Perception versus Reality 

Perception

From 1970 to 2020 personal Income, stocks, home prices, precious metals, GDP, Federal revenue per capita and per employed person all outperformed reported inflation.

1970-2020 average annual reported inflation 4.03%

Average annual growth in 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%
Average increase in Federal revenue per capita 4.99%
Average increase in Federal revenue per employed person 4.53%
Average annual growth in GDP per capita 5.14%
Average annual growth in the GDP per employed person 4.70%

Personal income outperformed inflation by 100.72%

5.51% 1970-2020, average annual growth in personal income
1.48% average annual growth above reported inflation
$29,714 what personal income would be in 2020 if pegged to inflation

$59,642 actual personal income in 2020
$29,928 overall growth in annual personal income above inflation


Sources & Data

Median home prices outperformed inflation by 74.88%

5.25% 1970-2020 average annual appreciation
1.22% average appreciation above inflation
$192,671 what median home prices would be in 2020 if pegged to inflation
$336,950 actual median home price in 2020
$144,279 overall appreciation in median home prices above inflation
x


The S&P 500 outperformed inflation by 432.48%

8.63% 1970-2020 average annual appreciation
4.83% average appreciation above inflation
705.40 what the S&P 500 would be in 2020 if pegged to inflation
3,756.10 actual price for the S&P in 2020
3,050.70 overall appreciation of the S&P 500 above inflation
x

Sources & Data

Gold outperformed inflation by 462.54%

9.81% 1970-2020 average annual appreciation
5.78% average appreciation above inflation
$315 what the price of gold would be in 2020 if pegged to inflation
$1,772 actual price of gold in 2020
$1,457 overall appreciation of gold above inflation
x

Sources & Data

Federal revenue per capita outperformed inflation by 44.13%

4.99% 1970-2020 average annual growth in Federal revenue per capita
0.96% average appreciation above inflation
$7,160 what Federal revenue would be per capita if pegged to inflation
$10,320 actual Federal revenue per capita in 2020
4.03% 1970-2021 average annual reported inflation

Federal revenue per employed person by 20.43%

4.53% 1970-2020 average annual growth in Federal revenue per employed person
0.50% average appreciation above inflation
$20,093 what Federal revenue would be per employed person if pegged to inflation
$24,197 actual Federal revenue per employed person in 2020

x

GDP per capita outperformed inflation by 67.16%

5.14% 1970-2020 average annual growth in GDP per capita
1.11% average growth above inflation
$38,551 what GDP per capita would be if pegged to inflation
$64,443 actual GDP per capita in 2020

GDP per employed person by 49.33%

4.70% 1970-2020average annual growth in GDP per employed person
0.67% average growth above inflation
$101,190 what GDP per employed person would be if pegged to inflation
$151,103 actual GDP per employed person in 2020

Sources & Data

In 2021 the U.S. has a higher percentage of the U.S population working and paying taxes than 36 out of the last 52 years.

44.23% of U.S. population is employed in 2021
2.25% from its 52 year high of 46.79% set in 2000
2.16% higher than the 52 year average 42.07%
9.88% higher than the 52 year low of 34.35% set in 1971

Sources & Data

Perception

With these glowing fundamentals you’d expect quality of life for U.S. citizens to be at or near an all time high, that the Federal Government would be running budget surpluses, paying down debt and working hard towards restoring their fiscal credibility and with their AAA debt rating.

Reality

From 1970 to 2021 Federal debt increased by 28.16 trillion
Federal debt as a percent of GDP increased from 35.49% to 125.77%
Federal debt per capita, from $1,879 to $86,025
Federal debt per employed person from $5,365 to $195,836
Federal Spending per employed person, from $2,929 to $53,210
9.1 trillion dollars in Federal Reserve bailouts, 8.2 trillion since 2008
2 debt downgrades caused by record deficit spending and the creation of trillions to fund it.
Borrowing monies paid into Social Security by issuing non marketable debt which has helped expedite its projected insolvency date to as early as 2028.
Borrowing the monies paid into Military and Civilian Employee Trusts by issuing non marketable debt which could jeopardize fair retirement income for beneficiaries.
Mismanaging Medicare pushing up it’s projected insolvency date to 2026

