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I have watched, listened and read a lot of fear mongering on the internet about economic collapse, if anything I hope to dispel those myths today by showing some graphs.

What makes a good economy using an inflationary model?
A good economy should have inflation(consumer prices) increase at similar rates to the average wage rate of the economy. This would mean that the rising prices of goods and services will be compensated by the increase in the national average wage rate over time. But you may ask why have inflation in the first place? why money print?, this is done to have velocity of money, meaning it promotes people to spend and not hoard money, giving incentive for people to actually start businesses to catch some of that consumer spending.

A comparison between Australia and USA in terms of inflation and wages

An example of a good economy: Australia.
Wages: Average weekly wages.
http://s9.postimg.org/9hjwxn0pr/Australia_Wages.png

Consumer prices/inflation:
http://s28.postimg.org/4wiz5lppp/Australia_CPI.png

As you can see the rate of change over time between both inflation and wages is very similar. This allows for a stable economy as it allows for velocity of money while still maintaining affordable prices for consumers.

An example of a not so good economy: USA
Wages:
http://s3.postimg.org/dhndssieb/Wages_USA.png


Consumer prices/inflation:
http://s8.postimg.org/46mf5psol/Consumer_Prices_USA.png

The US economy inflation rate has actually been quite low and stable, the problem is that wage rates do not keep up, this is causing more disparity in wealth compared to Australia. What needs to happen in the USA is an increase in the national average wage rate to match inflation. There are ofcourse other variables that need to be considered such as unemployment rates but the general point i am trying to make is that these are the things that need to improved on in the USA. Don't be afraid of studying a bit of basic economics no matter how much some fear mongerer wants you to think otherwise, the more you are educated the better you can spot people trying to push you in directions for their own benefit.

And in case you are wondering, I am a crypto-currency advocate because i prefer not to have all the important economic decisions and control of money printing come from a central authority.

How the hell do you think that dispeled anything?


Meanwhile - here is the real inflation

http://www.shadowstats.com/imgs/charts/alt-cpi-home2.gif

http://www.shadowstats.com/imgs/sgs-cpi.gif

The real unemployment

http://www.shadowstats.com/imgs/sgs-emp.gif

Can you comment on the validity of the shadowstats?

They base their statistics based on the methodology used by pre-Clinton administrations without for example hedonistic regression.

fuck it lets run for the hills.

Very much agree, since Fear Mongering actually enables people to build and engage in the economy.  ;D

If the economy is doing so well then why are the global markets having so many problems? Or are you just going claim we need to print more money to 'boost confidence' in the markets? People like you who follow the economic ideology of those in charge are precisely why everyone who can think for themselves is convinced the economy is going to collapse.

I hope this was a troll, I may have been baited :S :P

Those graphs don't disprove anything. Inflation punishes saving and I haven't seen any proof that it actually is good for the economy. People save money so they can spend it on something like starting a business for themselves or doing something else with it, you don't hoard for the sake of hoarding alone. Inflation just pushes people more towards going into debt to start a business or whatever and combined with interest this creates a horrible unsustainable economy which consumes the future in favor of the present until the whole system collapses. We are very close to that point right now. Sticking your head into the sand and saying everything is fine won't help anything.

Would OP care to explain why he used the post-80's manipulated inflation rate rather than the real inflation rate? I mean, I would just LOVE to believe that YoY inflation in Argentina is only 10% like the government says... lol. Give me a break. Use legit data then we can have a discussion on how healthy the economy is 8)

Any reason OP you are showing AU stats from '08 and USA stats from '12 ?

Warning people about the inevitable end of this total charade of a financial system needs to stop? Don't think so. This is not the time for ignorance on the most important and potentially devastating event of our time. Everything is about to change radically.

The economy has already been collapsing for a decade, it is simply accelerating now as the great fake economy built on worthless money by criminal bankers and corporatists enters the final death spiral.

Australia is far from "good", I don't think you really did any research here OP.

The 'shadow stats' inflation graph is showing ~9% per year inflation in the US since 2001, if that were true then today prices would be TRIPLE what they were in 2001.  This is patently absurd.  Meanwhile the real numbers average ~2.5% which gives us an increase of 40% which actually jives with reality over the last 13 years.  I think peoples inability to understand compounding leads them to believe these inflated inflation rate numbers.

