Dollar devaluation is pushing the market higher it’s definitely not the glowing economic fundamentals or fiscal restraint of the 21st century.
Dollar devaluation 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.
A 11.16% annual revenue to total 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. if interest rates did normalized in 2021 to the 1970 – 2007 average of 8.70%, 68% of all Federal Revenue would be consumed by debt service costs.
Ask yourself with Income, assets, Federal revenue all outpacing reported inflation how could the annual Federal revenue to debt ratio deteriorate from from 50.62% in 1970 to a mere 11.16% in 2021?
Reported Inflation Fact or Fiction?
1970 – 2021 Actual price increases versus price increases if pegged to reported inflation,
Average annual growth in Personal Income from 1970 through 2020 was 5.51% outpacing reported inflation by a strong 1.48%. Personal Income if pegged to inflation it would have been $29,714 in 2020 versus $59,642.
Median home prices have appreciated by an average of 5.25% annually outpacing reported inflation by 1.22%. If pegged to inflation they’d be $192,671 in 2020 not $336,950,
The S&P 500 appreciated by an average of 8.63% annually outpacing reported inflation by 4.83%. If pegged to inflation it would have closed out 2020 at 705.41 not 4,063.04.
Gold has appreciated by an average of 9.81% annually outpacing reported inflation by 5.78%. If pegged to inflation it would closed out 2020 at $315 not $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 per capita GDP 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.
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 not $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 not $24,196.86,
U.S. Employment
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 when the U.S. had a balanced budget 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.
Perception
With growth in personal income, homes, assets all outpacing reported inflation, you’d think the quality of life for a U.S. citizens 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 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.
The reality of what these numbers produced
A record 26.5 trillion in new Federal debt
9.7 trillion in Federal Reserve bailouts to keep the U.S. solvent
5.128 trillion of created money to buy U.S. debt the free market wouldn’t at rates the Federal Government could afford to pay.
2 debt downgrades with at least one more on deck
148.084 trillion in unfunded liabilities
In just 12 years the U.S. finds itself in yet another financial crisis that over the last 16 months has required 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,
10.107 trillion is 2.05 trillion more than China’s total debt of 8.057 trillion.
Federal Revenue & Spending
With revenue outpacing reported inflation by a strong 0.96% per capita and 0.50% per employed person it’s hard to reconcile average Federal spending exceeding revenue by 1.83% per capita and 1.98% per employed person.
Federal spending from 1970 through 2020 averaged 130.75% of annual Federal revenue, in 2020 and 2021 Federal spending is running at 219.23% of total Federal Revenue.
Average reported Inflation 4.03%
Per capita average annual growth in Federal revenue 4.99%
Per capita average annual growth in Federal spending 6.82%
Per employed person average annual growth in Federal revenue 4.53%
Per employed person average annual growth in Federal spending 6.51%
In 2020 Federal spending per employed person was $53,647 equivalent to 89.95% of U.S. personal income of $59,642.
2020 Per capita Federal Revenue $10,319
Per capita Federal spending $22,879
Per employed person Federal revenue $24,196
Per employed person Federal spending $53,647
Increases in Federal Spending
From 2015 through 2019 Total annual Federal spending (all-in) averaged 4.301 trillion.
In 2020 the Federal Government spent 7,631 trillion 3.330 more than the 2015-2019 average,
Final Federal Spending (all in) for 2021 is estimated to equal or exceed 2020’s 7.631 trillion.
The justification Covid-19, what we know in 2021.
According to CDC and WHO prior to 2020 viruses that cause lower respiratory infections were present in an average of 3,190,350 people who die annually.
Covid-19 is a virus that causes respiratory infections and was present in 3,483,529 people who died in 2020.
Total people who died that tested positive for Covid-19 with one or more preexisting condition 3,349,065
Total people who died that tested positive for Covid-19 with no preexisting conditions 134,464.
According to WHO and the CDC a person in 2020 with no preexisting conditions had a 10 times greater chance of dying from a road injury than Covid-19.
Using the Covid-19 pandemic to justify another print and spend party is a new low, even for U.S. politicians.
The way these politicians spent these borrowed trillions is absurd, The they’re financing these trillions through the creation of money from and backed by nothing puts the next U.S. financial crisis squarely on deck.
Over the last 16 months the Federal government spent 10.107 trillion generating 5.67 trillion in new Federal debt during the same period the Federal Reserve created 3.74 trillion to buy Treasury debt the free market wouldn’t.
5.671 in new Federal debt is 742 billion dollars more than the entire fiscal cost of World War 2. in 2021 dollars (Total Fiscal cost of World War 2 between 1941 and 1946 was 291.18 billion according the BLS this translates into 4.913 trillion today)
Since 1913 the Federal Reserve has created a net total 7.992 trillion from and backed by nothing for Bank and Treasury bailouts
771 billion of the 7.92 trillion was created from 1913 through 2007
3.441 of the 7.992 trillion between January 2008 through December 2019
3.780 of the 7.992 trillion during the last 16 months, 3.780 trillion is 339 trillion more than the total between 2008-2019.