All in, Government had piled on 154.473 trillion in unfunded liabilities

Federal spending per capita from 1970 to 2021 outpaced inflation by 228.46%

6.88% average annual growth in Federal spending per capita
2.85% average growth above inflation
$23,406 actual Federal spending per capita in 2020

$7,242 what per capita Federal spending would be in 2020 if pegged to inflation

Federal spending per employed person outpaced inflation by 158.58%

6.49% 1970-2020 average annual growth in Federal spending per employed person
2.46% average growth above inflation
$53,547 actual Federal spending per capita in 2020
$20,705 what per employed person Federal spending would be in 2020 if pegged to inflation


Sources & Data

Average annual Federal spending above reported inflation.

Per Capita
1970-2007 1.77%
2008-2019 1.87%
2008-2020 6.40%
1970-2020 2.95%

Per employed person
1970-2007 1.04%
2008-2019 1.89%
2008-2020 7.25%
1970-2020 2.62%


Sources & Data

In 2020-2021 Federal spending per employed person is equivalent to 87.09% of median personal income.


Sources & Data

Increases in Debt to GDP from 1900 through 2021

1900 to 2006, from 10.29% to 35.49%
1970 to 2007, from 35.49% to 61.93%

2008 to 2021 from, 61.93% to 125.77%
1939, 43.30% (end of the Great Depression)
1946, 119.12% (end of World War 2)
High, 2020, 129.19%

1900-1970 Average, 38.97%
1970-2007 Average, 42.17%
2008-2021 Average, 100.53%

Low, 1907 7.19%


Sources & Data

Increases in Federal debt per capita


1970-2021 actual increase in Federal debt per capita, $1,879 to $86,025, +4,478.23%
1970-2021 if pegged to reported inflation, $1,879 to $13,206, +602.63%
2008-2021 actual per capita increase in Federal debt, $29,998 to $86,025, +186.77%

2008-2021 if pegged to reported inflation $10,036 to $13,206, +31.58%
2020-2021 actual per capita increase in Federal debt, from $69,392 to $86,025, +23.97%
2020-2021 if pegged to reported inflation $12,374 to $13,206, +6.72%

Increases in Federal debt per employed person

1970-2021 actual increase per employed person $5,365 to $195,836, +3,691.59%
1970-2021 if pegged to reported inflation $5,365 to $37,693, +602.63%

2008-2021 actual increase per employed person, $64,871 to $195,836, +201.89%
2008-2021 if pegged to reported inflation, $28,645 to $37,693, +31.58%

2020-2021 actual increase per employed person. $150,228 to $195,836, +30.36%
2020-2021 if pegged to reported inflation. $35,420 to $37,693, +6.41%


Sources & Data

U.S. debt compared to other countries

1970-2020, 28.17 trillion in new Federal debt, this is more than the total debt of the United Kingdom, Italy, France, Germany, Australia, Canada, Mexico, Russia, China, Taiwan and India combined, total population of these countries 3.468 billion, U.S. population 332 million.

Since 2008, 19.60 trillion in new Federal debt, more than the total debt of the United Kingdom, Canada, Australia, Switzerland, Greece, Turkey, Taiwan, China, Russia, India, Argentina, Mexico and Nigeria combined, total population of these countries 3.587 billion.

Fed Bailouts since 2008 8.26 trillion, more than the total debt of China, population 1.442 billion.

16 months, 5.88 trillion in new Federal debt, 304 billion more than the combined total debt of the United Kingdom and Canada.


Sources & Data

Impact of record deficit spending and the creation of money to pay fund it

2 Federal debt downgrades in 2021 the United States has the worst debt rating in history, 11 countries are now rated higher.

