Social Security purchasing power has collapsed … the value of the dollar keeps sliding … why things will only get worse … this is the big story to prepare yourself for

The partisan bickering and general incompetence of our politicians is on display this morning.

A meeting between President Biden and congressional leaders intended to find a solution to the debt ceiling issue has been postponed. Speaker of the House Kevin McCarthy said “I don’t think there’s enough progress for the leaders to get back together.”

But while you likely saw this headline, yesterday brought another example of our government’s policy ineptitude you probably missed.

Here’s MarketWatch with the details:

The buying power of Social Security has dropped 36% since 2000, meaning that the oldest adults who retired before 2000 would need more than $500 a month extra just to maintain the same level of buying power.

I’m laying blame at the feet of our government because inflation – which is behind this drop in purchasing power – is a government-created problem.

Sure, other variables impact inflation, but at the end of the day, its formula is simple: too many dollars sloshing around the system, chasing too few products/services.

And where do “too many dollars” come from?

Our government.

Today, as we grapple with the remnants of the worst bout of inflation in 40 years, let’s remember how we got here.

From The Washington Post:

[From 2020 to 2022] the central bank’s emergency remedies increased the nation’s money supply by an astonishing 40 percent.

That was almost four times as much new money as had been created during the two years that preceded the pandemic…

And while the average, uninformed U.S. citizen thinks of the Fed as “fighting the good fight” against inflation, the reality is far different. If we analogize inflation to a raging forest fire, our government is much more so the arsonist rather than the firefighter.

Unfortunately, regardless of whatever disinflation we see over the next 12 months, the big-picture, macro variables that are charting our nation’s course won’t change at this point. It’s critical to know what this course is, and where it takes us.

The purchasing power of your savings is on a collision course with disaster

Think about why…

Our politicians (on both side of the aisle) are unwilling to stop spending… the demands for “free stuff” from our citizenry grow louder and louder… and the world is pivoting away from using the dollar as its reserve currency…

Put all of it together, and that 36% drop in Social Security buying power since 2000 is only going to get much, much worse.

Our InvestorPlace CEO Brian Hunt recently wrote about this in an email to a handful of department heads:

America has been corrupted by a mushrooming government that constantly manipulates our money and continually inflates the money supply.

If you’ve been watching the bizarre episodes of the past few years and had the sinking feeling that things just don’t seem “right” in America, please read on.

All the frauds… all the financial grotesqueries… all the bitter political fighting… all the despair people feel… all the rioting and stealing… all the inflation…

Trace their source to the corruption of our money.

What does this “corruption” look like?

When we think about price, we think about the value of an object – say, real estate – manifested in dollars.

The unspoken implication is that what’s changing is the inherent value of the real estate. The dollar is the sturdy, fixed point in this comparison. The North Star.

So, when a home price rises or falls, that reflects movement in the value of the home itself, since the good ol’ dollar is as enduring as an oak tree.

But as a thought experiment, let’s switch this…

Over the last several decades, as our reckless government has printed more and more dollars, giving away more and more entitlements, weakening the purchasing power of the dollar, what if it isn’t so much the value of the real estate changing, but the dollar itself?

What would that look like?

Well, it would look like an explosion in the value of the asset that’s priced in those dollars.

Below we look at the Case/Shiller Index. It’s a benchmark of the average single-family home price in the U.S.

Here it is since 2000, including the housing bubble in 2006-2007.

Of course, if an ever-weakening dollar is the key dynamic here, we’d see a similar “lower-left-to-upper-right” slope for all sorts of other assets priced in dollars.

And in fact, we do.

Gold…

Stocks…

Corporate bonds…

And we’re not restricted to evaluating the dollar through an “asset” lens. We can see the crumbling currency through expenses as well.

Take health care.

Peterson-KFF’s Health System Tracker just crunched the numbers. While prices for all consumer goods and services have climbed by an average of 78.2% since the year 2000, here’s what they found for health care:

Since 2000, the price of medical care, including services provided as well as insurance, drugs, and medical equipment, has increased by 115.1%.

Or let’s go even more simplistic – look at your salary.

Let’s say you made $100,000 in 2020.

How much of a pay raise would you boss have needed to give you in the last few years to keep your salary’s purchase power constant?

According to the US Inflation Calculator, you need to be making $117,214 today, just to tread water with the buying power of your 2020 salary.

Have you gotten a 17% pay increase since 2020?

While some might be able to claim this, that’s certainly not everyone – especially not in the tech sector, where layoffs are now becoming more common than pay-bumps.

