competitive rates with negative rates of return ensure a guaranteed loss in buying power for all the beneficiaries that have paid into their Social Security, Military and Civilian Employee Pensions/Trusts.
BLS calculation magic doesn’t end with end with inflation misrepresentations.
Reported Federal deficits do not include what politicians don’t get to vote on like Social Security and Medicare. Because these expenditures are not included in deficit reporting growth in the Federal debt will always outpace reported budget deficits,
From 1970 through 2020 reported budget deficits totaled 17.854 trillion dollars, total Federal debt during the same period increased by 26.515 trillion, the cumulative difference 8.661 trillion.
8.661 trillion in new Federal debt not disclosed in annual Federal budget deficits is more than the total debt of Australia, Canada, Russia, Greece, Switzerland, Spain, Norway, South Korea, Taiwan, Argentina, and Mexico combined.
From 2008 through 2021 the cumulative total Trade Deficit increased from 6.333 trillion to 13.568 trillion dollars +114.25%
Regulation, taxation and litigation have reduced manufacturing jobs in the U.S from 25.70% of the total U.S. workforce to 8.43%. In 2021 U.S. manufacturing as a percent of the total U.S. workforce is 0.11% from the all time historic low, 17.16% from the high and 8.63% below the average.
Do you think additional regulation, increased taxation, a spike higher in minimum wage and more litigation will motivate corporations that still manufacture products in the U.S. to stay?
Or do you think they’ll relocate to more competitive offshore locations where they can manufacture their products at a fraction of the price then dump them in the U.S. without major tariffs or tax implications?
The leverage these countries have over the U.S. owning 7.034 trillion of total Federal debt negates the U.S.’s ability to negotiate fair trade deals, threatens to the U.S’s fiscal infrastructure and ultimately is a threat to national security.
It’s no surprise why U.S. Federal debt has been downgraded twice since 2011 or why it will be downgraded two or more times this decade.
2020 is the first recession the U.S. entered without it’s coveted AAA debt rating, 12 countries now have a higher debt ratings than the the United States, in 2021 the U.S. shares the same debt rating as Hong Kong and Finland.
Annual Federal revenue in 1981 was 60.25% of total Federal debt, in 2007 28.69% of total Federal debt, in 2021 11.16% of total Federal debt.
This ratio makes it impossible for the U.S. to report inflation correctly or pay a high enough Treasury rate to attract buyers of maturing and new Federal debt in the Free market.
Impact on U.S, debt service cost if Treasury rates normalized
From 1971 through 2007 U.S. Treasury yields averaged 8.70%, 3.99% above reported inflation. From 2008 – 2020 2.67%, 0.94% above reported inflation 2021 2,01% 2.19% below reported inflation.
If yields normalized in 2021 to be in line with the averge
I’ve been a professional trader for nearly 30 years, my primary objectives are preservation and enhancement of family wealth.
Looking at the increases reported inflation relative to the increases in personal income, Federal revenue per capita and per employed person and Federal spending per capita and per employed person the only conclusion I can draw is BLS.GOV inflation releases are purely functional.
To support my conclusion.
Flight to quality is now a thing of the past, it’s nothing more than a footnote in history, inflation and real rates of return disappeared with fiscal responsibility.
From 1971 through 2007 annual Federal spending averaged 21.91% more than annual revenue.
From 2008 through 2021 54.12% more
2020 and 2021 119.23% more.
With new policies trade deficits have started to escalate, so have purchases of U.S. treasuries by foreign investors
Foreign buying for US Treasureis
Monetization has fully engaged
GDP per capita versus inflation
Inability to pay a competitive rate
Growth in income has outpaced inflation
Federal Revenue per capita
Federal spending per capita
To show you how fictitious BLS.Gov
World War 2
Federal Government’s inability to borrow on the open market
Fed’s creation of money
Per taxpayer debt escalated from to , per capita debt
Rest of the world’s debt per capita
resulting in two debt down grades in 2013 the latest in 2013, currently U.S. Federal Debt shares the same credit rating as Finland and Hong Kong.
Can you justify this? The Federal Government spent $53,647 on every employed person in the U.S equivalent to 89.95% of average personal income.
In 2021 it’s running at 84.71% of personal income (this is without the 4 Trillion in additional “stimulus” or $27,480 on every employed person.
Assets and income priced in gold
Top 20 stocks over the last 20 years
Have to watch monetization
Massive stock sales prior to the hike in long-term capital gains
Long-term bond holders are going to hemorrhage
Massive foreign liquidation
Higher corporate taxation, more regulation and a hike in minimum wage will will make U.S. corporations relocate offshore, Federal corporate tax revenue will decline.
High net worth individuals will move assets and income offshore further reducing Federal tax revenue
Trade deficits will escalates
The Federal Government will be unable to borrow enough money to sustain it’s budget and unable to satisfy unfunded liabilities
Trillions more money will b e created
On deck an inflationary depression
You can let these fundamentals work you or you can work them
Being on the right side of economic change.
As the Federal Government was cranking up this debt they told us the creation of money was necessary to avoid deflation, that deficit spending wouldn’t adversely impact the U.S.’s credibility, debt rating or the ability to finance new deficit spending.
- Inflation is undeniably higher, my estimate puts the average annual inflation 1.82% higher than reported.
- U.S. debt has been downgraded twice since 2011 with further debt downgrades currently on deck.
- Unable to attract buyers for record amounts of bad bank debt and new Treasury issues that have lowest yields and worst debt rating in history the Federal Reserve had to create 7.151 trillion dollars since 2008 to bridge the gap between what the free market would buy, what the banks needed in bailouts and what the Federal Government spent, 3.75 trillion of this 7.151 trillion created in the last 16 months.