Michael Snyder – Dennis Tubbergen

What is the Real Story?

For many years I have written about how economic data is often ‘massaged” (or manipulated?) to make the reported numbers look more favorable.

This is true of the reported inflation rate, the reported unemployment rate, and the money supply.

Now, it seems that there is extreme manipulation as far as the jobs report is concerned. This from Michael Snyder (Source: http://theeconomiccollapseblog.com/dont-be-stupid-the-u-s-economy-actually-lost-2-5-million-jobs-last-month/):

I can’t take it anymore. Fake numbers that are released by the government get turned into fake news by the corporate media, and many Americans don’t even realize that they are being conned. Major news outlets all over the country are breathlessly trumpeting the “blockbuster jobs report” as if it is a sign from heaven that good economic times are ahead. We are being told that the U.S. economy added 517,000 jobs last month, but that isn’t true. Sadly, the truth is that the U.S. economy actually lost 2.5 million jobs in January. Yes, you read that correctly. So how in the world does a loss of 2.5 million jobs become a “gain” of 517,000 jobs? Every month, government bureaucrats apply “adjustments” to the numbers that they believe are appropriate, and at this point, their “adjustments” have become so absurd that they have turned the monthly employment report into a total farce.

As I have been documenting on my website for weeks, there has been a tremendous wave of layoffs over the last several months.

Google, Microsoft, Amazon, Apple, Facebook, Lyft, Twitter, Walmart, McDonald’s, FedEx, and countless other large corporations have decided to conduct mass layoffs.

But now the government expects us to believe that the U.S. economy is actually adding jobs at a very brisk pace?

That doesn’t make any sense at all.

Unfortunately, the corporate media is totally buying it. For example, CNBC just posted an article that described the jobs report as “stunningly strong”…

The employment picture started off 2023 on a stunningly strong note, with nonfarm payrolls posting their biggest gain since July 2022.

Nonfarm payrolls increased by 517,000 for January, above the Dow Jones estimate of 187,000 and December’s gain of 260,000, according to a Labor Department report Friday.

And a CNN article has quoted one expert as saying that “the labor market is more like a bullet train”…

“With 517,000 new jobs added in January 2023 and the unemployment rate at 3.4%, this is a blockbuster report demonstrating that the labor market is more like a bullet train,” Becky Frankiewicz, president and chief commercial officer of ManpowerGroup, said Friday.

Really?

After all of the layoffs that we have witnessed in recent months, does she really believe that?

Not to be outdone, Moody’s Chief Economist Mark Zandi boldly declared that any concerns about a coming recession “should be completely dashed by these numbers”…

The January jobs report should “dash” concerns of recession, Moody’s chief economist said Friday, but warned that the numbers may overstate job growth.

“Any concern the economy is in recession or close to a recession should be completely dashed by these numbers,” Moody’s Chief Economist Mark Zandi told CNN’s Matt Egan on Friday, adding that it would take “an awful lot” to send the US economy into a downturn.

The U.S. economy did not add 517,000 jobs last month.

That is the “adjusted” number.

The “unadjusted” number actually shows that the U.S. economy lost 2.5 million jobs last month. The following comes from Bloomberg…

For the establishment survey, the government’s updated seasonal factors may have impacted the headline payrolls figure. On an unadjusted basis, payrolls actually fell by 2.5 million last month.

That is actually what was measured.

But if you brazenly add more than 3 million jobs to the report that simply do not exist, it makes it look like the U.S. economy is doing just great.

As we near the end of February, there have been even more layoffs announced. (Source: https://www.zerohedge.com/personal-finance/after-worst-january-job-cuts-great-recession-here-are-12-major-layoffs-have)

#1 Disney has decided to tell approximately 7,000 employees to hit the bricks…

“We will be reducing our workforce by approximately 7,000 jobs,” CEO Bob Iger said during the company’s first quarter earnings call. “While this is necessary to address the challenges we’re facing today, I do not make this decision lightly. I have enormous respect and appreciation for the talent and dedication of our employees worldwide, and I’m mindful of the personal impact of these changes.”