Country/Region Rating Outlook Date
Canada AAA Stable 2002-07-29
Denmark AAA Stable 2001-02-27
Germany AAA Stable 2012-01-13
Liechtenstein AAA Stable 2016-02-26
Luxembourg AAA Stable 2013-01-14
Netherlands AAA Stable 2015-11-20
Norway AAA Stable 1990-11-08
Singapore AAA Stable 1995-03-06
Sweden AAA Stable 2004-02-16
Switzerland AAA Stable 1989-06-26
Australia AAA Stable 2020-10-20
Austria AA+ Stable 2013-01-29
Finland AA+ Stable 2016-09-16
Hong Kong AA+ Stable 2017-09-22
United States AA+ Stable 2013-06-10

Debt to GDP by country


Sources & Data

Federal Reserve bailouts

1913-2007, 94 years
Formation of the Federal Reserve 1913
Total Federal Reserve bailouts 890.66 billion

1970-2019
, 11 years
Total new debt Federal 13.719 trillion
Total money created by the Federal Reserve 3.275 trillion

Federal Reserve profits forfeited to the U.S. Treasury 892 billion
Total Federal Reserve bailouts, 4.167 trillion

2020-2021, last 16 months
Total new federal debt 5.881 trillion
Total money created by the Federal Reserve 4.036 trillion

Federal Reserve profits forfeited to the U.S. Treasury 144 billion
Total Federal Reserve bailouts, 4.180 trillion


Sources & Data

In addition to the bailouts from 1998 to 2020 the Federal Reserve forfeited 1.242 trillion in operating profits to the U.S. Treasury, 142.49 billion more than total Federal debt in 1982.


Sources & Data

since 2008 the U.S. has cranked up 19.3 trillion in in new Federal debt and required the Federal Reserve to create over 8 trillion with keypunch entries for bailouts in the real world this would be inflationary

In the world of government inflation magically disappeared until May of this year

1970 to 2007 average Treasury rate 8.70% paying 3.99% more than reported inflation
2008 to 2020 average Treasury rate 2.67% paying 0.94% more than reported inflation
2021 average Treasury rate 2.01% paying 3.39% less than reported inflation
Reported inflation over the last 12 months 5.40%
1970 through 2021 average annual inflation 4.03%


Sources & Data

What the BLS tells us a 1939, 1946 and 1980 dollar is worth today.

In 1980 total Federal was 863.45 billion closing in on 1.00 trillion dollars, citizens panicked, gold rallied to $850 an ounce and interest rates spiked above of 15%.

The BLS translates 863.45 billion in 1980 into 3.015 trillion in 2021 dollars, 2.865 trillion less than new Federal debt in the last 16 months

Cost of the New Deal 1933-1939

Total cost of the New Deal from 1933 to 1939, 41.70 billion (1939 dollars)
The BLS translates this into 809.27 billion in 2021 dollars .

Total cost of the New Deal in gold 1.226 million ounces
Cost of the New Deal in 2021 if pegged to gold 2.207 trillion dollars

What the New Deal did for 809.27 billion BLS 2021 dollars

    • Job training for 8.5 million unskilled men to learn a new professions as they carried out public works infrastructure projects.
    • Built or modernized more than 55,000 civilian and military buildings.
    • Built 32 naval vessels, many played key roles during World War 2.
    • Built 4,026 new schools, the majority are still open today.
    • Built 130 new hospitals, including Fitzsimons , Allegheny General & Jersey City
    • 29,000 new bridges & tunnels including Lincoln,Throgs Neck and Golden Gate.
    • Scores of Dams including Hover & Shasta, the majority still produce power today
    • Built or modernized over 180,000 miles of highways including the Los Angeles Freeway, the Overseas Highway(107 miles) connecting Key West to the mainland
    • 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.
    • 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 works 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.

Either President Roosevelt really knew how to stretch a buck in the 1930’s or BLS.GOV inflation is fictional.

Fiscal cost of World War 2

Total U.S. fiscal cost 291.18 billion in 1946 dollars.
The BLS.GOV translates this into 4.347 trillion in 2021 dollars

4.347 trillion is 59.59% of what the Federal Government spent in 2020,
97.35% of what the Federal Government spent in 2019.

