The Inflation Reduction Act, The RAT RACE and Cost of Living. It’s Déjà Vu!

Nixon: The End of Real GOLD In US Dollar.

On August 15, 1971, President Richard Nixon closed the gold window ushering in the age of pure fiat currencies. Scholars debate whether that action should be considered a default by the United States government on its obligations. That type of debate is fruitless. Instead, what any rational person would do is a simple, and practical analysis of cost of living then and now. Anything else is just noise and likely propaganda.

It has been 51 years since that fateful day. Nixon shortly thereafter got embroiled in the Watergate affair and a few years later resigned in disgrace from office. What is fascinating to me are the similarities and differences between then and now.

In 1974, after a huge increase in government spending and the gold window being closed, President Gerald Ford succeeded President Nixon. Ford brought in Alan Greenspan to lead his Council of Economic Advisors. The centerpiece grassroots economic program that was forwarded was – “WHIP INFLATION NOW” with the beautiful acronym W.I.N. (see the header image).

Inflation Reduction Act and WIN Campaign Similarities.

Alan Greenspan who later went on to become Chairman of the Federal Reserve recalled in his book “The Age of Turbulence” that at the time he was thinking, “this is incredibly stupid” when the concept was presented to the White House. Unfortunately for America, that confession occurred 40 years too late!

You have probably noticed that “The Inflation Reduction Act” was recently passed in Washington D.C.

It’s DEJA VU all over again. As Mark Twain once said, “history doesn’t repeat but it sure does rhyme.”
Notice any similarities in the names of these programs? Sure, one was a grassroots program, the other is now official law.

This time it’s different. This time they mean business. Really!

The Act promises through a set of policies and programs that they are going to reduce government spending, including welfare and unemployment.
I only have one question. When was the last time that you saw politicians in Washington D.C act in a fiscally responsible manner? When was the last time that you saw voters send their political representatives to Congress asking them to spend less on the goods and services they provide?

The ruling class in Washington expects you and me to believe that after the biggest spending spree in the history of the United States over the past two years, they are now going to reduce spending and stabilize inflation.
No sooner had the bill passed that the following headlines filled the airwaves.

To paraphrase George Orwell.
“War is peace.
Freedom is slavery.
You reduce spending by spending more. “

So excited to see that they really mean business this time!
Mainstream economists despise facts.

The Cost of Living and Inflation in the United States.

Take a look at the cost-of-living statistics for yourself and simply ask yourself, has FIAT and the monetary policy of the last 51 years increased or decreased the standard of living for people?

Using the data provided from the Bureau of Labor Statistics, $1 in 1971 is equivalent in purchasing power to about $7.32 today, an increase of $6.32 over 51 years. The dollar had an average inflation rate of 3.98% per year between 1971 and today, producing a cumulative price increase of 631.55%.
Just stop and think about that, over the last 51 years the economy has seen inflation cumulatively increase 631.55%!
Notice how the average income increase did not keep up with inflation? That is why they call it the Rat Race!

Yet, today’s prices are 7.32 times higher than average prices since 1971, according to the Bureau of Labor Statistics consumer price index. A dollar today only buys 13.661% of what it could buy back then. Or stated another way, the 1971 dollar has lost 86.34% of its purchasing power.
As you study the graphic above look at the percentage change cost of different items and compare them to the cumulative inflation rate of 631.55%.
Prices increase for one of two reasons. 1) a supply and demand imbalance, or 2) currency debasement.
When gradual currency debasement occurs not 1 in 10,000 people notice it.

What makes you think that this time is different?

Gold Purchasing Power vs Dollar Debasement.

Meanwhile Gold was trading at $35 an ounce in 1971. It is now trading at $1800 an ounce. A gain of 5.046%.
Simple question. Can you see how the Gold Standard actually increased your Standard of Living while the FIAT currency system destroyed it?

None of the items listed above kept pace with the increases in the price of Gold.

Don’t allow yourself and your family to be fooled by the current round of government propaganda.
“The first step towards understanding the cause of inflation is to recognize that it is always and everywhere a monetary phenomenon. It is always and everywhere a result of too much money. Of a more rapid increase in the quantity of money than in output. More important, in the modern era the important next step is that today governments control the quantity of money. So as a result, today inflation is made in Washington and nowhere else simply because the government is the only one who owns and controls the printing press where the money is created.”
– Milton Friedman
Nobel Prize Economics 1976