#2 Yahoo has announced that it will be laying off “more than 20% of its workforce”…

Yahoo will lay off more than 20% of its workforce by the end of 2023, eliminating 1,000 positions this week alone, the company said in a statement Thursday.

#3 Ebay was doing quite well, but now they have decided that 4 percent of their workers are no longer needed…

Ebay on Tuesday announced plans to cut 500 jobs, or about 4% of its workforce, according to a filing with the SEC.

#4 Affirm is yet another tech company that has recently made a decision to conduct mass layoffs…

Affirm announced it’s cutting 19% of its workforce Wednesday. The news came as it reported second quarter earnings that fell below analyst estimates on both the top and bottom lines.

#5 As the U.S. housing crash deepens, JPMorgan Chase has concluded that now is the time to “cut hundreds of mortgage employees”…

JPMorgan Chase & Co. cut hundreds of mortgage employees this week, adding to job losses across the industry as home-lending businesses continue to be hurt by elevated interest rates.

#6 GoDaddy just let their workers know that they plan to “reduce the size of our global team by about 8%”…

Today, we are announcing a plan to reduce the size of our global team by about 8%. This will come as difficult news for many valued and respected GoDaddy team members.

#7 Micron is one of the biggest private employers in Idaho, but now it intends to “reduce its global headcount by about 10% over the next year”…

Micron has begun laying off workers, a spokesperson for the company told the Idaho Statesman.

The news marks the beginning of the company’s plan to reduce its global headcount by about 10% over the next year. Micron CEO Sanjay Mehrotra announced during a quarterly conference call with investors in December that the company is taking significant steps to reduce costs and operating expenses as demand for its principal products wanes.

#8 GitHub has become yet another victim of the downsizing trend in the tech industry…

Microsoft-owned GitHub is laying off 10% of its staff, the company confirmed to Fortune.

#9 Nomad Health just laid off approximately 20 percent of their entire corporate workforce…

Nomad Health, a healthcare staffing startup, laid off around 20% of its corporate workforce this week, according to four terminated employees, as the surge in travel nurses and other temporary healthcare workers ignited by the pandemic cools down.

#10 Zoom is giving the axe to approximately 1,300 workers…

Zoom on Tuesday said it will lay off about 1,300 employees, or approximately 15% of its staff, becoming the latest tech company to announce significant job cuts as a pandemic-fueled surge in demand for digital services wanes.

#11 Boeing was supposedly going to be hiring more workers, but instead, the company just announced that thousands of positions in finance and human resources will be eliminated…

“We expect about 2,000 reductions this year primarily in Finance and HR through a combination of attrition and layoffs,” Boeing confirmed Monday.

#12 Do you remember when Dell computers were still popular? Unfortunately, the tide has turned, and now Dell has been forced to get rid of 6,650 workers…

Dell Technologies Inc. is eliminating about 6,650 roles as it faces plummeting demand for personal computers, becoming the latest technology company to announce thousands of job cuts.

Despite reports to the contrary, the labor market is not healthy.

If you or someone you know could benefit from our educational materials, please have them visit our website at www.RetirementLifestyleAdvocates.com. Our webinars, podcasts, and newsletters can be found there.

Happy New Year – New Taxes Await

Happy New Year! And, with the new year comes higher taxes, thanks to the Washington politicians.

While I fully expect another difficult year for the economy and investing, the consumer spending-dependent US economy will have to withstand higher taxes in addition to record debt levels and inflation.

This from “Zero Hedge” (Source: https://www.zerohedge.com/political/heres-list-biden-tax-hikes-which-take-effect-jan-1):

When the Democrats finally passed the “Inflation Reduction Act” in 2022 (how’s that going?), they included several tax hikes set to take effect on Jan. 1, 2023.

Americans for Tax reform‘s Mike Palicz has conveniently compiled a list of them, along with his take on their intended effects:

$6.5 Billion Natural Gas Tax Which Will Increase Household Energy Bills

Think your household energy bills are high now? Just wait until the three major energy taxes in the Inflation Reduction Act hit your wallet. The first is a regressive tax on American oil and gas development. The tax will drive up the cost of household energy bills. The Congressional Budget Office estimates the natural gas tax will increase taxes by $6.5 billion.