The U.S.’s fiscal cost of World War 2 in gold, 131.662 million ounces
Cost of the WW 2 if pegged to gold 15.088 trillion 2021 dollars

Spending and new debt during last “crisis” and “recovery”, 2008-2019

47.689 trillion total Federal Spending (all in)
5,892.84% the total cost of New Deal
1,097.06% the total fiscal cost of World War 2

13.718 trillion total New Federal Debt
1,695.11% the total cost of the New Deal
315.57% the total fiscal cost of World War 2


Sources & Data

Spending and new debt during the Covid crisis 2020-2021

11.312 trillion in Federal Spending (all in)
5.88 trillion in New Federal Debt
Data on pre Covid causes of death & Covid causes of death

BLS inflation calculations tell us that in the last 16 months new Federal debt grew by 724 billion more than the combined fiscal cost of the New Deal and World War 2 (5,156 trillion)

Annual Federal Revenue is now a mere 11.16% of total Federal debt.

1970 50.62%
1980 58.89%
1990 32.19%
2000 35.98%
2007 28.69%
2021 11.16%


Sources & Data

Impact

An 11.16% annual revenue to total debt ratio makes it impossible for the U.S. to accurately report inflation, normalize interest rates or increases in any Federal expense that’s pegged to reported inflation such as Social Security, Medicare, Military or Civilian employee pensions.

If Treasury rates normalized to the 1970 – 2008 average of 8.70%, 68% of all Federal revenue would be consumed by debt service cost alone.

Accurate increases in Medicare would push it’s insolvency date closer than the projected 2026, Social Security before the projected 2028 to 2035.

Under reporting inflation contains the majority of all Federal costs

From 2008 to 2021 Federal debt increased by 200.00% yet annual debt service cost increased by only 30.91%.

Total Federal debt in 2007 8.950 trillion, annual debt service cost 411.32 billion
Total Federal debt in 2020 26.880 trillion, annual debt service cost 538.45 billion


Sources & Data

How the U.S. reports budget deficits, the poverty and homeless rates have further eroded U.S. fiscal credibility.

1970-2020 cumulative reported budget deficits $17.857 trillion, cumulative increase in Federal debt $26,515 trillion. According to U.S. politicians the 8.658 trillion doesn’t count because they’re mandatory expenses and they don’t et to vote on them.


Sources & Data

Difference between reported deficits and increase in total Federal debt

1970 to 2007 4.021 trillion,
2008 to 2020 4.637 trillion.

U.S poverty rate

The Federal Government has contained the official poverty rate and all subsides linked to the poverty rate by lowering what the poverty rate is.

In 1970 if your income was less than 49.60% of median personal income you were below the poverty threshold and qualified for government assistance.
In 2020 your income needed to be below 21.70% of median personal income to be below the poverty threshold and qualify for government assistance.


Sources & Data

Homeless rate

By redefining who’s homeless the Department of Housing and Urban development has reduced the official homeless rate between 2005 and 20920 by 173,691 people.

Sources & Data

In 2021 Federal Debt as a percentage of GDP is the worst in history


Sources & Data

Regulation, taxation and litigation have destroyed U.S. manufacturing and eliminated over 20 million jobs.


Sources & Data

The resulting trade deficits have eliminated 13.95 trillion in domestic wealth, 7.652 trillion since 2008.


Supporting Links & Data

Foreign held Treasury debt now impedes the U.S.’s ability to negotiate fair trade

If the 7.012 trillion in foreign held Treasury debt hits the market for any reason it will create an unprecedented financial crisis, unprecedented dollar sales by foreign investors and additional dollar devaluation fueled by the Federal Reserve’s creation of trillions of dollars trying to support the Treasury market and dollar, hyper inflation will engage.

Sources & Data

In 2021 without ongoing Fed intervention the U.S would be insolvent

Since 2008 the Fed’s created over over 8 trillion dollars with keypunch entries to buy debt at non competitive rates the free market wouldn’t. In the last 16 months the Federal Reserve bought more Treasury debt than the previous 50 years.

