September has been a rough month for the stock market with the Dow hitting new lows for the year. Market participants are spooked as the Fed is aggressively raising rates to try to get a handle on inflation (even though it won’t).
The latest inflation numbers show that inflation is persistent and not transitory like the Fed wanted you to believe. It is worse in some sectors but it is hitting absolutely everything and retailers in the U.S. and Europe are preparing to increase prices even more, just to survive their own increased costs.
What does this mean for the purchasing power of the dollar? This chart below will help get a better understanding of the gravity of what we are living through now.
The line in this graph shows purchasing power from 1913 (when the Fed was created) to the present. The $1 of 1913 is now worth 3.6 cents…
This basically means there has been a pure wealth transfer from the people to the state throughout the years, all manufactured to fund a massive debt.
The proceeds have funded the wars, the welfare, the tyrannies, the rise of the administrative state and finally the lockdowns. That’s when the Fed unleashed the helicopters to drop money all over the country.
Just as the CDC (Centers for Disease Control and Prevention) forgot about natural immunity, looks like the Fed forgot about the equation of exchange. By the way, the velocity of money, which is a measurement of the rate at which money is exchanged in an economy, is still far lower than in pre-pandemic levels. That means that inflation still has a long way to go before it normalizes.
The Wall Street Journal calculates that the average household in the U.S. is spending an extra $250 per month compared to last year on the same goods and services.
Only two years ago, getting a 5% increase in salary was considered generous right? Now that means your salary is lower in real terms than it used to be. It’s just a salary cut you don’t see because it doesn’t occur in dollar terms. The government inflates it away and loss becomes more difficult to see.
The pattern of 40 years, in which prices felt reliably stable and predictable, has been completely shattered.
Stay alert, stay informed,
Wave Cap
Comments