And, of course, this tax hike violates Biden’s pledge not to raise taxes on Americans making under $400,000 per year. According to the American Gas Association, the methane tax will slap a 17% increase on the average family’s natural gas bill.

$12 Billion Crude Oil Tax Which Will Increase Household Costs

Next up – a .16c/barrel tax on crude oil and imported petroleum products which will end up on the shoulders of consumers in the form of higher tax prices.

The tax hike violates President Biden’s tax pledge to any American making less than $400,000 per year.

As noted above, Biden administration officials have repeatedly admitted taxes that raise consumer energy prices are in violation of President Biden’s $400,000 tax pledge.

As if it weren’t bad enough, Democrats have pegged their oil tax increase to inflation. As inflation increases, so will the level of tax.

$1.2 Billion Coal Tax, Which Will Increase Household Energy Bills

This one increases the current tax rate on coal from $0.50 to $1.10 per ton, while coal from surface mining would increase from $0.25 per ton to $0.55 per ton, which will raise $1.2 billion per year in taxes that will undoubtedly be passed along to consumers in the form of higher energy bills.

$74 Billion Stock Tax Which Will Hit Your Nest Egg — 401(k)s, IRAs, and Pension Plans

Democrats are now imposing a new federal excise tax when Americans sell shares of stock back to a company.

Raising taxes and restricting stock buybacks harms the retirement savings of any individual with a 401(k), IRA or pension plan.

Union retirement plans will also be hit.

The tax will put U.S. employers at a competitive disadvantage with China, which does not have such a tax.

Stock buybacks help grow retirement accounts. Raising taxes and restricting buybacks would harm the 58 percent of Americans who own stock and more than 60 million workers invested in a 401(k). An additional 14.83 million Americans are invested in 529 education savings accounts.

Retirement accounts hold the largest share of corporate stocks, accounting for roughly 37 percent of the outstanding $22.8 trillion in U.S. corporate stock, according to the Tax Foundation.

In 2017, corporate-sponsored funds made up $4.45 trillion in market value; union-sponsored funds accounted for $409 billion; and public-sponsored funds, which benefit teachers and police officers, added up to $4.25 trillion.

A tax on buybacks could dissuade companies from doing so, and US companies will face significant compliance costs, which will – again, be passed along to consumers.

$225 Billion Corporate Income Tax Hike, Which Will Be Passed on to Households

American businesses reporting at least $1 billion in profits over the past three years will now face a 15% corporate alternative minimum tax, which will be passed along in the form of higher prices, fewer jobs, and lower wages, according to Americans for Tax Reform.

A Tax Foundation report from last December found a 15 percent book tax would reduce GDP by 0.1 percent and kill 27,000 jobs.

Preliminary cost estimates from the Congressional Budget Office found the provision would increase taxes by more than $225 billion.

According to JCT’s analysis, 49.7 percent of the tax would be borne by the manufacturing industry at a time when manufacturers are already struggling with supply-chain disruptions.

Which industry will likely be most affected? According to the Tax Foundation, “the coal industry faces the heaviest burden of the book minimum tax, facing a net tax hike of 7.2 percent of its pretax book income, followed by automobile and truck manufacturing, which faces a 5.1 percent tax hike.”

There is really no such thing as a business tax. When businesses are required to pay additional taxes, the business simply adjusts the price of the product or service that the business offers in order to cover the tax. This means that consumers pay more when purchasing a product or service.

As I write this, I just paid my natural gas bill, which is how I heat my West Michigan home. The bill that I just paid was significantly higher than the bill from the same time last year. Now, after this tax is implemented, I can expect another 17% increase in the cost of natural gas. That increase will be solely the result of new taxes.

These taxes come at a time when the average American family is struggling due to inflation. Discretionary income in many households is now a memory rather than a reality. Making ends meet has become a nightmare for many households, and it’s now about to get worse.

Michael Snyder, an author, and prolific economic commentator, recently noted that almost 2 out of 3 American households are now living paycheck to paycheck. (Source: https://www.silverdoctors.com/headlines/world-news/15-facts-prove-a-massive-economic-meltdown-is-already-happening-right-now/)

This (Source: https://www.cnbc.com/2022/12/15/amid-high-inflation-63percent-of-americans-are-living-paycheck-to-paycheck.html) from CNBC:

As rising prices continue to weigh on households, more families are feeling stretched too thin.