2020-2021 last 16 months
Federal debt purchased by the Federal Reserve 2.764 trillion
Increase in Federal debt 5.881 trillion

Domestically purchased Federal debt 2.694 trillion
Debt purchased by foreign investors 311.5 billion
Non marketable debt held by Federal agencies & Trusts 111.8 billion

1970-2019 previous 50 years
Federal debt purchased by the Federal Reserve 2.637 trillion

Increase in Federal debt 22.289 trillion
Domestically purchased Federal debt 7.301 trillion
Debt purchased by foreign investors 6.716 trillion
Non marketable debt held by Federal agencies & Trusts 6.01 trillion


Sources & Data

Percent ownership of total Federal Debt

2020
Domestic, publicly held Federal debt 35.01%

Federal debt held by foreign investors 24.62%
Non marketable Federal debt held by Federal Agencies & Trusts 21.46%
Federal debt held by the Federal Reserve 18.92%

1970
Domestic publicly held Federal debt 79.58%
Federal debt held by foreign investors 4.12%
Non marketable Federal debt held by Federal Agencies & Trusts 0.00%
Held by the Federal Reserve 16.30%


Sources & Data

Income assets and spending in ounces of gold

Personal income in ounces of gold 1981-2021

Gold +36.46%, from 24.67 to 33.66, +8.99 ounces
Dollars +426.59%, from $11,326 to $59,642, +$48,316

2020 33.46 ounces
1981 24.67 ounces
1981-2021 annual average 55.33 ounces
High 2001 117.29 ounces
Low 1981 24.67 ounces


Sources & Data

Increase in Median home prices

Gold +1.28%, from 183.32 to 185.67 ounces, +2.24 ounces
Dollars +388.69%, from $68,950 to $336,950, +$268,000

2020 185.67 ounces
1981 183.32 ounces
1981-2021 average 312.01 ounces

High 2000 617.83 ounces
Low 2011 134.10 ounces


Sources & Data

S&P 500 futures contract

Gold +721.69%, from 14.78 to 121.47ounces, +106.69 ounces
Dollars +3,147.64, from $6,788 to $220,450 +$213,662

2020 185.67 ounces

1981 183.32 ounces
1981-2021 average 312.01 ounces

High 2000 617.83 ounces
Low 2011 134.10 ounces

Sources & Data

 GDP per employed person in gold

Gold +8.96%, from 78.27 to 85.28 ounces, +5.23 ounces
Dollars +320.45%, from $35,937.56 to $151.102.75, +$115,165.18

2020 85.28 ounces
1981 78.27 ounces
1981-2020 average 153.27 ounces
High 2001 297.62 ounces
Low 2012 73.07 ounces

Per capita

Gold +16.80%, from 31.14 to 36.37 ounces, +5.23 ounces
Dollars +350.72%, from $14,297.62 to $64,443.08 +$50,145.46


2020 36.37 ounces
1981 31.14 ounces
1981-2020 average 67.64
High 2001 137.94 ounces
Low 2011 31.14 ounces

Sources & Data

Federal revenue per employed person in gold

Gold -7.34%, from 14.74 to 13.66 ounces, -1.08 ounces
Dollars +257.58, from $6,766.66 to $24,196.85, +$17,429.94

2020 13.66 ounces
1981 14.74 ounces
1981-2020 average 27.13 ounces
High 1999 56.20 ounces

Per capita

Gold -0.67%, from 5.86 to 5.82 ounces, -0.04 ounces
Dollars, +283.32%, From $2,692.19 to $10,319.60, +7,627.14

2020 5.82 ounces
1981 5.86 ounces
1981-2020 average 11.98
High 1999 26.03 ounces
Low 2011 5.00 ounces


Sources & Data

Federal spending per employed person in gold

Gold +85.26% from 16.34 to 30.28 ounces, +13.93 ounces
Dollars +614.91% from $7,504 to $53,647, +46,143

2020 30.28 ounces
1981 16.34 ounces
1981-2020 average 32.86
High 2001 59.53 ounces
Low 1981 16.34 ounces

Per capita

Gold +100.86% from 6.50 to 13.06 ounces, +6.56 ounces
Dollars, +675.08% from $2,985 to $23,140, +20,154

