With Special Co-Host John Rubino
34 Minutes, 34 Slides
If there is one consistent theme we can learn from economic history, it is
that Unsound Money inevitably leads to a Corrupt Society. It is both predictable
and unavoidable.
Since August 1971 when the US adopted an unbacked fiat currency regime, and
thereby launched itself unto the well trodden path of unsound money, the US
has steadily witnessed debt soar while societal financial malfeasance has
equally accelerated.
The measurement of consumer inflation which traditionally reflected (prior
to 1980) assessing the cost of maintaining a constant standard of living (as
measured by a fixed-basket of goods) has been reconfigured to understate the
real rate of inflation via:
- HEDONIC Quality Modeling - lower prices to account for quality
improvements.
- SUBSTITUTION - replace rising components with less expensive alternatives.
- GEOMETRIC WEIGHTING - give less weight to rising components.
- IMPUTATION - i.e. Homeowners' Equivalent Rent. Cost of housing
used to be tied to home prices, but 1983 was switched to an estimate of
what homeowners would have to pay to rent their homes, adjusted hedonically
for quality improvements. Result: massive under reporting of inflation
during the housing bubble.
These devious manipulations have lead to mis-represented measurements of inflation
and growth.
Which...
- No longer measures the cost of maintaining a constant standard of living,
- No longer measures full inflation for out-of-pocket expenditures,
- Lowers the cost of living adjustments to Social Security.
- Creates the false impression of a recovery in GDP (when deflated with
the true inflation number, US growth has been flat or negative since
2009.)
THE UNAVOIDABLE RESULT:
- A disconnect between what the government is telling us about our cost
of maintaining our current lifestyle and our first hand experience,
- A growing suspicion that we're being systematically deceived and exploited,
- A building and economically crippling "Crisis of Trust".
- A narrowing "Horizon of Trust".
- A Dishonest and Corruptible Society.
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