As of November, 63% of Americans were living paycheck to paycheck, according to a monthly LendingClub report — up from 60% the previous month and near the 64% historic high hit in March.

Even high-income earners are under pressure, LendingClub found. Of those earning more than six figures, 47% reported living paycheck to paycheck, a jump from the previous month’s 43%.

“Americans are cash-strapped and their everyday spending continues to outpace their income, which is impacting their ability to save and plan,” said Anuj Nayar, LendingClub’s financial health officer.

Although consumer prices rose less than expected in November, persistent inflation has caused real wages to decline.

Real average hourly earnings are down 1.9% from a year earlier, according to the latest reading from the U.S. Bureau of Labor Statistics.

This leaves many Americans in a bind as inflation and higher prices force more people to dip into their cash reserves or lean on credit just when interest rates rise at the fastest pace in decades.

Already, credit card balances are surging, up 15% in the most recent quarter, the largest annual jump in more than 20 years.

At the same time, credit card rates are now more than 19%, on average — an all-time high — and still rising.

As I stated last week, because of the actions of the politicians and the Fed, it’s my firm belief that severe deflation and economic pain lie ahead.

Make sure you educate yourself and take action to protect yourself.

Economic Deterioration and Washington Excesses

As the year 2022 comes to a close, and we look forward to next year, it is difficult to move ahead, anticipating a better year economically speaking.

That might seem too negative since the year 2022 wasn’t great economically. This past year saw negative economic growth in the first two quarters of the year, raging inflation, and now, as the year draws to a close, the evidence suggests that the economy is deteriorating despite the claims of some politicians to the contrary.

We have been discussing the economy and investing markets in this publication each week all year, and some of what will be discussed this week is a review of past discussions. However, this past week, Michael Snyder wrote a well-sourced piece documenting the strength of the economy as we move into 2023.

Here is a bit from the piece (Source: http://theeconomiccollapseblog.com/15-facts-that-prove-that-a-massive-economic-meltdown-is-already-happening-right-now/):

Economic conditions just keep getting worse. As we prepare to enter 2023, we find ourselves in a high inflation environment at the same time that economic activity is really slowing down. And just like we witnessed in 2008, employers are conducting mass layoffs as a horrifying housing crash sweeps across the nation. Those that have been waiting for the U.S. economy to implode can stop waiting, because an economic implosion has officially arrived. The following are 15 facts that prove that a massive economic meltdown is already happening right now…

#1 Existing home sales have now fallen for 10 consecutive months.

#2 Existing home sales are down 35.4 percent over the last 12 months. That is the largest year over year decline in existing home sales since the collapse of Lehman Brothers.

#3 Homebuilder sentiment has now dropped for 12 consecutive months.

#4 Home construction costs have risen more than 30 percent since the beginning of 2022.

#5 The number of single-family housing unit permits has fallen for nine months in a row.

#6 The Empire State Manufacturing Index has plunged “to a reading of negative 11.2 in December”. That figure was way, way below expectations.

#7 In November, we witnessed the largest decline in retail sales that we have seen all year long.

#8 Even the biggest names on Wall Street are starting to let workers go. In fact, it is being reported that Goldman Sachs will soon lay off approximately 4,000 employees.

#9 The Federal Reserve is admitting that the number of actual jobs in the United States has been overstated by over a million.

#10 U.S. job cuts were 417 percent higher in November than they were during the same month a year ago.

#11 A recent Wall Street Journal survey found that approximately two-thirds of all Americans expect the economy to get even worse next year.

#12 A newly released Bloomberg survey has discovered that 70 percent of U.S. economists believe that a recession is coming in 2023.

#13 Inflation continues to spiral wildly out of control. At this point, a head of lettuce now costs 11 dollars at one grocery store in California.

#14 Overall, vegetable prices in the United States are more than 80 percent higher than they were at this same time last year.

#15 Thanks to the rapidly rising cost of living, 63 percent of the U.S. population is now living paycheck to paycheck.

