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Central Banks' 2% Plan to Impoverish You
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
The 2% target is low enough that the household frogs in the kettle of hot water never realize they're being boiled alive because the increase is so gradual.
A comment by correspondent David C. suggested the importance of demonstrating the impoverishing consequences of central banks reaching their 2% inflation target. David observed: "That central bankers aren't all hanging by their necks from lamp posts everywhere is a testament to how scarce are those who grasp exponents and compounding."
Anyone with basic Excel skills can calculate the cumulative impoverishment caused by central banks' "modest" 2% annual inflation. Here is my worksheet:
Column 1: year
Column 2: index starting with 100
Column 3: annual inflation sum (2% of previous year's total index)
Column 4: cumulative total index
Column 2: index starting with 100
Column 3: annual inflation sum (2% of previous year's total index)
Column 4: cumulative total index
1 100.00 2.00 102.00
2 102.00 2.04 104.04
3 104.04 2.08 106.12
4 106.12 2.12 108.24
5 108.24 2.16 110.41
6 110.41 2.21 112.62
7 112.62 2.25 114.87
8 114.87 2.30 117.17
9 117.17 2.34 119.51
10 119.51 2.39 121.90
2 102.00 2.04 104.04
3 104.04 2.08 106.12
4 106.12 2.12 108.24
5 108.24 2.16 110.41
6 110.41 2.21 112.62
7 112.62 2.25 114.87
8 114.87 2.30 117.17
9 117.17 2.34 119.51
10 119.51 2.39 121.90
Ten years of modest 2% inflation robs households of nearly 20% of their purchasing power. What was $100 in year 1 costs about $122 after 10 years of "modest" 2% inflation. Put another way, $100 in year one is only worth $81 in year 10.
11 121.90 2.44 124.34
12 124.34 2.49 126.82
13 126.82 2.54 129.36
14 129.36 2.59 131.95
15 131.95 2.64 134.59
16 134.59 2.69 137.28
17 137.28 2.75 140.02
18 140.02 2.80 142.82
19 142.82 2.86 145.68
20 145.68 2.91 148.59
12 124.34 2.49 126.82
13 126.82 2.54 129.36
14 129.36 2.59 131.95
15 131.95 2.64 134.59
16 134.59 2.69 137.28
17 137.28 2.75 140.02
18 140.02 2.80 142.82
19 142.82 2.86 145.68
20 145.68 2.91 148.59
Two decades of "modest" 2% inflation robs households of one-third of their purchasing power. What was $100 in year 1 costs about $150 after 20 years of "modest" 2% inflation. Put another way, $100 in year one is only worth $66 in year 20.
Even when central banks fail to reach their 2% annual-thievery target, incomes decline across the entire spectrum. The middle class (however you define it) lost roughly 10% as of 2012. In Japan, famous for essentially no inflation, wages have fallen by 9% in real terms since 1997.
While wages go nowhere, costs continue lofting ever higher as central banks print and pump money and credit:
Imagine central banks overshoot their 2% theft per year target and reach 3% annual inflation. If 2% is good, 3% must be even better, right?
In one decade of 3% annual inflation, the purchasing power of $100 declines to $73, and after 20 years of central bank inflation, it drops almost in half to $54. The central banks' inflation is a steady transfer of wealth from households to the banking sector and those holding ballooning assets like stocks. This is why central banks cling to their target so vociferously: their reason to exist is to enrich the banking sector at the expense of the rest of us.
The 2% target is low enough that the household frogs in the kettle of hot water never realize they're being boiled alive because the increase is so gradual. The central banks assume their 2% plan to impoverish us all escaped our notice. Apparently it has.
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Apparently, humanity isn't just another ponzi, it's the ponzi.
Boris is loving Happy Days. Ponzi is so friends of Richie Cunningham and familiar.
Real rates of inflation (financial repression) is just one of the many ways that the bankster parasite class screws us.
Not only has it escaped notice, the ones that do notice have bought into the brainwashed propaganda that it's a good thing and needed.
Yep. they didn't pick the number at random; it's been road tested and people will put up with it; act like it isn't there, etc.etc. Reminds me of a cook-book my girlfriend bought once in California called, "How to cook Japanese"; but applying to everyone.
Its the price of the ponzi.....get a higher paying job and get over it
Its the price of freedom!
Real inflation is more like 6%
http://www.shadowstats.com/alternate_data/inflation-charts
How do Japanese taste?
paraphrase:
"If we limit our counterfeiting operation to 2% of outstanding supply, it should allow us to still buy some $30 million dollar apartments in Manhattan without too many of the natives getting restless and realize what's going on.....anything over 2% and we risk our counterfeiting operation to be under political risk from washington to rein in the Fed and Banking Elites"
"Paaaaay," say's The Ponz.
