You're Getting Legally Robbed Every Day
CPI is bullsh*t, inflation isn't transitory, the Fed isn't on your side, and what you can do about it
The Central Bank of the United States is stealing ~10-30% of your money. Every year.
Here’s some crazy numbers for you. These are cost of good increases year over year (August 2020-August 2021). Source - Bureau of Labor Statistics.
Used Cars & Trucks: +31.9%
Home Prices: +16.2%
Meats, Poultry, Fish, & Eggs: +8.0%
The Federal Reserve said that overall inflation hit 5.3% this year (August 2020-August 2021). But the Fed’s inflation target is just 2%.
So let me recap. The Fed is saying inflation should be 2%. Then they admitted it’s actually 5.3%. But gas, cars, and food are up anywhere from 8%-42%? If that doesn’t make sense to you, keep reading.
Disclaimer: This is not financial advice.
What is inflation and how is it theft?
“Inflation is a decrease in the purchasing power of money, compared to a general increase in the prices of goods and services in the economy.” -Investopedia
In other words, inflation is when your dollars are worth less and the stuff you want to buy costs more. There are a number of ways inflation happens, but we’re going to focus on the most prevalent one that exists today. Money printing (also known as Quantitative Easing).
The Federal Reserve is the United States Central Bank. Surprisingly, the Fed is NOT a Government entity. It’s kind of a hybrid of public and private control, which is good and bad. Here’s why.
The reason the fed is not a Government agency is to keep short term political pressures away from the monetary policy of the country. This is an admirable goal.
But on the flip side, this same facet is controversial because it means the individuals dictating the monetary policy cannot be held accountable by the public… Who are the same people that are directly affected by said monetary policy. So if they’re not accountable to the public… Do they do whatever they want with our financial system? In short… Yes. Check this out.
~40% OF ALL US DOLLARS THAT HAVE EVER BEEN PRINTED WERE PRINTED IN THE LAST 24 MONTHS.
Go read that sentence again.
And here’s what that looks like.
It doesn’t take an economist to figure out this chart looks just a little bit… off.
And this chart below shows that earning $2.50 in 1964 is the same as earning $20.27 in today’s world. So your paycheck is bigger (in nominal terms), but it doesn’t mean you’re richer (in real terms).
All of this means that inflation has been eating American purchasing power steadily over the last century.
So if your grandpa was storing a few bucks under his mattress to give to you, each dollar is now worth just about 7 cents. Yikes.
CPI measures inflation, and the CPI is bullsh*t
The Consumer Price Index (CPI) is supposed to be a measure of an average basket of goods for the average American over time. Unfortunately, not all of these baskets are made the same. That’s the secret of the CPI.
The CPI started out as a Cost of Goods Index (COGI), meaning that it was truly a basket of goods. However, the BLS (Bureau of Labor Statistics) has now changed the CPI to be a Cost of Living Index (COLI), which tends to result in lower reported inflation numbers. This change also allowed for the biggest change - substitution.
The CPI was intended to be a measure of the same goods across time but in 1995, Fed Chairman Alan Greenspan introduced substitution to the CPI. Meaning if Americans could no longer afford a certain item, the Fed could replace it with a cheaper substitute. Filets are the same thing as ground beef right? Just like Fruit Rounds are the same as Fruity Pebbles. Just like generic toothpaste is the same as Colgate. Just like white bread is the same as wheat bread!
The best part is, in 1983 the Fed removed mortgage payments from the CPI and replaced it with a rental payment instead. Meaning the astronomical rise in residential real estate over the last ~40 years is not included in the CPI. Only increases in rent. Wasn’t owning your own home an integral part of the American Dream? The Fed doesn’t think so.
If we use the same methods to calculate CPI from the 80’s, inflation is around 13% per year. And some wonder why the wealth gap is growing.
As long as the Fed continues to let the money printers roll, everyone who uses their paycheck to live will get poorer because goods cost more, and your dollars don’t go as far. And it’s getting worse exponentially. But the stock market will keep rising, and that’s all they care about.
In case this wasn’t already obvious here’s a news flash - The Fed isn’t on your side. Just last week 2 of the regional Fed Chairs “stepped down” for insider trading. Seems like they’re in it for themselves to me. Both of these men will likely avoid criminal insider trading charges, just like those in Congress that do the same. If a law doesn’t apply to everyone, is it not just more of a suggestion?
Ok, I get it. What can I do?
Get comfortable with the idea that traditional financial mantras and methodologies no longer apply. You won’t retire in 40 years off of piling money into a savings account earning 0.5% APY (Annual Percentage Yield). You may as well put your money under your mattress at that rate and prepare to work until the end of your days just to stay alive. Get comfortable with taking responsibility into your own hands. Understand that in order to stay ahead, you must learn to harness the new technologies that will put you there.
This may be a surprise to some, but I don’t have a savings account. The money may as well be under my mattress instead. I only use a checking account to pay credit card bills (in full, always). Instead of a savings account, you can stake your money in UST Stablecoin on Anchor Protocol for ~20% APY. (Tutorial coming soon).
Gone are the days of surviving off of one income stream. One income stream just means you have a single point of failure. Instead, ponder ways to unlock alternative streams. Here are a few.
Buy Bitcoin and hold. (More on this another time).
You can stake CAKE on an audited platform like PancakeSwap for ~74% APY, no minimum required. (Tutorial coming soon).
You can mine Helium using an internet connection and a clear line of sight, for about $500 upfront. I made my money back in less than 1 month. (Tutorial coming soon).
Invest in yourself by learning to invest in the stock market. Start by investing in some ETF’s (Exchange Traded Funds) in future growth sectors. Think renewable energy, electric cars, cryptocurrency, precious metals to name a few ideas.
If you’re knowledgeable about a particular topic, go educate others via a newsletter on Substack or Medium.
If you have a valuable skill, go pick up gigs on Upwork.
I have a friend who gets paid to dog sit multiple times per week while she works from home via apps called Rover and Wag.
Your employers have silently taken away pensions. Your 401k was never supposed to be your sole retirement vessel (more on this another time too - Lots of topics to cover!).
To survive in the new world, you must take your financial future into your own hands. That’s what the Decentralized Way is.
Thank you for reading! If you enjoyed, please consider subscribing to the Decentralized Way (it’s free!). Or find me on Twitter @decentralizedJ