In a desperate attempt to get inflation under control, the Federal Reserve has been dramatically increasing interest rates.

Those interest rate hikes are what has caused the housing market to crash, but Fed officials insist that such short-term pain is necessary in order to tame inflation.

If you’d like to learn more details, visit www.RetirementLifestyleAdvocates.com and view the 12/26/2022 “Headline Roundup” webinar where I go into detail on each of these 15 points.

As I have discussed frequently in the past in this publication and on the “Headline Roundup” webinars, inflation cannot be brought under control until the Washington politicians balance the budget.

Rather than taking inflation and the budget deficit seriously, the Washington politicians recently rammed through a 4,000+ page piece of legislation that will set the country back $1.7 trillion.

True to form, given the time frame between the introduction of the bill and its passage and the sheer volume of the bill, there is not one politician that voted for the bill that could have read it.

As I noted last week, the politicians are not only wildly spending on a deficit basis, they are also fabricating the reported deficit numbers. Last week, in “Portfolio Watch”, I shared an excerpt from a piece written by Egon von Greyerz who noted that as the reported deficit was $1.4 trillion, the national debt increased by $2.5 trillion.

It must terribly frustrate Washington politicians that there are still citizens that can actually do the math. Sigh, it’s probably only a matter of time before the reported debt numbers are also manipulated to make them seem more favorable.

I liken this to the decades-old metaphor of re-arranging the deck chairs on the Titanic. It might seem more comfortable for a brief period, but the ship is still going to sink.

Michael Snyder, in the piece referenced above, comments:

This week, an abominable 1.7 trillion dollar omnibus spending bill is being rammed through Congress, but not a single member of Congress has read it.

The bill is 4,155 pages long, and U.S. Senator Rand Paul just held a press briefing during which he wheeled it out on a trolley…

After the grossly bloated $1.7 trillion Omnibus spending bill advanced in the Senate by a vote of 70-25, GOP Senator Rand Paul held a press briefing during which he wheeled in the “abomination” on a trolley and demanded to know how anyone would be able to read it before the end of the week.

Paul, along with the only other dissenting Senate Republicans Mike Braun, Ron Johnson, Mike Lee, and Rick Scott highlighted how ludicrous the fast tracking of the bill has been.

Unfortunately, this absurd spending bill has broad support on both sides of the aisle, and that just shows how broken Washington has become.

Our system of government has failed time after time, and our politicians continue to spend money on some of the most ridiculous things imaginable.

The following examples that were pulled out of the 1.7 trillion dollar omnibus spending bill were discovered by the Heritage Foundation…

-$1.2 million for “LGBTQIA+ Pride Centers”
-$1.2 million for “services for DACA recipients” (aka helping illegal aliens with taxpayer funds) at San Diego Community College.
-$477k for the Equity Institute in RI to indoctrinate teachers with “antiracism virtual labs.”
-$1 million for Zora’s House in Ohio, a “coworking and community space” for “women and gender-expansive people of color.”
-$3 million for the American LGBTQ+ Museum in New York City.
-$3.6 million for a Michelle Obama Trail in Georgia.
-$750k for the for “LGBT and Gender Non-Conforming housing” in Albany, New York.
-$856k for the “LGBT Center” in New York.

And have you noticed that our politicians often prefer to push these types of bills through just before major holidays when hardly anyone is paying attention?

Ironically, the bill that established the Federal Reserve in 1913 was jammed through congress and signed into law just before the Christmas holiday as well.

Because of the actions of the politicians and the Fed, it’s my firm belief that severe deflation and economic pain lie ahead.

Make sure you educate yourself and take action to protect yourself.

Inflation and the Curious Fed

Stocks had another down week while gold and silver continued to rise. As noted last week, all major US stock indices are now trading below their 200-day moving averages, a technically significant level.

As a reminder, there is just one week remaining to request the February Special Report titled, “Stock Update: Is the Crash Upon Us?”. Visit www.RequestYourReport.com to request the report for yourself or someone else.

Inflation remains the dominant news story. The Federal Reserve called an emergency meeting last Monday that resulted in no action being taken regarding interest rates, a bit of a surprise to many analysts.

