As we all know, the US is headed for a fiscal crisis. Like having a 'heart attack,' says Ray Dalio.
The only way to prevent it is to make dramatic policy changes now not just to 'improper payments' to federal bureaucrats, but also serious cuts to the firepower industry.
Possible? Here's Barrons:
Trump Sends Shockwave Through Defense Stocks, Says Military Spending Could Be Halved
“At some point, when things settle down, I’m going to meet with China and I’m going to meet with Russia, in particular those two, and I’m going to say there’s no reason for us to be spending almost $1 trillion on the military ... and I’m going to say we can spend this on other things,” Trump said.
But here's Congress:
House Republicans on Tuesday revealed a budget resolution that would add $100 billion in defense funding, one-third less than the Senate blueprint which would raise defense spending by $150 billion.
Asked about the latest Senate budget proposal, Sen. Rand Paul said:
"I don't think the numbers are real."
What follows is a look at how unreal the feds' world... and their numbers... really are.
News came yesterday that a dozen eggs now cost nearly $5. US News:
US eggs prices hit a record high of $4.95 and are likely to keep climbing
The latest monthly consumer price index showed that the average price of a dozen Grade A eggs in U.S. cities reached $4.95 in January, eclipsing the previous record of $4.82 set two years earlier and more than double the low of $2.04 that was recorded in August 2023.
In 1925, a dozen eggs cost about 25 cents. The typical working man had to work about 30 seconds to buy a single egg. Today after all the labor-saving devices... computers, motors, artificial intelligence... and 100 years of enlightened economic management he has to work 50 seconds.
Don't trust our math? We don't either. It's based on phony numbers (there is also the matter of 20 million chickens that have either died of bird flu in the last four months or been culled by order of the Federal government). Almost all the statistics used to compute the effects of federal programs are frauds.
Let's begin with unemployment... now near record lows. Politico reports:
The prevailing [unemployment' statistic does not account for the meagerness of any individual's income. Thus you could be homeless on the streets, making an intermittent income and functionally incapable of keeping your family fed and the government would still count you as "employed." If you filter the statistic to include as unemployed people who can't find anything but part-time work or who make a poverty wage (roughly $25,000), the percentage is actually 23.7 percent. In other words, nearly one of every four workers is functionally unemployed in America today hardly something to celebrate.
Based on research from the Ludwig Institute for Shared Economic Prosperity we see also that the average wage has been similarly inflated. When we did our egg calculations, we used the feds' number for earnings around $60,000.
But when you adjust incomes to include all the marginally employed people in the statistic, the real number is closer to $52,000, which makes an average egg worth 57 seconds of human labor.
The Ludwig research team also found that inflation was understated. Just tracking prices of the everyday things that everyday people buy, they found:
In 2023 alone, the CPI indicated that inflation had driven prices up by 4.1 percent. But the true cost of living, as measured by our research, rose more than twice as much a full 9.4 percent.
In the recent election, the Democrats couldn't understand why the voters didn't appreciate the great economy they had given them. This is why. The numbers were fake. Real earnings, for example, did not rise, as widely advertised; instead, they fell.
But the big kahuna of federal statistics is GDP. If it is going up, we are told that all is well. If it is going down, something must be done.
Want to increase GDP? Set up a suicide hotline. Then, when people call... you sell them a tombstone... a burial plot... and a casket, with an upsell to silk lining. Every sale will be included as a boost to GDP.
When you die, too, GDP will get a little bump up maybe your house will be sold... flowers... estate resolution.
Or suppose five million immigrants suddenly arrive. The competition might reduce your earnings, but the economy GDP would rise.
A big component of GDP is government spending. Transfer payments are not included; the rest totes to about 17% of GDP. So, if the feds spend another trillion on weapons, for example, it will add a trillion to GDP. Except for some people in the firepower industry its suppliers, lobbyists, think tank shills and owners most people will be worse off.
As it is, today's GDP includes more than $4 trillion of federal spending, mostly wasted on unproductive programs, and much of it debt financed. The big question is whether Trump, Musk et al are cutting it back...or making it worse.
More to come...
The Daily Reckoning