You're Getting Legally Robbed Faster Everyday
Inflation is officially out of control and it's not Russia's fault. Now what?
Hello Decentralized Way Subscribers!
If you’re a longtime reader of the Decentralized Way, you’ll recognize the title of this article… And if not, I recommend you go read You’re Getting Legally Robbed Everyday, the first ever Decentralized Way article, followed by There’s No Cure For Inflation.
Both of those articles go more in depth into the details surrounding inflation, how it works, what it is, and begins to touch on where it’s all going.
What was written and predicted in back in September 2021 is all unfolding even faster than expected.
With that, let’s dive right in.
Your Government is fudging the numbers
Last week the latest official inflation numbers (CPI - Consumer Price Index - The official Government measure of inflation) came in at a whopping 8.5%, the highest number reported since 1981. A quick reminder, that 8.5% is a measure of inflation over a trailing 12 month period - In this case, March 2021 to March 2022.
Most of you reading this weren’t alive last time inflation was this high, but here’s the kicker - The real number is actually far higher than 8.5%.
You don’t have to be a mathematician to realize that the official number of 8.5% is far lower than the rest of those shown above.
Not only that, but shelter is weighted heavily in the CPI, making up 33% of the calculation. With shelter officially at 5%, it makes sense (mathematically speaking) how the Government came up with an 8.5% number.
The real story is that they’re manipulating the shelter component to drag the official CPI number down.
If rent is up an average of 17% and housing prices up an average of 19%, how can shelter possibly be at 5%? Source.
Hint: It’s not.
As discussed in You’re Getting Legally Robbed Everyday, the calculations that create the Consumer Price Index have been manipulated and modified to suppress the true rate of inflation and deceive the public.
The CPI was intended to be a measure of the same goods across time but in 1995, Fed Chairman Alan Greenspan introduced substitution to the CPI. Meaning if Americans could no longer afford a certain item, the Fed could replace it with a cheaper substitute. Filets are the same thing as ground beef right? Just like Fruit Rounds are the same as Fruity Pebbles. Just like generic toothpaste is the same as Colgate. Just like white bread is the same as wheat bread!
The best part is, in 1983 the Fed removed mortgage payments from the CPI and replaced it with a rental payment instead. Meaning the astronomical rise in residential real estate over the last ~40 years is not included in the CPI. Only increases in rent. Wasn’t owning your own home an integral part of the American Dream? The Fed doesn’t think so.
- You’re Getting Legally Robbed Everyday, The Decentralized Way, September 2021
The real inflation rate is at least double digits and is now tracked using a new tool called Truflation, which pegs inflation at 13.3%.
To put it in concrete terms - If you put $100 in the bank just 12 months ago, it’s now worth $86.67.
And the Fed stole the difference from you.
Let’s play the blame game!
Have you heard the phrase “Putin price hike” lately?
That seems to be the line that the White House is using to explain the price acceleration we’re seeing these days, but what it really means is that they are refusing to take any blame for our dire economic situation that has been created by the very policies they pursue.
Instead of putting time and effort into creating solutions that may lessen the impact on the American people, our politicians are more concerned with the next election cycle and how to “frame” reality to give them the best chances of re-election.
To say that Putin and Russia are the root cause of the highest inflation in 40 years is just bologna. The Russian aggression in Ukraine is not even 2 months old and could not have possibly impacted consumer prices enough in that time to create the (official) 8.5% inflation.
In case that wasn’t clear, the last inflation number prior to any Russia/Ukraine conflict was 7.9%. Again, this was here prior to any conflict. But yet you’ll still hear “Putin price hike” every time you turn on your TV.
We know they are lying
They know they are lying
They know we know they are lying
We know they know we know they are lying
But they are still lying.”
– Aleksandr Solzhenitsyn
And your Government knows there’s no way out
But they won’t admit it. As discussed in There’s No Cure For Inflation, there simply is no way around the devaluation of the dollar and eventually a generational recession.
And from their perspective it actually makes sense.
The US Government holds an absolutely astronomical amount of debt to the tune of ~$30.3 trillion dollars, resulting in an insane 139% debt to GDP ratio. Source.
The US Government must “service” the debt, aka pay back the money borrowed + interest. But here’s where it gets funky.
Say you loaned me $100 dollars exactly 12 months ago. I agreed to pay you back in a years time, plus 5% interest.
Today I give you your $100 + $5 worth of interest for a total of $105. But it’s not really worth $105. If you discount that money using the current rate of inflation, it’s actually about $88 dollars.
To recap - You gave me $100 a year ago. I paid you back $105 today. But it’s really only worth $88. I win.
And that’s exactly the game the government is playing. They will pay back their obligations in dollars - or numbers on a screen - but not in actual value. By devaluing the currency, they dilute the debt.
By diluting the debt, they kick the “reckoning day” can down the road.
Currency devaluation steals money from those that hold the currency through inflation. Otherwise known as you and anyone else that holds dollars.
In other words, we’re paying now for the reckless monetary policy and debt created over the last 50 years.
What are the options?
Here’s the options the Fed and lawmakers are staring down.
Option 1: Stay the course. Keep devaluing the dollar through QE (quantitative easing/money printing) and try to maintain the deteriorating status quo. This eventually will fall apart, but those in power get to pass blame around and hope it doesn’t happen on their watch.
Option 2: Raise interest rates above current inflation rate to get in front like Paul Volker did in the early 1980’s. On one hand you slow inflation… But on the other hand you cap borrowing and spending at the knees. The US would no longer be able to service the debt and it sends us straight into a generational recession. Not really an option.
So option 1 it is!
If you remember nothing from this article, remember this…
When the Fed increases their balance sheet, inflation accelerates. When inflation accelerates, those that don’t own assets get poorer (see the 46% of Americans that don’t own a single equity).
The chart below shows the Fed balance sheet. To say it has increased is an understatement. They have recently pivoted to say reducing the balance sheet is in the works but we have yet to see any action.
Simply put, the Fed is buying assets when they ‘increase their balance sheet.’ As demand rises, asset prices rise.
As asset prices rise, those with assets get richer (see the top 10% of wealthy Americans own 89% of all equities).
And thus the wealth gap will continue to expand. As it does, political polarization will continue to increase. We’re not there yet, but hyperinflation from the Weimar Republic’s failed monetary policy led to the rise of Nazi Germany.
Know that the central bankers have no way out, whether they want one or not. Double digit inflation is no longer reserved for “third world” or developing countries. It’s here in the United States and it’s here to stay.
So keep your head on a swivel and try to read between the “official” lines. Everyone has an angle in play and it’s now your job to discern exactly what that angle is and why.
To say we live in interesting times would be an understatement.
And with that, I’ll catch you all in the next episode of The Decentralized Way.