By January 2020 Federal debt had gotten so heavy, Treasury rating and yields so low, the U.S. has been unable to sell enough Treasury debt on the open market to to satiate their ever increasing spending addiction.
2.795 of the created 7.922 trillion 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 majority of this junk debt today.
The 7.922 trillion in bank and Treasury bailouts between 2008 and 2021 is on top of the 1.241 trillion in operating profits the Federal Reserve forfeited to the U.S, Treasury during the same period.
Fed’s contribution to keep the U.S. solvent before and after 2008
From 1913 through 2007 the Federal Reserve’s total contribution to keep the U.S. solvent was net 771 billion dollars.
Since 2008 8.392 trillion to keep the U.S. solvent.
Unprecedented spike higher in M1
Over the last 58 weeks M1 has spiked 385.35% higher from 4.774 trillion to 19.156 trillion, yes other countries are doing the same thing that doesn’t make it right.
As Federal debt soared inflation and real rates of return magically disappeared
From 1970 through 2007 Treasuries had an average yield of 8.70% and paid an average of 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 2.01% paying 2.19% less than reported inflation.
Ask yourself, does it make any sense Federal spending, Federal debt and the creation of money all hit a historic highs while inflation hit a historic low?
The only explanation for this aberration is reported inflation is fictional.
To appreciate just how absurd BLS reported inflation has become compare the total cost of Roosevelt’s New Deal from 1933-1939 to what BLS inflation calculations tell it would cost in 2021.
New Deal
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 dollars or 10.96% of what the Federal government spent in 2020, 17.91% of total spending in 2019.
During the new deal Federal debt per capita increased by $129.00 from $179.14 in 1933 to $308.14 by the end of 1939. BLS inflation calculations tell us this translates into an increase Federal dent per capita of $2,588.48, from $3,594.79 to $6,183.27.
In the the last 16 months Federal debt per capita has increased by $16,831 or 272.21% of what Federal Debt increased by per capita during the New Deal that built America’s infrastructure and prepared it for World War 2 from 1933 through 1939.
What the New Deal did and funded
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- 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 ordinance manufacturing facilities preparing for World War 2
- Built 32 navel vessels, many played key roles during World War 2.
- Built or modernized 4,026 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 Highways, 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
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- 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.
Or comparing the total fiscal Cost of World War 2 to what BLS inflation calculations tell us it would cost in 2021.
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. BLS.GOV inflation calculations tell us this 291.18 billion in 1942 translates into 4,912 trillion 2021 or 64.37% of what the Federal Government spent in 2020.
From 1941 through 1945 Federal debt per capita increased by $1,455.72 from $383.61 to $1,839.33. BLS inflation calculation translates this to an increase if $24,876.56 from $6,555.45 to $31,432.01 in 2021 dollars.
In the last 4 years U.S. Federal debt per capita has increased by $25,389.99 or $513.43 more in 2021 dollars than the increase in Federal debt per capita from 1941 through 1945.
BLS calculations tell 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 in 2020 and wants to spend in 2021.
Purpose of reporting fictional inflation reporting
Lower inflation translates 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 and Treasury rate that determine debt service cost.
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%.
Medicare
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%
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 entirely 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.
Social Security
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 in 2021 and 1.445 trillion by 2025.
Despite more money being paid into Social Security than any other time in history Social Security will stop running a surplus this year starting in 2022 the Federal Government will need to borrow or create more money to pay retiring beneficiaries rather than borrowing out the surplus which they’ve done every year since 1935.
According to the 2020 Social Security Trustees Report Social Security will be insolvent on or before 2035.
If I lived in the United States and had to make involuntary payments into a retirement account that would be insolvent by the time I retired I’d be very angry and want monetary compensation and jail-time for the decision makers that thought it was OK to embezzle funds from my retirement account to fund absurd Federal Spending.
Status of Government Trust Reserves
As of April 2021 the Federal Government had borrowed out 5.982 trillion in reserves held in trust for Government Pensions 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 a negative rate of return ensure a guaranteed loss in buying power for every beneficiary that made mandatory payments their entire working lives into Social Security, Military or Civilian Employee Pension Trusts.
Cost to citizens
Inflation manipulation by the BLS to justify low Treasury rates and the depletion of retirement accounts has stripped American citizens of 10’s of trillions of dollars and lowered the quality of life for all, the sad part is no one is calling the Federal Government out so they continue to do it.
Poverty rate in the United States
The U.S. Census Bureau reports the 2020 poverty rate at 19.71%, 5.85% higher than the 1989-2020 average of 13.85% .
