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.
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. It is these fiduciary bank credits which constitute Federal Reserve Bank Units.
In INFLATION REVEALED! "REAL GDP" AND FEDERAL RESERVE BANK UNITS, I reveal how using the FRBU deflator give the best measure of inflation.
As can be see with your eyes, both before-tax and after-tax corporate profits are in a bubble.
Between Q3 1971 and Q4 2001, the before tax profit averaged $130.20 billion in GWD, the after tax profit averaged $87.85 GWD and the taxes paid averaged $43.36 billion GWD. The taxes paid to after tax profit ratio was a whopping 49.35%!
Since Q1 2002, the before tax profit average $211.28 billion in GWD, the after tax profit average $161.10 billion GWD and the taxes paid averaged $50.18 billion GWD. The taxes paid to after tax profit ratio was a 31.15%
Average after tax profit has grown 83.38% and taxes paid as grown 15.7% while before tax profit has grown 61%.
Corporate Taxes, in billions Gold Window Dollars (GWDs) using FRBU-deflator
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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.
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. It is these fiduciary bank credits which constitute Federal Reserve Bank Units.
What counts is buying power, that is, how much real stuff you can buy with an ounce of gold or a share of the S&P 500. Since inflation is a banking phenomenon, using a FRBUs-based deflator, we can compare the true price of the S&P 500 against the true price of gold.
Here is True S&P 500 vs True Gold in True Dollars™.
S&P 500 in GWDs vs Gold in GWDs
From Q4 1975, through Q1, 1989, an ounce of gold let you buy more than one share of the S&P 500. Between Q2 1989 and Q4 1990, speculators struggled between the two.
The True S&P 500 won that struggle by Q1 1991. Stock speculators and investors did not look back to gold for a long time.
The peak of gold bettering the S&P 500 came in Q2 of 1980 when the price ratio of one ounce of gold to one share of the S&P 500 stood at $5.56.
From April 1, 1991, through January 1, 2009, one share of the S&P 500 let you buy more than an ounce of gold. The peak of S&P 500 bettering the gold came in Q1 of 2000 when the price ratio of one share of the S&P 500 to one ounce of gold stood at $0.18.
During the Greenspan-Bernanke Credit Bubble, the largest credit bubble in history, the average price ratio of one share of the S&P 500 to one ounce of gold stood at $0.41.
Between Q3 2011 and Q3 2012, investors and speculators once again fought between gold and the S&P 500. Twice in that period, gold bested the S&P 500.
Since Q4 2012, the S&P 500 has been pulling away from gold. In the two years, True Gold has fallen -35.4% falling at a yearly rate of -19.6%. Meanwhile, True S&P 500 has risen 17.4% rising at a yearly rate of 8.3%.
Sooner, rather than later the U.S. economy shall stop its fall, steady and begin a long run climb. It might be another decade and another banker-fueled inflation (credit bubble) before gold becomes a good speculative play.
Since 1993, SPDR S&P 500 ETF Trust (SPY) has let speculators bet long on the S&P 500 and since 2006, ProShares Short S&P 500 ETF (SH) has let speculators bet short the S&P 500. Likewise, since 2004, SPDR Gold Trust (GLD) has let speculators bet long on gold and since 2008, Deutsche Bank AG DB Gold Short ETN (DGZ) has let speculators bet short gold.
Here are ways you can play the S&P 500 and gold with ETFs.
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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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