With inflation raging at levels not seen in 40 years, the Fed’s inaction is curious.

From my perspective, as I outline in the March “You May Not Know Report” real interest rates will need to be positive to make an impact on inflation. Here is a bit from the March report:

As an aside, but for an important point of clarification, the Fed does not buy US Government debt directly. The big banks buy the US Government debt and then the Fed buys the debt from the big banks using newly created currency.

I talk to many clients and radio show listeners who ask how much the Fed needs to raise interest rates to get inflation under control. While there is not a universally accepted answer to that question, the answer that is often given is that real interest rates need to be positive.

Here’s an example to make the point. Presently, the official inflation rate is 7.84%, which is the non-seasonally adjusted rate as of January. The yield on the 10-year US Treasury as this piece is being written is 2.035%. This means that an investor in a 10-Year US Treasury note experiences a real interest rate that is almost 6% negative!

When calculating the real inflation rate using the inflation calculation formula used in the late 1970’s and early 1980’s, rather than using the heavily manipulated Consumer Price Index, one concludes that the real inflation rate is about 16%.

In the early 1980’s when inflation was at this level, interest rates had to be increased to 20% to get inflation under control. With interest rates at 20%, real interest rates were positive, and inflation was eventually brought under control.

In my view, that is where we now find ourselves. With the real inflation rate at 16%, raising interest rates to 1% or 2% doesn’t make much of an impact on inflation. However, it will probably make a huge impact on financial markets. In calendar year 2018, when the Fed increased interest rates to a little over 2%, financial markets reacted very negatively. It’s my view they will react similarly again.

It’s my view that we are headed for higher consumer prices and a stagnating economy and distress in the financial markets. While the Fed is feeling political pressure to do something about inflation, the math dictates that the central bank won’t be able to raise rates enough to get inflation under control unless the federal government’s budget is balanced or gets a lot closer to balanced.

Since that is unlikely to happen anytime soon, the Fed’s actions with interest rates will be more form than substance. Inflation will probably continue and accelerate while financial markets react negatively to small increases in interest rates.

The reality is that there are many Americans feeling the pinch of rising inflation. Michael Snyder recently commented in an article he wrote stating that 70% of Americans are now living paycheck to paycheck. (Source: http://theeconomiccollapseblog.com/the-cost-of-living-in-the-united-states-is-rising-to-absolutely-absurd-levels/)

This paycheck-to-paycheck existence is directly attributed to inflation. Here is an excerpt from Mr. Snyder’s piece:

Over the past couple of years, the Federal Reserve has pumped trillions of fresh dollars into the financial system.

You just can’t “undo” that.

And our politicians in Washington have been on the biggest borrowing spree in all of human history. I think that many of them truly believed that there would never be any serious consequences, but as Forbes has aptly noted, we “are now paying a heavy price for this magical thinking”…

Unfortunately, Americans are now paying a heavy price for this magical thinking. Inflation—spurred at least in part by record government spending and inaction on other issues—is running at its highest rate since 1982. The prices for meat and eggs are up 12.2% since last year. Furniture and bedding is up 17% and used cars and trucks are up 40.5%.

Meanwhile, the Treasury Department recently reported America’s total national debt is now over $30 trillion—the highest ever. To put this in context: If you stacked $30 trillion of $100 bills you could almost reach the weather satellites orbiting the earth at over 20,000 miles above us.

Today, we have absolutely gigantic mountains of money chasing a smaller pool of goods and services because of the pandemic.

As a result, the cost of living has been soaring into the stratosphere.

For example, one new study found that 82.2 percent of new vehicle buyers actually paid above sticker price during the month of January…

A study from the online marketplace found that 82.2% of new car buyers paid over the manufacturer’s suggested retail price (MSRP) in January, up from .3% in January 2020, before the coronavirus pandemic started affecting the industry

The average price paid above sticker was $728, while savvy shoppers were getting a discount of $2,648 just two years ago. Cadillac’s customers led the way by paying a $4,048 premium, followed by Land Rover’s ($2,565) and Kia ‘s ($2,289).

In my entire lifetime, I have never seen anything like this.

