Even the infamous John Maynard Keynes predicted that too much reliance upon credit expansion would eventually lead to wealth inequality and a distortion of the economy. And we see this in his writings where he advocated that government intervention using additional stimulus for for a short duration of time, and only until the economy recovered itself, and began a new move into growth.
But unfortunately humans are not fiscally responsible and logical beings, and like Aesop’s fable of killing the goose to try get all the wealth at once rather than being content with slow and steady wealth creation, the Western world has gone too far in attempting to create a credit based economy and now it must rely upon false data reporting and infinite money printing simply to keep the entire system from collapsing outright.
Unbiased private-sector efforts to calculate the real rate of inflation have yielded a rate of around 7% to 13% per year, depending on the locale–many multiples of the official rate of around 1% per year.What would happen if the real rate of inflation was revealed? The entire status quo would immediately implode. Consider the immediate consequences to Social Security, interest rates and the cost of refinancing government debt.
So what happens if the status quo accepted the reality of 7+% inflation? Here are a few of the consequences:
1. Social Security beneficiaries would demand annual increases of 7+% instead of zero or near-zero annual increases.
The Social Security system would be revealed as unsustainable if real inflation (7+% annually) were made public.
2. Global investors might start demanding yields on Treasury bonds that are above the real rate of inflation.
Bond yields of 8+% would collapse the status quo of massive government deficit spending.
3. Private-sector interest rates would also rise, crushing private borrowing.How many autos, trucks and homes would sell if buyers had to pay 8% interest on new loans? A lot less than are being sold at 1% interest auto loans or 3.5% mortgages.
4. Any serious decline in private and state borrowing would implode the entire system. Recall that a very modest drop in new borrowing very nearly collapsed the global financial system in 2008-09, as the whole system depends on a permanently monstrous expansion of new borrowing to fund consumption, student loans, taxes, etc. – Of Two Minds
Governments have used the propaganda of the mainstream media, coupled with over $1 trillion per year in welfare assistance, to mask the underlying reality that most people’s standards of living have declined immensely since 2000. And when you look at the newest alternative data model known as the Burrito Index, you realize just how great price inflation has overtaken the economy, and left the 99% far worse off since wages have climbed less than 1% in relation to inflation.
Since we keep detailed records of expenses (a necessity if you’re a self-employed free-lance writer), I can track the real-world inflation of the Burrito Index with great accuracy: the cost of a regular burrito from our local taco truck has gone up from $2.50 in 2001 to $5 in 2010 to $6.50 in 2016.
That’s a $160% increase since 2001; 15 years in which the official inflation rate reports that what $1 bought in 2001 can supposedly be bought with $1.35 today. – Peak Prosperity
The fact of the matter is, the economy is completely broken and at the point where the central banks and governments can do nothing to stop the eventual drop off the cliff. So they must continue to spin tales of ‘recovery’, manipulate data in their weekly, monthly, and quarterly reports, while behind the scenes continuing to churn out over $1.2 trillion in new credit every six months just to keep the system treading water and not instantly sinking to the bottom of the ocean.
Kenneth Schortgen Jr is a writer for Secretsofthefed.com,Roguemoney.net, and To the Death Media, and hosts the popular web blog, The Daily Economist. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.