Very interesting information. I do have one request though. Could you normalize the first chart in the USA graphs to match the first chart in the Australia graphs? I think that would be much more beneficial as a read. (Australia is average weekly wage, where as USA is average hourly wage.) This might be a little misleading considering that there are some that work part-time, some work salaried (and are essentially paid for 40 hours of work a week) and some work tons of overtime.

Nonetheless, I agree that it is definitely an issue that living costs inflate at a steady rate whereas wages do not follow the same trend that it needs to. I've seen it many times throughout the years.

OMG... you are serious... you didnt know about the faking of inflation? That is NOT a conspiracy theory (!). Lol, that is true... even the way they calculate inflation and other statistics is laughable

Hm...

Thats interesting, but did you actually traced price of anything from 2001?

Because from i have learned i belive the official numbers are manipulated , look at the great video cleatly explaining it with simple words

http://www.youtube.com/watch?v=pwI3Nya5L9g

So did anybody tracked the real prices of anything from 2001? Because i belive the shadowstats.com and if it says that the price have in total tripled from 2001, then i belive so... (im not from usa though)


Did you follow any prices?

No I simply asserted that is is ABSURD to say their prices for 'all consumer products in AGGREGATE' which is what CPI is measuring has averaged 9% for the last 13 years.  If I started going into the weeds I could certainly find A product that has tripled, something which has doubled, another which has dropped by half, I could show anything by anecdotes.  

It is in our common perception of the value of money and the average of prices that should be used to do a basic sanity check in the same way I would reject a claim that people have been getting 9% taller each year, because the extrapolated change over a time period that I personally experienced is FAR beyond what I would have failed to notice.  The official number sounds sane but it could easily be off by a whole percentage point, it is simply not rejected while the Shadow number is rejected.

Think of the implications of a 3 fold increase in aggregate prices, do you think a person who made $5 an hour in 2001 would have exactly the SAME standard of living as someone today making $15 cause that's what ShadowStats is saying.  Or take a look at house prices which everyone agrees were in a bubble when they were increasing around 9% a year, according to ShadowStats their was no Bubble, houses were just managing to hold their value during that period and before (during the 90's) they were becoming cheaper in a real sense.

Ha ha ha, this, in combination with your OP, is a legendary post! Read it in the morning, burst out laughing and have been giggling all day long about it!

Props to you to be ready to see what's in front of your eyes.

Yes, the tripled price sounds in 13 years sounds believable to me overall. The thing is, memory is a tricky thing and people get accustomed to circumstances and prices really quickly. Can I ask you how old you are? Have you earned your living expenses yourself in 2001 (if you do now)? If not, it's even easier to be deceived.

Take the stuff that gets cheaper each year because of "technical advance" reasons out of the equation - that stuff shouldn't even be in a basket! It's like nowadays inflation baskets consist of 3 flatscreen TVs and an iPhone...

Take rent, public transport, food instead. It's hard to believe, because people forget quickly (just like who lied to them before the last election), but it's very believable... Oh, and I can guarantee you a billion percent that shadowstats is WAY closer to the truth than official numbers. 2% or so!? Who could even remotely believe that?

In regards to housing - there you have it, as you say yourself, unbelievable inflation! That risen price already IS the inflation though, the market is pumped up by a money bubble. Basically, the MONEY is in a bubble, which creates all the other bubbles, with stocks, with goods, with houses... The difference between a house and a banana is just that you won't ever resell the banana anyways, it's eaten and gone (and houses are a special case in that regard as they can be resold without any significant reduction for price for you having used them, as opposed to, say, cars).

The Shadowstats statistics is not just some made up number by John Williams - it's just the governments own accounting, before they started to fake the numbers a little bit more each year. To claim that those numbers are not true means to claim that the government on purpose waaaaay overcalculated inflation during the 80ies - by 6% or so more than it actually was! Which is not in the government's best interest at all. It's certainly not how governments act.

Btw, inflation plays into many more economic calculations, which are all subsequently MASSIVELY tainted! Think of the GDP number, for example, or the P/E ratio, which tells us if the stock market is cheap or expensive: All faked by the means of inflation.

The numbers are sad, but they are true.

People clearly delude themselves into believing what they want to believe too.  I was graduating High-school in 2001 and can assure you that the the $5 an hour jobs I had back then is not equivalent to a $15 an hour one now.  My last job was for $20 an hour and if ShadowStats was right I would have had the equivalent of ~$6.50 and would have seen only marginal increase in my standard of living, instead I could live in an apartment twice the size, eat lunch out every day and save money, at $5 I had to fight to keep any kind of roof over my head and eat mostly Ramen noodles.