Years ago, I remember spending hours hammering a salesman until I was totally satisfied that the dealership would not knock off a single penny more from the price of a used vehicle that I wanted.

But now things have completely changed.

Today, just about everyone is paying above MSRP.

Of course, it is becoming more expensive to fuel our vehicles as well. On Wednesday, the average price of a gallon of gasoline in California hit a brand new record high…

Gas in California hit a record high of $4.72 a gallon on average on Wednesday — and experts say a whopping $5 a gallon will likely be the norm there in a matter of months, if not sooner.

Sadly, five-dollar gas is only just the beginning.

In fact, one expert that was interviewed by Yahoo Finance has actually raised the specter of seven dollar gas…

Drivers best start bracing for another surge in gas prices amid the conflict between Russia and Ukraine and years of under-investment by the oil industry, warns one veteran energy strategist.

“My guess is that you are going to see $5 a gallon at any triple-digit [oil prices] … as soon as you get to $100. And you might get to $6.50 or $7. Forget about $150 a gallon, I don’t know where we will be by then,” Energy Word founder Dan Dicker said on Yahoo Finance Live.

Can you imagine paying seven dollars for a gallon of gasoline?

That definitely seems crazy to me. But soon it will happen.

Housing prices continue to surge as well. In fact, we are being told that a recent spike in lumber prices has increased the average price of a new home by nearly $19,000…

“If people aren’t listening now, the dire predictions that we’ve been making appear to be coming true,” National Association of Home Builders CEO Jerry Howard said on “Varney & Co.” Wednesday.

Volatile lumber prices have caused the average price of a new single-family home to increase by $18,600, according to a new statistic from the NAHB.

Heating our homes is becoming a lot more painful too. According to the Heartland Institute, the average American family saw their heating and cooling costs jump “by as much as $1,000” last year…

A new analysis by the Heartland Institute reports the typical American family’s home heating and cooling costs increased by as much as $1,000 in 2021 as a result of President Joe Biden’s energy and environmental policies.

Needless to say, most Americans were not prepared for a dramatic shift in the cost of living such as this. At this point, 70 percent of Americans are living paycheck to paycheck.

So how are people making ends meet? Well, we just found out that credit card debt rose at the fastest pace ever seen during the fourth quarter of 2021…

As I have been suggesting, the best course of action is to hedge for both inflation and deflation using the Revenue Sourcing™ planning strategy.

Inflationary Death Spiral – Part Two

The economic news continues to concern.

As anyone who has been a long-term reader of my posts knows, when the Federal Reserve began quantitative easing programs, a.k.a. currency creation, I suggested we would ultimately have inflation followed by deflation or should the Fed be tempered in its approach to currency creation, we could move directly to a deflationary environment.

Technically speaking, inflation is an expansion of the money supply while deflation is a contraction of the money supply. Since all currency presently is debt, when debt levels reach unsustainable levels, the money supply contracts.

Since shortly after the time of the financial crisis, the Federal Reserve has been engaged in currency creation. When studying history, one discovers that currency creation initially results in prosperity. A better term to use to describe this prosperity is prosperity illusion since currency creation doesn’t solve the debt excess problem; instead, it temporarily masks the effects of too much debt on the economy.

History teaches us that eventually, the debt excesses become the dominant economic force and because the central bankers and policymakers have only one response to the recessionary impact of debt excesses, they resort to more currency creation.

This is the beginning of something that I wrote about last week – the inflationary death spiral.

If you missed last week’s issue of “Portfolio Watch”, you can read it at www.RetirementLifestyleAdvocates.com.

For reference, I am reproducing the inflationary death spiral chart here again.

Notice from the chart, that the death spiral begins in earnest when the politicians began to promote the rhetoric that deficits don’t matter.

Obviously, with the proponents of the non-sensical Modern Monetary Theory are gaining in number and while their collective voice is getting louder, this theory is being advanced because any theory based on sound economics would require that government spending deficits be eliminated, and reliable currency being adopted.

Massive deficit spending with existing debt levels automatically eliminates the adoption of reliable, sound money. Policymakers have two choices – one, act responsibly when it comes to finances, or two, promote a theory that validates your collective irresponsible behavior.

