Economic deception and collapse

Today, we will discuss some metrics of the American economy. They inform us that what the government-academia-media-entertainment (GAME) industrial complex tells us is a bunch of lies, concealing the collapse of the American economy.

Let us review the two employment series from the Bureau of Lying Labor Statistics. I set them equal to 100 in December, 2020, the last full month of the Trump administration. The upper red line shows the fantastic jobs gains reported by the media, according to the establishment survey. See how nice and smooth it is. The lower blue line shows the results of the broader household survey. There is a 2.3% gap between the two surveys as of January 2024. They could both be accurate, on condition that more people are working multiple jobs.

The next graph takes two looks at income. I set them equal to 100 for the last quarter of 2020, the last full quarter of the Trump administration. The upper red line shows the smoothly increasing GDP - hooray! The lower blue line shows disposable personal income. There is an 8.4% gap between those numbers as of 2023 quarter 4.

To understand the structural problems with America’s economy, the next two graphs are instructive and alarming. The following graph shows America’s money supply, 1959-2023, with a caveat. We expect the money supply to increase over time, as the population increases and as general prices increase. Therefore the graph depicts real money supply per capita; that is money supply adjusted for population increase and the Consumer Price Index. This graph should be a horizontal line; there is no justification for this quantity to increase over time. However, today, it stands at 5 times its level in 1959. In the second quarter of 2020, it had increased more than 29% over one year earlier, a record. This was due to pressure from President Trump on the Federal Reserve during the pandemic, even though there was no liquidity crisis. Recall that money inflation leads to price inflation about one year later.

Economics-finance bloggers often write about the erosion of the value of currency over time due to inflation. That seems minor to me, as long as wages increase at the same rate. When the money supply increases faster than the combined rate of inflation and population increase, it appears to be an attempt to destroy the currency.

Our final graph is perhaps the worst of all. It depicts my original combination of two important metrics: the velocity of money (which is the GDP-to-money supply ratio), and the debt-to-GDP ratio. The economy shows long-term strength when the first number is large and the second low. Conversely, the economy shows long-term weakness when the first number is small and the second high. One number shows the ability of one dollar in the money supply to create economic activity. The other number shows the ability of one dollar of debt to create economic activity.

Thus, I chose to calculate how much economic activity is created by a dollar from either source: money supply or debt. The result is shown below, from 1966 to 2023.

From 1968 to 1982, this metric remained above 1, signifying a healthy economy. It remained above 0.71 through mid-2008. It fell sharply during the financial crisis, settling in to remain above 0.49 during the Obama and Trump presidencies, until the pandemic, when it fell to 0.38, a far larger percentage decrease than during the financial crisis. It is currently around 0.435. That is, each dollar from the combined pool of money supply and federal debt creates 43.5 cents of economic activity. That is a failing economy. No presidential candidate has addressed this issue.