Looking closer at the U.S. poverty rate the U.S. Census Bureau also uses deceitful accounting tricks to massage the official poverty rate lower.
In 1970 if your income was below 49.60% of U.S. personal income you were below the poverty threshold, this ratio has been lowered every year since 1970.
By 2020 this percentage had been lowered to 21.69% of U.S. personal Income. The U.S. Census Bureau is telling you if your annual pretax income is $12,940 annually, $1,078 monthly you were above the poverty threshold and ineligible for many poverty related subsides.
Using the 1970 ratio of 49.60% you’d be below the poverty threshold in 2020 if your pre tax annual income was below $29,581, $2,465 monthly.
According the the Social Security administration 51% of the employed American population makes less that $30,000.
By lowering the criteria than defines the poverty threshold the U.S has contained trillions poverty related subsides.
It should come as no surprise that the official poverty rate is linked to the official BLS inflation rate.
U.S Homeless Rate
According to the Department of Housing and Urban Development (HUD) since 2005 the homeless rate in the U.S. has declined by 23.04% from 754,147 in 2005 to 580,455 in 2020.
According to the Department of Housing and Urban Development (HUD) since 2005 the homeless rate in the U.S. has declined by 23.04% from 754,147 in 2005 to 580,455 in 2020.
HUD also is telling us that the homeless rate in the United States increased by only 12,751 people in 2020.
Using tweaked poverty rate numbers it’s the poverty rate is at a 50 year high and the homeless rate declined by 23.04% since 2005 does this make sense to you?
It should be very clear why U.S. Federal debt has been downgraded twice in ten years and faces at least 1 or more in the next 4.
With the spending on deck the annual Federal Revenue to total Federal debt ratio will drop from 11.16% to less than 9.00% by 2022
Politician will raise long-term capital gains and income tax for top earners
Politicians will raise Corporate tax, hike the minimum wage raise income tax revenue, up regulations which they hope will result additional income from fines Face it it’s already bad and getting worse by the year the trade deficits tell the story
What these political dinosaurs that have ruined the country don’t realize is professional trader like myself no longer consider Treasuries and dollars quality.
The majority of these long term investors woud rather will tak thier chanes owning quality stock who’s value is based o tangible assest and profitability rather than Treasuires and dollars back by the the full faith and trust of the US government, thiose who do liquidate will by gold or any tangible asset before Treasuires.
The stock market will sell off will be far less than politicains were hoping negating the justification they were looking for to print more money.
With a current credit rating that’s the same as Finland and Hong Kong’s the U.S. can’t afford to raise rates to attract buyers for record trillions in new debt, that pay the lowest yields history with the worst debt rating in history, denominated in a currency it’s central bank creates by the trillions. What idiot would buy a 5 to 30 year Treasury bond with a negative real rate of return in 2021?
Unable to Fund record defict spending the Federal Government will instruct the Federal Reserve to create as many trillions as it takes to sustain spending.
True Dollar devalution will enage with tenacity as this occurs over 7 trillion in foreign debt will unwind.
Unable to find buyers for foreign debt that is being liquidated much less new debt to sustain spending the Federal Government will instruct the Federal Resrve to create as much money as it takes to cover foreign liquidation and sustain spending.
The annual Federal revenue to total federal debt ratio will fall to less than 5%
Corporate taxation, regulation and litigation with esculate to the point corporations will be fleeing the US for offshore locations, the percentage of the workforce that is employed in the manuafaturing sector will drop from the current 8% to less than 4%
People who make $400,000 or more will do the math, incorporate offshore throgh the same structure Epstein provided to a host of politicians and high profile clients while he entained them on little St james rather than forfeit income equivilent to 6 to 9 months of thier professional lives each year.
They fly intop the airport at the bottom of the hil of my house
They enjoy beautiful weather, clear water in a polite society
An they watch the U.S implode from 800 miles sout east ok miami political corruption and incompetence destroy whats left of America
Although most bilionares that are critial of censervative have alredy set up what epstien offered politicians and high profiel clients I don’t think they like the environment that thier agnda will create.
I see Federal Debt by the end of 2024 above XXX and the Federal Reserve owning YYYY of that debt
With the creation of XXXX trillion the cost of eveything witll rocket higher
The Federal Reserve will go from buying
he math magicians at the BLS’s wont be able to contain offical inflation without potential Federal incration
I’ve been a professional trader and run a family office for nearly 30 years, my primary objective is preservation of family wealth, secondary objective enhancement of family wealth, my performance is judged by asset valuation in gold not a fiat currency.
From 2008 though April 2021 Federal debt has increased from
11.16% is the lowest Federal revenue to debt ratio in history and 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, Social Security, Medicare, Military, Civilian employee pensions and Treasury rates.
If inflation was accurately reported Treasury rates would normalize to the 1970 – 2007 average of 8.70% at 8.70% debt service cost would consume 68% of all Federal revenue.