You completely fail to understand the point about the housing bubble, housing obviously went up in price everyone knows that, but if Shadow is right about inflation then housing never had a BUBBLE because the rate of increase in housing would have been matched by ALL goods and their would be no relative change in the cost of houses.  But houses clearly were going up faster then OTHER stuff.

Have a look at these Debunkings, it looks like the ShadowStats creator may simply be making some really basic errors of math to create his BS numbers.

http://www.peakprosperity.com/forum/80408/shadowstats-inflation-closer-truth-cpi

And the simple analysis of the Housing bubble vs inflation

http://blog.jparsons.net/2011/03/shadow-stats-debunked-part-i.html

People that talk shit and bitch all day about looking forward to collapse of economies are no where to be found when things start looking up in a solid way.

It's just a pleb mentality of wanting to see their betters fall. Weak fucks.

This isn't an explanation.

If individuals in the market wish to defer consumption until a later date, or wish to invest in businesses (perhaps interest from a functional lending bank rather than one addicted to cheap debt) why is that some kind of market failure?

Perhaps excess consumption and environmental catastrophe, as well as impending poverty in old age, is a consequence of this.

Keynsians have such a wacky interpretation of economics and the free market.

I look at the rate of broken families and single parent hood, aging population and low savings interest rates.
The difficulty in getting a job( Assuming baby boomers are not lying about how they walk from one job into another
at their lunch break).

That's all I need to know, that's all.

http://www.pbs.org/newshour/making-sense/ben-bernanke-as-easter-bunny-why-the-fed-cant-prevent-the-coming-crash/

All you need to understand about an economy is that goods are paid for with goods, you cannot consume something without producing something first, if you want to eat you have to hunt or grow food, if you want to buy food you have to have first produced something to trade for the food, this is Say's law of markets. Money is a tool developed by the market as a way of assigning exchange values to goods so we don't have to barter, money derives its value from the goods you can exchange it for. If you accept this than all the economic schools of thought that rely on manipulation of money to produce wealth become nonsense and it helps to understand the real problems of the US economy. The US main problem is that it does not produce enough hence the trade deficits, this is because of high tax rates and excessive regulation making the US unable to compete with the rest of the global market, the persistent trade deficits mean that the US population have also been consuming too much, capital has been flowing out of the economy so the people have in fact been getting poorer, but what the government and the central bank have done is pump liquidity into the market to make up for the loss of capital in the economy, they have encouraged Americans to consume more despite the loss of capital and reduction of wealth, of course this is unsustainable and the problems will come to light when lenders realise America will never pay back it's debts of if it does it'll pay them back by printing money, but that money will have no value because the US doesn't produce anything anymore and money derives it value for the goods you can exchange it for.

Yeah , same with people complaining about our food and how dangerous for our health junk food  is , how toxic the air is and god knows why life expectancy if growing year by year.
Also , In my country which was hit pretty hard in 2007-2010 we have the highest rate of newborns this century.

Core CPI in the US is misleading, it excludes volatile products like foodstuffs and gas.

Further core cpi is a composite of weighted items.

40% is too low. Gas was about 1.50$ in 2001.
It's around 4$ now.

That's around 200%. - Inline with shadow alternative stats.

Core CPI better measures something like a car. A 2002 m3 cost around 43k new - least options. now the coupe runs around 61. that's near 40%.

Personally, I tend to discount core cpi since those usually are capital purchases vs 'volatile things' you need day to day and do impact you.

Someone please correct my mistake please.

Good advice, although I would substitute "the more you are educated" with "the greater your understanding".

That is simply false:
http://www.shadowstats.com/imgs/charts/alt-cpi-home2.gif?hl=ad&t=


That's ludicrous.  Perhaps the average salary has risen 40% but the average cost of living has gone up far more than the shadow stats numbers indicate.

It certainly does not jive with the reality I am experiencing.  If you will recall, we just went through a housing price collapse.  Yet my house is assessed almost exactly 2x higher than 14 years ago, having gone from 650 to 1280.   I could buy a pack of cigarettes for 1.80 in 2000, but now pay 14.  I could buy a gallon of gas for 1.2, but today paid 3.5.  My monthly utilities went from 45 to 160 in that time.  