2020 13.06 ounces
1981 6.50 ounces
1981-2021 average 14.48
High 2001 27.59 ounces
Low 1981 6.50 ounces

Sources & Data

Federal debt per employed person in gold

Gold +349.38%, from 23.73 to 106.65 ounces, +82.92 ounces
Dollars +1,634.08%, from $10,897 to $188,966, +178,069 

2020 106.65 ounces
1981 23.73 ounces
1981-2020 average 97.51
High 2001 161.09 ounces
Low 1981 23.73 ounces

Per capita

Gold +387.20%, from 9.44 to 46.00 ounces, +36.56 ounces
Dollars, +1,780.03%, from $4,335 to $81,507, +77,172

2020 46.00 ounces

1981 9.44 ounces
1981-2020 average 43.17
High 2001 74.66 ounces
Low 1981 9.44 ounces


Sources & Data

What could clean up this mess?

Fiscally responsible politicians on both sides of the isle
Giving up on trying to spend out of every crisis, 28.5 trillion in new debt proves it doesn’t work
Balanced budgets and paying down debt to minimize the damage to future generations

Effective regulations rather than regulations that foment fines & litigation
Bring companies back to the US by hiking tariffs rather than taxes
Trade surpluses rather than trade deficits,
Transparency in Federal revenue and expenditures that’s easy to understand and follow
Citizens joining Patrick Henry’s united we stand divided we fall party rather than being pawns of Julius Caesar’s divide and conquer.
Have a government that was afraid of voters rather than voters being afraid of government

What’s more likely to happen

Annual Federal Revenue is now a 11.16% of total Federal debt, this ratio makes it impossible for Federal government to raise interest rates high enough to attract enough buyers to finance the ongoing record deficit spending.


Sources & Data

For the U.S to remain solvent the Federal Reserve has to continue creating trillions of dollars with keypunch entries to buy all the debt the free market won’t.

We see total Fed created money increasing from 8.24 to 13.53 trillion by the end of 2026
Treasury debt owned by the Federal Reserve increasing from 5.30 to 8.66 trillion
Other debt owned by the Federal Reserve increasing from 2.898 to 4.689 trillion

This Fed link to monitor the creation of money
This Fed link to monitor Treasury debt owned by the Federal Reserve


Sources & Data

Record spending plus the creation of money to fund it equals inflation

Our estimate puts average annual BLS reported inflation above 4.50% through 2026.
Actual inflation averaging more than 5.25%.
Shadow Stats puts the average above 7.50%.


Sources & Data

Dollar devaluation and negative rates of return are here to stay.


Sources & Data

    • Inflation and debt monetization have fully engaged
    • Real rates of return aren’t going to happen this decade
    • Record deficit spending and the Fed’s creation of money to fund it will fuel inflation higher
    • .U.S’ debt will be downgraded two more times before the end of 2029
    • Sales of over 7 trillion in foreign owned debt and dollars will engage
    • The Fed will create trillions more trying to support the U.S. debt market and dollar
    • Inflation will escalate moving above 6.00%
    • Growth in Federal debt will outpace growth in federal income 1.5 to 1
    • Desperate for income politicians will pass increases in income, corporate and long-term capital gains taxes forcing more corporations and citizens offshore
    • Trade deficits will increase
    • Stocks will have 1 to 3 corrections with recovery to new highs fueled by dollar devaluation.
    • Proceeds from stock sales may go into Federal debt short-term but just until these dollars find new homes in tangible assets, quality stocks and higher rated debt.
    • Mortgage delinquency rates will increase from 2.75% to more than 5.00%
    • Federal Reserve ownership of mortgage backed securities will increase from 2.422 to over 4 trillion
    • A temporary selloff in real estate will be caused by higher rates, higher taxes, higher inflation, decreasing affordability, with a recovery to new high fueled by dollar devaluation.

It’s going to be a exciting decade to trade packed with beautiful up and down trends if you have any questions or need additional information please contact me.  

Peter Knight Advisor
Direct Phone Virgin Islands +340 244 4310
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Peter_Knight@peterknightadvisor.com

 


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