The current crop of policymakers has chosen the latter.

But, as the inflationary death spiral illustrates, eventually, this theory will be proven to be erroneous as inflation accelerates in earnest.

For context, let’s review the first few stages of the inflationary death spiral.

One, the politicians and policymakers advance the theory that deficits don’t matter. Two, government spending picks up speed and rises far faster than tax revenues. The increasing deficit is funded via more currency creation. Three, consumer price inflation kicks in. Four, interest rates begin to rise in response which throws the economy into recession.

I believe that is where we now find ourselves as interest rates began to increase last week and I believe that the economy is already in a recession although not officially. While its highly doubtful that interest rates will rise from here in a straight line, over time, interest rates will move higher exacerbating the economic difficulties.

The response to recession will be more currency creation…..and the cycle continues.

Michael Snyder penned a terrific piece last week that brilliantly describes where we find ourselves economically speaking currently. (Source: http://themostimportantnews.com/archives/they-have-lost-control-and-now-the-dollar-is-going-to-die)

Michael begins with some context:

All throughout history, there have been many governments that have given in to the temptation to create money at an exponential rate, and it has ended badly every single time.

So, our leaders should have known better.

But it is just so tempting because pumping out money like crazy always seems to work out just great at first. For example, when the Weimar Republic first started wildly creating money it created an economic boom, but we all know how that experiment turned out in the end.

He then continues by discussing some of the recent economic news beginning with consumer price inflation.

Very painful inflation is here, and on Wednesday we learned that prices have been rising at the fastest pace in more than 30 years…

The consumer price index, which is a basket of products ranging from gasoline and health care to groceries and rents, rose 6.2% from a year ago, the most since December 1990. That compared with the 5.9% Dow Jones estimate.

On a monthly basis, the CPI increased 0.9% against the 0.6% estimate.

If inflation continues to rise at about 1 percent a month, it won’t be too long before we are well into double digits on a yearly basis.

Of course, I don’t actually put too much faith in the inflation numbers that the government gives us, because the way inflation is calculated has been changed more than two dozen times since 1980.

And every time the definition of inflation has been changed, the goal has been to make inflation appear to be lower.

According to John Williams of shadowstats.com, if inflation was still calculated the way it was back in 1980, the official rate of inflation would be close to 15 percent right now.

This is a real national crisis, and it isn’t going away any time soon.

One of the factors that is driving up the overall rate of inflation is the price of gasoline. If you can believe it, the price of gas is almost 50 percent higher than it was last year at this time…

Gasoline prices last month shot up nearly 50% from the same month a year ago, putting them at levels last seen in 2014. Grocery prices climbed 5.4%, with pork prices up 14.1% from a year ago, the biggest increase since 1990.

Prices for new vehicles jumped 9.8% in October, the largest rise since 1975, while prices for furniture and bedding leapt by the most since 1951. Prices for tires and sports equipment rose by the most since the early 1980s.

Even Joe Biden is using the term “exceedingly high” to describe the current state of gasoline prices.

Other forms of energy are also becoming a lot more expensive…

The price of electricity in October increased 6.5% from the same month a year ago while consumer expenses paid to utilities for gas went up 28%, according to numbers released Wednesday by the U.S. Bureau of Labor Statistics. Fuel oil rose 59%, and costs for propane, kerosene and firewood jumped by about 35%, the data show.

It is going to cost you a lot more money to heat your home this winter.

Price increases are occurring while real wages are declining. More from Michael’s piece:

The Labor Department’s own numbers show that real average hourly earnings are going down…

The Labor Department reported Friday that average hourly earnings increased 0.4% in October, about in line with estimates. That was the good news.

However, the department reported Wednesday that top-line inflation for the month increased 0.9%, far more than what had been expected. That was the bad news – very bad news, in fact.

That’s because it meant that all told, real average hourly earnings when accounting for inflation, actually decreased 0.5% for the month.

What this means is that our standard of living is going down.

Americans are increasingly resorting to taking on more debt to make ends meet. Household debt is now more than $15 trillion, a record high while credit card usage is increasing, and debit card usage is declining.

The death spiral is in full swing.