I see what you are do there!
Good article but you are preaching to the quire here. I would believe that most Zero readers understand this concept. We just need to get it to the masses so they can understand it.
"The masses" don't give a shit. They're either too engrossed in entertainment to care, too dumbed down through poisons to understand it, or too busy trying to survive to comprehend the bigger picture.
preaching to the quire here
Quire, really?
Ok, so you and many other posters here had poor educations, but you could at
least use a spell checker and pretend......
They are Happy because Mr. C is a freemason. His lodge brothers shut his competition down.
2% of what? Just a bullshit number provided by bullshit central.
One step for man..One step into the shitpile for mankind.
Remember, boil frog is not complaining!
Boris! Where the hell have you been komrade? Mr Obama keeping you busy translating the secret diary of Karl Marx?
Crimea?
Boris is sad suspension of urban proximity copper strip mine operation and is now telecommute for working in Chernivtsi near bordering Moldova. Is work hard for pick turnip, but is happy coming home for furlow.
Thinking about the urban copper strip mine is cracking me up so bad I can't type; hilarious. Only in the Workers' Paradise, eh, Comrade ? Just ignore the greenish blue dust in the air, a little copper sulphate is good for you.
Boris playing a little rough with Obama's throat?
Maybe someone is crush laryinx of teleprompter in chief so is attenuate annoying monologue?
We impoverished some folks.
We boiled some blokes
We fucked some fucking fuckers in their fucking asses...
"Compounding interest is the greatest force in the universe."
Albert Einstein ALLEGEDLY said it, but others claim it's an urban legend. Regardless, he SHOULD have said it because it's true.
"Good and evil both increase at compound interest." - C.S.Lewis
Until the Reformation, usury was banned by Christianity for good reasons. Fixed interest is "a fee" and fixed/variable interest rate is, "A form of enslavement". Anyone who understands the basic maths of compound interest cannot help wondering if it really is the cause of all evil in finance, after all, the energy and devotion dedicated to making money out of money is the reason why we're stuck with a system that is a casino full of trillions of speculated imaginary crap instead of a market selling actual goods that can be put to use.
2% deflation each year would be small enough not to notice, but would greatly increase purchasing power for the commoners. Wonder why that isn't an option?
debt money is not a law of nature.........
Inflation is not natural consequence, is not healthy, is gradual debasement of wealth of proletariat for beneficial of ruling class.
notice they target price inflation not wage inflation. price inflation good, wage inflation bad. in reality it is all just an excuse to steal.
If bankster and political class is first to steal trouser from labor force citizenry, they are not complain when are pick pocket.
Boris is not to forget unfireable public sector union komerades of vast government?
I really wish more people "got this."
This 2% should have every banker swinging from a lamp post.
And that 2% is on top of all the productivity gains which they also have stolen. People should only have to work for a dozen hours a week to provide for themselves.
But then you would not have the ultra wealthy class that makes its money off the skim.
pods
Tell that to all the people that have watched their wages stagnate over the last 6-7 years as costs have gone parabolic through these global printing games.
This shit will keep going on until people get pushed to the point that they've got nothing to lose if they hang some D.C. & bankster folks.
We chased some folks with pitchforks and torches prior to hanging them.
Which may help to explain...in part....why activest investors from Starboard who helped push Office Depot and Office Max to merge are now taking increased stakes in Office Depot and Staples and openly calling them to merge.
Shrinking pie of disposable dollars....less need for office products.....leads to one office store brand to lead them. But hey....Obummer says the economy is recovering.
Yip.
Most extreme in the eurozone given the lack of company chips.
T
I like that the dollar depreciates over time. It encourages people to recognize money as a medium of exchange, and to either spend it or invest it, btu to exchange it. If you hoard it, you hurt the economy, it is good that it hurts you too.
Yes go out and spend you assholes, forget about about the future and every generation after you, .gov has your back. Hey, as long your pole is being stroked who gives a fuck. Buy the neo-made slave shit and help TPTB reclaim their rightful place. Do you feel that boot on your neck yet?
What a load of shit.
Don't hoard cash. What to give to your kids later or waste on a nursing home while you shit your pants. Save some, invest some, then spend the rest and live as well as you can. Simple game, just play the hell out of it.
Currency is a medium of exchange and should definitely be spent because it will be worth less and less over time.
Personally, I like to spend my currency on actual money.
See, I'm hurting the economy AND helping myself.
Suck it.
Krugman? Is that you?
Math is a powerful thing!
Maybe math is powerful, but rope with noose is more of convincement.