On that note, on Wednesday, Microsoft reported it won’t be making any salary increases this year. And this comes after the tech giant has announced 3,000 layoffs in recent months.

Why there’s no solution

Let’s return to Brian for why we shouldn’t expect to see an improvement in all of this:

Around 10 years ago, the content of our national character started changing. And not for the better if you ask me.

You see, around 2010, America experienced a tectonic shift in how we view success and govern our country. Despite occurring with zero fanfare, this historic “paradigm shift” has put our country on an entirely different path than the one that made it the greatest, most prosperous country on Earth.

This paradigm shift has made it so that every day that goes by, American citizens that succeed through hard work and fiscal responsibility are valued less and less in our country.

This critical part of our “national soul” is being gradually replaced with a desire for endless government benefits and an utter disregard for financial responsibility.

The dignity of work that means so much to so many people is being replaced with waiting for the next “stimmie” check… the next handout… the next government job… the next free home loan… the next free this or that.

To put it simply, we are slouching towards full blown socialism and a government takeover of our economy.

You don’t have to search long to find illustrations of this. Here’s one involving the current administration’s efforts to forgive student loans from just a few days ago.

From CNN:

Nearly 610,000 student loan borrowers have received debt relief from the Public Service Loan Forgiveness program since October 2021, when the Biden administration temporarily expanded eligibility.

Another 6,000 borrowers in the program will see their loans discharged soon.

Altogether, those cancellations will total $42 billion of federal student debt…

But these sorts of debts are never really “cancelled” – the financial obligation just shifts to someone else

And that “someone else” is you.

Think about why.

The federal government is completely broke. In forgiving $42 billion in student debt, that’s $42 billion it won’t have on hand to fund its various entitlement programs elsewhere.

Of course, don’t expect that means those entitlements won’t be paid out. Instead, it means the government will need to tax other citizens at a higher rate in order to make up for the student loan debt it just forgave.

And who do you think those “other citizens” are?

Here’s how Brian puts it:

To satisfy the insatiable demand for more and more government benefits that millions upon millions of people now demand, our political leaders are waging an undeclared war on the only people that can pay for it all…

People with money.

People that in most cases are over 50 years old, followed the rules, worked hard, and saved for a rainy day.

People like you.

If you’re skeptical, at the start of the month, we received a great illustration of this.

Here’s CBS News:

Changes in the mortgage industry could spell bad news even if you have good credit.

Beginning May 1, some people with higher credit scores may actually end up paying a higher fee while those with lower scores will pay less…

…Starting in May, a homebuyer with a credit score between 640 to 659 – considered “fair” – and who has a down payment of 5% will incur an LLPA of 1.5%. Prior to the change, the fee for this group of buyers was 2.75%…

But some purchasers won’t get as good deal as they did before. For instance, homebuyers with credit scores of 740 to 759 – considered “very good” – and putting 20% down will face a new LLPA of 1%, compared with 0.5% previously…

The changes are part of the federal government’s effort to provide equitable access to home ownership.

To be clear, if you have very good credit, your fee just doubled overnight – a 100% markup – so that someone who hasn’t been as careful with money can now pay 45% less.

The point of today’s Digest isn’t to frustrate you, it’s to help you prepare

Here are just a handful of starter takeaways…

The money you have in savings – even a relatively nice, high-yield 4%+ savings account – is just a melting ice cube when it comes to your purchasing power. Be careful how long you let your cash sit in savings.

Stocks of fundamentally strong, well-run businesses with pricing power (the ability to raise prices alongside inflation) will better protect your wealth over the long term. Same thing with quality real estate. You need assets that will float atop the rising tide of inflation and dollar debasement.

If you’re in retirement, it is absolutely worth it to pay an experienced CPA to help you navigate the complex world of estate planning and estate taxes. The government is going to do its best to get its hands on every last dollar of yours that it can.

Don’t count on Social Security. The Social Security Board of Trustees has projected that by 2035, the system will only be able to pay you 75% – 80% of the benefits it will owe you.

Finally, learn how to trade. One topic we didn’t have time to cover today which we will in a future Digest is how the U.S. dollar is losing is global reserve currency status. As this happens, it will create huge dislocations in various global financial markets. But that’s a massive opportunity for trading profits.

We’ll continue diving into details on this topic in future Digests as it’s critical to know what’s coming. But the bottom line is that our nation, currency, and financial markets have passed the proverbial Rubicon.

Things will get worse. It is critical to see what’s happening, understand what’s coming, and begin taking steps today to protect your assets and your family.

Have a good evening,

Jeff Remsburg