INFLATION REVEALED! "REAL" GDP AND FEDERAL RESERVE BANK UNITS.

Federal Reserve Bank Units (FRBUs), or if you like better, Federal Reserve Buying Units are what circulate goods and services in the U.S.A. and elsewhere on earth.

Many Americans think they have money, but they do not. No one does. 

As I explain in BITCOIN IS SOFTWARE PROTECTED BY COPYRIGHT. BITCOIN IS NOT LEGAL TENDER CASH, money is coined metal by weight and fineness. The Romans said so. It's their word. Always, money can exist without banking and government. 

Today, there is only cash, which is evidence of past bank deposits circulating in perpetuity and checkable deposits, which, too, is bank credit.  Both cash and deposits must have banks and banking to exist. Americans have legal tender cash. 

From the banker's view, cash and deposits are one and the same. Both are liabilities of bankers. 

Everything in America gets priced in cash and deposits, which are one and the same. 

In ELECTRICITY PRICES. SHOCKING, ISN'T IT? THANKS, NIXON, I explain that Richard Nixon, then president of the U.S., through Executive Order 11615, closed the gold window, which put Americans on fiduciary bank credits as money system and thus the world on a floating exchange rate scheme for international trade settlement.


During my university days, professor eggheads who spread their false doctrine of economics, unwittingly of course, cherry-picked as their preferred base GDP from which to calculate "real" GDP average GDP between 1980-1982.  Today, it seems eggheads are fond of 2009. Either way, doing so reveals foolery.

Here, you can see GDP, every year in current dollars as well as "real" GDP expressed in 1971 GDP using the last quarter of 1971 annualized GDP, which is the first quarter of commerce after the Nixon shock of closing the gold window. The chart looks typical of any year where an official government agency "deflates" the current dollar GDP. 

 


Merely measuring today's GDP in another year's GDP fails to capture reality. All anyone is doing is measuring another year's GDP in the base year's inflated GDP.

In doing so, there is no way to isolate effects on price owing to changes in what actually circulates goods — cash and checkable deposits.

And for the foregoing, this is why everyone is wrong who publishes so-called "real" GDP stats using the method approved by economist academicians everywhere.


Edwin Walter Kemmerer gave good description of what is inflation:

Kemmerer goes on to say:

The right way to measure inflation or deflation is to measure changes to the sum of checkable deposits and cash in circulation. The sum of checkable deposits and cash is what I call FRBUs.

FRBUs give the best tool to measure inflation. The chart below reveals the quarterly changes in FRBUs. 

 
And the next chart shows the yearly change of FRBUs, which, of course, is inflation or deflation of that which circulates goods in America under a fiduciary monetary system of bank credits.

 


And here is what True GDP looks like when removing inflation in FRBUs. This is GDP calculated in gold window dollars (GWDs).



As you can see True GDP looks quite a bit different from what politicians sell you. Yet, anyone who has lived as a working-class, wage-earning adult during these years sees how the graph resonates with his or her experiences.

As I recall, the years 1980 through 1982 were bad ones. The years 1986 through 1989 were good ones. From the time the first Gulf War hit until 1993 were bad years. The years 1993 through the dot com peak of the 2000s were good ones, truly good ones.

From dot com to dot bomb were weak years. And then the final credit bubble madness hit with as expressed in the residential realty bubble.

Life has been pretty tough in America since peak credit 2008. The economy has gotten smaller every year since peak credit. Everyone can tell you this is so from their experiences.

Yet, by the shape of the curve, anyone can see the shrinking is slowing. The current economy is about the size between 1993 and 1994.

Likely, using the FRBU deflator is the most accurate tool to measure inflation you can get, unlike the Consumer Price Index (CPI) of the U.S. Department of Labor and its Bureau of Labor Statistics. The jokers at the BLS use all kinds of deceitful trickery to massage the CPI numbers.

Besides, inflation is a banking phenomenon. Without banking there cannot be inflation. As I explain in FALLACY FRAUGHT FORBES TRIES TO STOKE FEARS OF HYPERINFLATION, inflation is the growth of credit that outstrips the growth of output owing to credit being priced too cheap. 

