The F.E.D. Index and Price Increases

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by Gary Christianson, Miles Franklin:

For the week ending October 2, 2020:

Gold rose $50 to $1,907.

Silver rose $0.93 to $24.03

The NASDAQ 100 Index rose 104 to 11,255.

Politicians… yada yada yada.

The Federal Reserve has two mandates: a stable dollar and low unemployment. They are doing a miserable job with both.

a). The dollar is not stable. Look at price changes between 1970 and 2020. Trucks are up from $3,000 to $60,000. Postage changed from 6 cents to 55 cents, silver (COMEX) rose from $1.63 to $24 (and soon much higher), food prices are up substantially… and the list continues.

b). Nearly one million people applied for unemployment last week. Many millions are out of work. Even more will be laid off in coming months. Employment is weak. Jobs are disappearing. Desperation… Fed dollars won’t fix these problems.

But Fed employees are doing an outstanding job devaluing the dollar, transferring wealth from the many to the few, and paying themselves large salaries.

From Peak Prosperity:

“Under this regime, the rich benefit disproportionately at the expense of everyone else AND it creates a hyperinflation in the cost of retirement. This accelerating war on the 99% cannot stand much longer without serious consequences and repercussions.”

Ask any congressperson if he/she thinks the Fed will stabilize the dollar’s purchasing power, support a balanced budget, cease monetizing debt, prudently manage the supply of currency… and so on. Obviously not.

From Sven Henrich:

“Do you really think it’s an accident that the only people placed in charge of the country’s monetary policies are doves? People of the perma intervention kind. It is after all the same Congress comprised of these very two parties that approves all the nominations. Bernanke was a dove. Yellen was a dove, Powell now the perma-dove with interest rates at zero forever and ever amen.

Ask any congressperson if he/she thinks the U.S. government will balance its budget, reduce the national debt, and wisely manage the economy.  Obviously not.

The debt-based currency system will persist until it collapses, which might be years or decades. National debt will increase because politicians spend dollars… forever, or until something breaks.

From Alasdair Macleod:

“… the purchasing power of the dollar is hostage to foreign sellers, and that if the Fed continues with current monetary policies the dollar will follow the same fate as John Law’s livre in 1720.”

The Consumer Price Index (CPI) supposedly measures the declining purchasing power of the dollar. We pretend it’s real because it’s official, even though every shopper knows it under-reports consumer price inflation and dollar devaluation.

In short, the CIP is good for slowing the increase in Social Security Payments (CPI indexed) and making government policies look better than they are.

LET’S CREATE A NEW INDEX TO MEASURE DEVALUATION OF THE DOLLAR:

  • Keep it simple.
  • Make it easy to calculate.
  • Base it on 50 years of history.

We’ll call it the F.E.D. Index where “F.E.D.” stands for Fiat Enduring Devaluation. Alternates are Fiat’s Embarrassing Devaluation, and Fiat Endorsed Devaluation.

You see the idea. The Fed and banking cartel create dollars and make existing dollars less valuable. The government creates an agency to track price increases, but often modifies the methodology to pretend consumer price inflation is less nasty, particularly in election years.

Another viewpoint is the F.E.D. Index:

Track the monthly closing prices for the S&P 500 Index and the monthly closing prices for gold bullion on the COMEX. Weigh gold at 1.5 times the S&P (historical average) and add them together. That sum creates an index.

OBSERVATIONS:

The F.E.D. Index rises exponentially and peaks when either the S&P or gold peaks.

The F.E.D. Index has stayed within a log trend channel since the mid-1980s – about 35 years.

The log-scale graph shows that the F.E.D. Index rises logarithmically at about 5.6% per year since the mid-1970s. The Index burst through the trend channel in 1980 when gold bubbled higher. It could happen again.

Approximate Index values are:

Date                    Index     Ratio to 1970

1970                       150         1.0

2000                    1,500         10.0

2010                    3,000         20.0

2020                    6,500         43.0

Example Price Increases – Estimates:

  • A new truck costs about 20 times as much in 2020 as in 1970.
  • A McDonald’s burger increased in price from $0.55 to $4.00, up a factor of 7, but it’s smaller.
  • Cigarettes cost $0.35 per pack in 1970. Today they cost $8.00 per pack, depending on the state. They are up a factor of 22 since 1970.
  • A silver dollar from 1921 cost about $1.50 in 1970. Today it costs about $38, up a factor of 25. Higher silver prices lie ahead.
  • College Tuition for an expensive college was $3,500 per year. Today it is at least $70,000, up a factor of 20 or more.
  • The DOW was 750 in 1970. Today it is 27,600, up a factor of 37.
  • U.S. government expenses in 1970 were less than $200 billion. In 2020 they exceeded $6,000 billion (in 11 months), up by a factor of about 35.
  • Medical care, prescription drugs, and hospitalization expenses are up an estimated factor of 50 to 150 compared to 1970.
  • However, the CPI estimates that prices are only 6.9 times higher than in 1970. The CPI underestimates actual costs for food, utilities, housing, medical care, and many other expenses.

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