Most people fail to understand basic mathematical concepts such as exponents and ratios as they apply to everyday life. We usually “get it” when it comes to the mathematical facts that are taught in school (if we passed through basic Algebra) but nobody in our government schools ever teaches how these functions apply to the real world by Karl Denninger
The reason they don’t, I assert, is that the educational establishment from the government itself on down knows full well how these functions relate to everyday life, and they also know that if you understood these facts there would be a revolution the next morning as you would understand exactly how you have been systematically and intentionally robbed by the mavens of finance with not only the consent but the active participation of your government.
With that in mind I wish to present two pieces of data today. The first is “average hourly earnings”, which is from the St Louis Fed, and the second is the total systemic debt, public and private, taken from the Fed Z1.
Why the second as a point of comparison? Because as I have repeatedly pointed out “credit” (that is, debt on the other side of the balance sheet) spends exactly the same as does currency (emitted money.) Therefore, when one compares earnings power in real terms one must look at the denominator that is in actual use, which is that currency + credit.
Over the last 30 years, from 1980 to today, the average production and non-supervisory employee earnings have gone from $6.61 to $20.09 (not seasonally adjusted.) We will use the September 2012 cut-off for this because that’s where our Z1 data ends (for another few weeks), which is $19.83.
This is an almost-perfect triple, which sounds great at first — you’re making three times as much, per hour, today as you were in 1980.
But how far does that money go?
In January of 1980 (in other words, the end of Q4 1979) the total systemic debt was $4.274 trillion. Were that to have tripled, that is, your purchasing power was to remain exactly constant then systemic debt would be about $12.82 trillion.
It is in fact $55.358 trillion, or 12.95 times greater.
Now to be fair we adjust for the population change. It has gone from ~227 million to about 314 million; roughly a 38% increase. In other words on a per-person basis the increase in debt has been a bit over 9x.
You got 3 of the multiples in increased dollars in your paycheck. You went backwards at three times the rate of “nominal” acceleration unless you were somehow able to glom some of the debt cycle “profits”, all of which were factually illusory.
This is what “drove” you into the stock market. It is what “drove” you into “investing” rather than saving. But since you can only pick up small crumbs even if you do so, and even if you’re right more often than wrong, the fact remains that you are still behind.
Who stole your purchasing power via this mechanism?
That’s simple — the 0.01%. The Wall Street Banks. The politicians. Their friends.
Everyone but you.
But — but — but you say, how about since 2006?
Ok. 2006, incidentally, is when the BLS started tracking all employees, not just non-supervisory ones. At the end of the first quarter of 2006 the average hourly earnings were $20.38. Again, as of 10/1/2012 (last update for the Z1) they were $23.55, or an increase of 15.6%.
At the end of the first quarter of 2006 systemic debt was $43.16 trillion. As of the end of the third quarter of last year it was $55.36 trillion, as noted before, an increase of 28.3% while population only increased about 5% during the same period.
In other words you are still going backward and in fact your hourly earnings are decreasing in purchasing power terms and have been since 2006, just as they have been since 1980. In fact GDP has “increased” by 20.1% over the same period (2006-Q1 to 2012-Q3) yet debt has gone up by 28.3% (22.2% population-adjusted), which means that GDP has actually declined in real terms on a per-capita basis over that period, not advanced.
The so-called “increase” in your wages are an intentional chimera which is thrown to you to make you “feel good” about your earnings “going up.” But in point of fact they’re not going up at all, they are going down because the divisor, the total number of dollars in the system that are available to buy the goods and services are rising much faster than your earnings are.
The fraud you’re being sold is exactly identical to going into a bakery and ordering a sheet cake. The baker asks you how many pieces you would like the cake cut into; your options are 2, 4, 8, 16 or 32. He then tells you that if you’re really hungry you should choose 32, because that way you can eat more pieces.
You’d either laugh at the baker or string him up by his necktie were he to pull that crap, yet this is exactly what Ben Bernanke along with all the politicians have been selling you for the last 30 years.
Incidentally the S&P 500 stood at about 107 at the start of 1980. If it increased at the same rate as systemic credit it would stand at 1385, which is not all that far from where it actually is. “Greatest Bull Market in History” or outright fraud due to credit manipulation by a 0.01% of the population who have systematically and intentionally lied to you while skimming off 90+% of the so-called “gains” of said “bull market”, leaving you with scraps — if you’re fortunate enough to be able to participate at all.
There is no answer to these problems found in “redistribution” or “entitlements.” There is only one answer available, and that is to stop inflating the monetary system through fraudulently unbacked emission of credit and remove same from the system, forcing those who unjustly stole your effort to eat the losses that will ensue and go bankrupt, deflating the price level and restoring balance to the economy so that your purchasing power is also restored.
Would doing that result in a large amount of short-term economic pain? You bet it would. But that pain would fall disproportionately on those who stole from you in the first place, exactly as it should.
There is no other means by which you can restore your purchasing power; all other schemes to “increase credit”, “increase lending”, “lend support through QE” or “tax and redistribute” will simply steal more through the exact mechanism that has been used to rip you off thus far.
I can understand how someone might not “get it” when it comes to how they’ve been robbed if it has not been clear to them, and they simply didn’t know where to look to find the truth. But after seeing this (and verifying it for yourself, which is not very hard), exactly what excuse do you have for continuing to play the puerile game run by both the banksters and the politicians of all stripes?
See also: Chris Martenson – The Crash Course
Inflation (1 of 2)
Inflation (2 of 2)