As I show in PARTY OVER OOPS OUT OF TIME. YOU SHOULD HAVE PARTIED LIKE IT WAS 1999, prices for many things have risen substantively since 1999. For many things, today, it takes more minutes for the average wage earner in America than the comparable average wage worker in 1999.

So what is the difference between 1986 through 1999, or the Reagan-Bush Era and the Clinton Good Times versus 2001 through now, or the Bush-Obama Hard Times?

Why it's the growth of checkable deposits relative to cash. It's this growth that results in higher prices and a lower living standard for bottom class and middle class Americans. 

The blue and red bars reveal the growth of cash and checkable deposits, respectively for their respective periods. The orange bars reveal the ratio of cash to checkable deposits.




During the Reagan-Bush Era and the Clinton Good Times when the living standard grew for the average wage earner each year, there were almost two dollars ($1.97) in cash for every one dollar in deposit bank credit. However, during the Bush-Obama Hard Times, there was only about 75 cents ($0.74) in cash for every one dollar in deposit bank credit.

In YOU LIVE AT THE MERCY OF A CLOWN-CAR DRIVEN BY MEN AND WOMEN OF THE FEDERAL RESERVE, I show how clueless former egghead in chief of the Federal Reserve, Ben Bernanke is. Bernanke failed to see a bubble in residential realty brought on by inflation (too much credit). 

Bernanke pursued exactly the wrong policy. Bernanke sought to increase deposit bank credit rather than what he should have done, deflate it. More so, Bernanke should have pursued action to restore a strong cash-to-deposits ratio.

In what class do you find yourself? If you don't know, I explain it in BUT WERE YOU EVER IN THE MIDDLE CLASS?

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PARTY OVER OOPS OUT OF TIME. YOU SHOULD HAVE PARTIED LIKE IT WAS 1999.

Everything most think they know about inflation is wrong, oh so wrong. Almost all suffer from a silly false belief that inflation means higher prices, rather than the reality that inflation leads to higher prices.

Writers from at least since 1810 through the early 1920s understood well what inflation means. However, today, few do. Most don't understand what is inflation because most don't understand banking and the financial system under which they live.

As I wrote in FALLACY FRAUGHT FORBES TRIES TO STOKE FEARS OF HYPERINFLATION, inflation is the growth of credit that outstrips the growth of output owing to credit being priced too cheap. 

The residential realty bubble of the 2000s renders a classic example of inflation. House prices soared because bankers created too much bank credit for everyone to buy houses.

And until the profit squeeze, which always happens during inflation leading to crisis, Americans could flip, re-fi, move up into ever bigger houses. Crisis came when incomes no longer could pay for taxes of all kinds (income, sales, property) as well as living expenses and mortgages.

Americans know that something is wrong at the bedrock of American life today. Americans whose adulthood journey began in the 1980s can tell you this is so.

If you were to work for the average hourly wage, how many minutes would you need to work to buy X where X is a gallon of gasoline, a gallon of milk, a kilowatt hour of electricity, a pound of burger meat and so on? Using the 1980 average wage worker and how many minutes, hours and days that worked needed to work to gain products, how do average wage workers of other years since compare to the 1980 average age worker? 

The tables of the embedded spreadsheet tell you these answers. This spreadsheet captures what Americans know about America.  

Have a listen as I explain how to understand the numbers and how to understand your reality, perhaps for the first time.

Who knew that with these jokers:

ll of us should  have partied back in 1999.


1999 from PRINCE on Myspace.

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THE WEALTHY PEOPLE EFFECT AND WHAT IT TRULY SHOULD MEAN TO YOU

As their neoclassical school brethren, those of the Austrian school get reality as wrong as the Keynesians and Monetarists do. The latter wrongly believe one side of the coin, spending, leads to a better state of trade. The Austrians wrongly believe its the other side of the coin, savings (see Chris Casey's attempt to justify savings over at the Austrian mouthpiece in the USA, Mises.org).

Neither spending nor savings increases the state of trade. It's profit. 

Savings are illusory. It's profit that must arise. If profit lays idle, then trade stops.

