Our current US administration is throwing around data they say proves that the economy is booming, interest rates are coming down and the job market is the healthiest it’s been in decades. They want you to believe there’s nothing to worry about and we are moving into one of the best financial conditions ever. This is Buhtphuckery at its worst…gibberish and complicated models that the common man will never understand. More important…it’s not true.
View the article below for more information on how the Federal Reserve calculates the National Debt.
https://www.federalreserve.gov/monetarypolicy/files/FOMC20151001memo01.pdf
The following is an examination of how Inflation and National Debt run hand in hand to erode the American Dollar and put a higher burden on our citizens. The middle class is the hardest hit. The same people our politicians call the strength of our democracy. It’s amazing that during an election year, our politicians can sell these lies.
Inflation
The Federal Reserve defines inflation as an increase in prices for all goods and services over time.
After decades of generally low inflation, the Bureau of Labor Statistics says that the CPI, Consumer Price Index, (what things cost for the average American) began surging in 2021. In March 2022 prices were 8.5% higher than a year earlier. This was mainly caused by supply chain shortages during high consumer demand and exaggerated by Government aid programs to satisfy that demand at a higher cost.
This was the largest increase over a 12-month period since 1981 and came after a 7.9% annual increase the previous year.
A Vicious Cycle
Purchasing power decreases as inflation increases, makes sense, right? When things are more expensive consumers buy at higher prices. The economy appears strong, but people are getting less for their money – inflation. The biggest worry is that inflation could grow so much that money becomes almost worthless. For example, a loaf of bread could end up costing $100.
To control this inflation The Federal Funds Rate (the cost of borrowing by banks and loan institutions paid for by the consumer) is increased to entice people to save money rather than borrow and spend. Although this attempts to curb inflation, people still need to buy their food, heat their homes, turn on lights, purchase essentials, etc.
Over the past several years, there have been 11 interest rate hikes amounting to a cumulative 5% increase in the Federal Funds rate. Investors have responded to these rate hikes. Just look at the wild swings in the stock market caused primarily by these rate hikes. However the US Government continues inflationary spending.
As spending power drops, what does the government do to meet the needs of the country? They either increase taxes which places more burden on citizens, or they create Rescue Plans and Relief Plans to help struggling taxpayers instead.
National Debt
How does the government create this relief money? They borrow it at the new high interest rates. They sell US bonds to investors with the promise of guaranteed payback. This increases the National Debt even further. Who pays back the debt? That’s right, the taxpayers. The nation’s debt permanently crossed over to $34 trillion on January 4, 2024. The debt load of the U.S. is growing at a quicker clip in recent months, increasing about $1 trillion nearly every 100 days. U.S. debt, which is the amount of money the federal government borrows to cover operating expenses, now stands at nearly $34.4 trillion, as of April 10, 2024. Bank of America investment strategist Michael Hartnett believes the 100-day pattern will remain intact with the move from $34 trillion to $35 trillion.
The taxpayer gets saddled with the repayment on this borrowing creating even further stress.
When national debt increases domestic investment decreases and borrowing from abroad increases. The US dollar has been the most valued and trusted currency in the World. Investors buying the US debt were confident that their investment was safe and secure. Unfortunately, we are running short of investors both nationally and internationally. Our increasing debt is beginning to impact the faith in the US Dollar.
Ray Dalios, billionaire investor warns of $ 34 trillion debt tsunami…
Many of our government representatives are not too worried about the national debt. They tend to have the idea that the dollar will always be the strongest and most desired currency in the world. The U.S. government has been slowly destroying the value of the dollar through inflation ever since it created the Federal Reserve in 1913. Strangely enough, part of the Fed's job is to protect the value of the dollar. The U.S. dollar is now worth about one-30th of its value in 1914 — which means it takes an average $30 to buy the same amount of goods and services that one dollar bought.
Economists long had a rule of thumb that deficits of more than 3% of Gross Domestic Product were not sustainable over the long run (GDP - the total value of all goods and services produced in the US during a year). This fiscal year, the U.S. is likely to have a deficit equal to 7% ($1.75 trillion). This is on top of total debt more than 100% of GDP. Yes, that’s right, our debt equals the total value of all goods and services produced in a year.
The US Dollar is fading worldwide
How US' Staggering $34 Trillion Debt Can Trigger a Global Rebellion
Compounding the vicious debt/inflation cycle is the widening gap of income between the Upper and Middle classes. In 1970, adults in middle-income households accounted for 62% of aggregate income. This fell to 42% in 2020.
Meanwhile, the share of aggregate income accounted for by upper-income households has increased steadily, from 29% in 1970 to 50% in 2020.
Lower-income households dropped from 10% to 8% over these five decades, even though the proportion of adults living in lower-income households increased over this period.
PEW Research Graph on income by upper, middle and lower.
https://www.pewresearch.org/wp-content/uploads/2022/04/ft_2022.04.20_middleclass_03.png
During this period the rich have been selling off their stocks to preserve wealth.
No political leader, including deficit-hawk Republicans, has a plan for the necessary level of reform. The current big lie out of the Biden administration and the Fed is that they will bring inflation back down under 2%, increase employment, subsidies, relief plans and many other debt creators. All the while increasing foreign aid and reducing traditional industries productivity (oil, gas, and other carbon products and services). They intend to accomplish this partially by imposing new taxes on corporations. In 2012, large corporate industries employed 51.6% of the workforce.
https://www.census.gov/content/dam/Census/library/publications/2015/econ/g12-susb.pdf
This taxation will most likely stunt economic growth, which will then increase the cries for more spending to reduce the hardships of the recession, which will further increase the debt, until the vicious cycle collapses.
Joe Biden's State of the Union address exemplifies Buhtphuckery in our government. Buhtphuckery at the highest level. The link below contains some highlights from Biden's speech that run contrary to the data in this blog. It demonstrates denial of rising inflation, increase in National Debt, reduced spending power, weakening of the US dollar, and the widening national wealth gap. However, he promises more spending. This speech is a campaign rally. Promise anything to win the election and create a greater bipartisan division. The final comments on the video show the extent of ridiculous Buhtphuckery in our government. Corrupt politics that lead to the WORST possible outcome at the HIGHEST possible expense.