Now I know why the FED is keeping interest rates so low and the Treasury is giving money away to the banks for 0.10% to lend out at 4.50%-20!
"It's a cookbook!" https://www.youtube.com/watch?v=NIufLRpJYnI
Charles,
A detailed explantion of something everyone with a high school education should understand. Any solutions other than the lamp post idea?
Guillotine? Nail gun? Napalm? All of the above?
Just a matter of time until thinking is, if I'm going down than I'm taking some people with me...... Just hope it goes high enough up the pyramid.
The wonder of gold is that it is virtually an INEXPANDABLE CURRENCY!
And unlike Bitcoin (the worst return of almost any investment vehicle in 2014, BTW) gold won't go away when your computer dies.
Bitcoin : up 2600% over two years - up 300% over 1.5 years - flat over 1 year.
Gold : down 30% over two years - flat over one year.
Smoke that.
Just something else to speculate over. How do you stand on your bitcoin with a semi-auto to guard it?
Good question. My Semi-Auto wouldn't be necessary to guard my Bitcoin as I can store Bitcoin in my head (strong BIP password) and store them anywhere on the planet in multiple copies. Even coinbase now allows multi-sig. I would use my arsenal largely to protect family, friends and food.
Wow... Going from roughly 750 (peaked around 900 within a few weeks) to around 350 in 2014 is "flat?" You work for Janet Yellen, don't you?
And of course you do realize that by making easily verifiable, false, statements you discredit the rest of your pretend money promotions.
That's the real problem with bitcoin: As former commodity trader Ann Barnhardt said in one of her videos - "If you can't put it in a pile on the floor, stand on top of it with a semi-auto to guard it, then it's not yours".
That makes no sense, because you CAN do that with crypto - it's called cold storage.
Then again, if you don't have to guard it with a gun, how is that a bad thing? Good luck guarding your gold with a semi-auto from a gang of street thugs wielding AK-47's.
Yet it expands daily with the naked issuance of paper claiming to be gold.
consider that the 2% includes the amount of increase in money needed to keep up with population growth there is a lot more money sloshing around every year. the advantage to inflation has always been directly related to your place at the trough. the .1% skim all the premium, inflation+ money and the bottom 99.9% get the inflation- money. same as it ever was.
Banksters are killing the 'folks' and the tide cannot be turned. Accumulated wealth will count for nothing if there is no economy to spend it in. I'm sure many realise this, but the pirhanas are ravenous and will not stop. The architects of our demise will not escape this fate.
It's all so utterly pointless and stupid.
Well understood, condoned and approved by the US Senate.
Hugh screwed up a bit above - the table showed that after 20yrs 2% inflation steals 48% and not one third as he reported. Damn math.
2% is a crock of shit. my cost of living (major expense categories) has gone up 71% in the last 5 years. Go to hell, FED. I hope you all suffer as the rest of us have. Fucking criminal.
Now run the numbers with the real 6 to 9% inflation...
it's fucking hurting but everybody keeps looking at the thermometer to console themselves that everything is just peachy
Of course the human frog does not complain about being boiled because they are led to believe that they are in the jacuzzi.
CHOIR
Damn ye, you are a sneaking puppy, and so are all those who will submit to be governed by laws which rich men have made for their own security. – Black Sam Bellamy
“Okay, so you guys are ready for a guillotine, rope and noose, lamp post, and napalm among other “remedies”.
Trouble is these are instruments of routine slave uprisings: they roam streets looking for anything remotely related to tax gatherers without regard to age or sex, condition, guilt or innocence; this slaughter continues for a few days, or weeks; then, when it is exhausted, slaves are still slaves: they return to the usual routine: submitting to confiscatory taxes and intolerable conditions.
Isn’t there something better… like another revolution that ADVANCES the cause of liberty… instead of tyranny?
Isn’t it time to duplicate what American Founders did, minus their mistakes? We have the same power they had; the power to make criminal and useless-idiot classes accountable for their crimes; and we REFUSE to use that power.
There are three main reasons for this failure: one is that Americans have no knowledge of such power; the second, they’ve been herded into a kind of impotent stupor by medication and indoctrination; the third, that they aid, benefit or are/were complicit in such evil.
There’s a remedy for all three of these failures: 1) learn, and use, the law and procedures of redress (full article); 2) follow a health regimen that has REDUCED – not slowed – my biological age 50 years (it also un-does the damage done by medication and indoctrination); and, 3) see number one.
This health regimen has given me the coordination, health and physical condition of a professional athlete around the age of 20; I’m 70 years of age (for validation, video and webpage – each leads to the other).