Whether Austrians, Keynesians or Monetarists, the Neoclassicists get it wrong because economics is fake, a false knowledge. As I explained in WHY IS THE ECONOMY SO HORRIBLE? BECAUSE ACADEMIA ECONOMICS IS FAKE, like the Keynesians, the Austrians wrongly believe that the basis of trade, or what they call, "the economy" is scarcity and utility. 

Yet, the whole of what humans do, which is trade, can be summed up in two words, property and profit. 

The "wealth effect" is badly named. It should be said as the "wealthy people effect." The "wealthy people effect" also is known as "trickle-down" economics. 

The "wealthy people effect" is the belief that if street prices rise of extant property (right of ownership) that can be held as collateral, wealthy people will trade that property as wealth held in collateral letting them sell rights of action against themselves to buy bank credits in a purchase and sale. With these bank credits, these wealthy ones then will buy luxury goods (e.g., through HELOCs) or to expand business. In either case, it is believed that employment should rise either to produce more of these goods or to fulfill work in expanding business.

The idea of savings is rather silly. There is no such thing as savings. Beyond break-even, individuals and firms gain profit. In trade, there are only purchases and sales. Individuals for themselves or their firms through purchases and sales buy property in bank credits by selling cash, bank credits or debt, or buy property in other things by selling selling cash, bank credits or debt instruments.

Only through profit for workers (wages less living expenses) or firms (sales less outlays) can individuals and firms call for more goods. It is from confidence in expectation of profit that bankers enter into purchases and sales of bank credits for both cash and debt at discount. 

Back in 2010, then chairman of the Federal Reserve, Ben Bernanke said, "Higher equity prices will boost consumer wealth and help increase confidence, which can spur spending." Deciphering, Bernanke said, when stock prices rise, those who hold stock have collateral with increased liquidation prices, which instills confidence in bankers, who will sell bank credits to those seeking it with such collateral.

As I explained in YOU LIVE AT THE MERCY OF A CLOWN-CAR DRIVEN BY MEN AND WOMEN OF THE FEDERAL RESERVE, guys like Bernanke believe prices make people behave rather than increases in their buying power owing to increasing profits, whether by wages less living expenses for individuals or sales less outlays for firms.

Prices aren't wealth, whether rising or not. Only property which can be traded at the moment of trade is wealth. Once trade ceases, that which was traded no longer is wealth, but merely potential wealth. A used bicycle with flat tires and bent handle bars on offer at a garage sale no one buys isn't wealth, yet the seller has property in it.

The foolish believe the key lies in prices. For them, higher prices means worthier collateral. However, ever increasing prices leads to the profit squeeze, when at some point of ever rising prices, outlays outstrip sales and wages fail to rise with living expenses thus pushing people to below break-even loss. It is from then that collapse follows and debt reckoning begins.

Even the phrase "paradox of thrift" is badly named. Thrift means prosperity, not savings.

The word savings enters English in 1737 meaning "money saved," in turn from the Old French "save" meaning to "keep safe," which came into English around 1200. By 1300 save was being said to mean "keep possession, hold back." 

In the days of money, and money only ever can be coined metal by weight and fineness, some would sell their gold or silver to bankers in purchases and sales for shares of future profits of those bankers. The rhetoric around doing such became "Save your money with us," and "We'll keep your money safe with us."

Yet, nothing ever was saved. Bankers didn't keep anyone's money separated from all others in a warehouse, keeping anyone's money for safe. Instead, bankers lent money in which they had property, property acquired in purchases and sales of claims against profit, which gets called interest, for money.


The word thrift is a Middle English word from about 1300 meaning "thriving, prosperity" and comes from the Old Norse meaning the same.

In prosperity, anyone who wants to work can find work. Profit abounds. Wages increase faster than living expenses. Sales increase faster than outlays. The creation of property grows at an increasing rate.


Under false-belief faux prosperity, little creation of property of wealth happens. Instead, increases in the estimates of street prices for extant property of potential wealth swells false beliefs leading to credit inflation and speculative promotion (2002-2008 Residential Realty Bubble, 1997-2000 Dot Com Bubble) .

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