"When a man fails to redress an injury – whether as victim or perpetrator, a conscience will torment a man until he makes redress. If he chooses to ignore his conscience, it does not go away; it simply withdraws into the interstices of his mind and poisons every unguarded thought and action. When men attempt to suppress their conscience, it is usually a case of a strong person injuring a weak person: an employer against an employee; a tax-collector, bureaucrat or policeman against a citizen. In this case, the victim dares not object for fear of loss of job, jail or fine. So he suppresses his conscience; but the conscience does not go away. The pressure builds; one day, his child makes a careless remark at the dinner table; a table is overturned; he realizes that what he is about to do is wrong – but he has lost control of accumulated resentments; dishes and food fall to the floor, and a child is beaten near senseless."
Thanks, your comment is a direct quote from Cults of Totalitarianism.
Those who choose to join such cults fail to account for two inexorable processes of nature. As years pile on each other, 1) the energy needed to suppress such a conscience increases each year, day, or hour and 2) the ability to produce the energy needed to support the human frame decreases each year, day, or hour. Their levels, in other words, move in opposite directions. When the former becomes greater than the second, a very ugly end is almost instantaneous: either suicide or complete insanity; sometimes the insanity takes the form of multiple murders ending with suicide.
Thanks again.
As the theory is pitched to us, our incomes go up by a minimum of 2% annually too, to keep it all in proportion. If that were the case, as the story goes, the purchasing power of an individual fiatsco doesn't matter.
But the bigger picture is that this is what has to happen to perpetuate the use of debt as money, and the function of money as a commodity that can be bought and sold in and of itself. Those systems require unlimited supplies of markets, resources, energy, and of course money. Nobody would take on a loan at interest if they didn't think they'd have more money in the future to pay that interest. If nobody takes out a loan at interest, there is no ability to grow the supply of money without just printing it, and the entire system grinds to a halt.
I would maintain that the ability to make money abstract and fungible, and to have it serve as a commodity to be bought and sold in and of itself, is what separates modern Capitalism from old fashioned Mercantilism. The Central Bank hypothesis was proposed and adopted to try to corral the wild swings and boom/bust cycles inherent to modern Capitalism as it evolved. As time has gone by, howevver, the Central Bankers have proven unable to overcome the inherent instability in the Capitalist system, for good and for ill.
I don't have a solution. Mercantilism was more of a "closed loop." Capitalism allows for rapid and quantum expansion of wealth when there are new discoveries, for instance. But the tail packs a wallop of a stinger. Attempting to "massage" or rig the game doesn't do anything but delay what we all know is coming anyway. It might be better to let Capitalism tear itself apart every generation or so, as it seems to want to do. After a while most of us would get the hang of it and limit our exposure to volatility as best we could, to tide us over the stormy bits.
But I think the role of money itself in modern Capitalism is more what drives this than the Central Bankers themselves, despite what they'd have you think.
Obolacare basically gave me another mortgage to pay.
chocolate rations will decrease by only 2%
It's even worse than that. Because (in normal scheming central banking times) when they raise wages (cola) to keep pace with said inflation you're paying taxes on the increase. So like Barry Obama's gay dates, you're getting punished on both ends.
Author forgot about serving size inflation, quality collapse inflation, component substitution inflation, choice narrowing inflation, package cost and quality inflation, air conditioning, freezing/heating power limitation inflation, shopping quality inflation, and other manipulations to keep so called nominal price marginal increase of few percent only per year.
That's will make true nominal inflation total about 25% a year on retail side alone, not to mention gigantic health care and insurance inflation, education inflation etc. This combined with collapse of wages/benefits/other incomes produces about 50% inflation/year. That's why all retailers cheat about their sales just like Wallmart because in response to such big inflation drastically cut spending as only thing they can do. They go to store 50% less times and buy 50% less in dollars then before per trip.
All these are signs of hidden hyper inflation approaching through first almost halting transaction volumes and collapse of money circulation in society 99%. Believe me, in contrast to most Americans I lived through hyperinflation meaning when prices we doubling every month after years of attempts to hide the fact that currency has been debased.
All of it was not due to laws of economy but deliberate policies of government to give a chance for oligarchs to bail out before everybody finds out. When people found out, especially courtiers (government, corporate employees) of the system that there were screwed, all hell broke loose and FED printers will roar to shut them up. Therefore, they are careful not to mess up good thing going as long as they can.
One good point was raised though. They want to cook us slow so we won't jump out of pan so they can devour us while we still alive. Monsters feed off frog's hope that next frog will be eaten first and that they will be full before they get to me. Hope is mother of stupid and immoral.
'I'M GIVING IT ALL SHE'S GOT CAPTAIN BUT SHE CAN'T HOLD IT!"