Holding fiat is insanely self-destructive.  Yet the velocity of money plummets because everyone fears for their job, and everyone has so much debt that they live from paycheck-to-paycheck.  There's no slack.  My salary went from 60 to 300 during the past 13 years, and so kept up with inflation (barely) but most people I know have salaries between 1x and 2x what they earned in 2000.   This is clearly reflected in the Fed's GINI numbers.  The beneficiaries of QE largess are the very wealthy.  The vast majority of people see prices rising, and wages frozen, endagered by redundancy,

The more deceitful propaganda you consume, the more likely it becomes that your mind will be twisted, deformed and disabled. 

Then it isn't working.  According to the Fed stats the velocity of money in the U.S. has plummeted under QE.

I was clearly referring to the 1980-based graph you Twit.

If you want to defend the 1990-based graph as the truth then admit that the other graph is complete BS first.

The 1980 based graph actually corresponds to the facts much better than does the 1990 based graph.  It is also clearly averaging less than 9% annually.  I think some people are confused by a failure to understand integration, or the statistical mean, or geometric averaging.

The economy has already collapsed, you just haven't realized it yet.

That's because of the slow inflation that has been robbing people of purchasing power ever since the Federal Reserve was created. The only thing that has been preventing people from realizing it is the continual debasement of the dollar, and also technological advancements in productivity. Bpth of those forces happen slowly, so people do not realize it.

But, if you took what $20 bought in 1913 (the passing of the Federal Reserve act), and compared it to what $20 bought today, you would realize it.

Back in 1913, $20 bought a man a nice suit, a nice dinner, and a nice hotel room for the night. Try doing that with $20 today.

Of course, if you kept that $20 in gold from 1913, you would still be able to afford a nice suit, a nice dinner and a nice hotel room for the night.

Moral of the story? Gold does not lie, but Congress does, and fiat paper loses value.

Have a nice day.

So have you made up your mind now to defend the 1980 graph?  If so Do you geometric averaging and SHOW YOUR MATH, if you want to nitpick my visual graph reading estimate, which is if anything conservative.

That applies to virtually every good sized economies and nations on earth.

Yet people persist in defending the power of the central banks to wantonly destroy and cruelly seize wealth from the population to enrich a very few amoral sub-human oligarchs.

Are you trolling OP? Unfortunately some have not learned from our past mistakes. The banks have gotten more clever this time around and instead of selling Mortgage Backed Securities to pensions and hedge funds, they're selling it directly to the Federal Reserve. 85 Billion dollars per month, or a little over a trillion a year at 0% interest rates.

When you borrow from the FED for nothing, and charge your cardholder 20%, anyone can make money.
 
Even if you are only charging 9%, you are stealing them blind with profits relative to cost.

What's a bank with billions of dollars to do? They buy a bunch of useless shit. Drink beer, soda, or energy drinks? JP Morgan and Goldman Sachs have skimmed millions out of the Aluminum market.

http://www.nytimes.com/2013/07/27/opinion/goldman-sachss-aluminum-pile.html?_r=0 (http://www.nytimes.com/2013/07/27/opinion/goldman-sachss-aluminum-pile.html?_r=0)

If natural laws of economics were in place, banking would be extremely competitive and it would not be very profitable.

But inflation is low, some say. Yes, the official CPI numbers are low, but they are rigged. The price of housing and rent has gone up. The price of petrol, electricity, even the price of printing a dollar is up. Banks can just selectively buy assets and point to the CPI "But look! the CPI is low and inflation isn't hitting it's target"

Ever wonder why rent is sky high while you're unemployed or underemployed and barely able to make payments? Banks are buying up a shitload of houses and rent them out for record profits.

http://business.financialpost.com/2013/04/23/us-rentals/ (http://business.financialpost.com/2013/04/23/us-rentals/)




The median asking rent for US vacant housing units just hit an all time high of $735 per month.

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/07/Avg%20Rental%20Price_0.jpg


There's no way out. Had the US gov't let the banks fail and endured a fast, hard, deep recession starting in 2008, while there's no guarantee because things were already pretty fucked, there was at least a chance to recover. There is no chance now.

So the system will fail, and do so spectacularly, with more and more insane financial inputs until it just suddenly collapses. In the end, banks will try to suck every last dollar out of anything that moves and we're all along for the ride. Short of a global revolution where we go back to sound economic policies such as abolishing central banking, putting a stop to deficit spending with 0% interest rates, and replace the current system with a resource based economy with Bitcoin as a part of it, shit will only get progressively worse. Actually shit will get worse anyway, but thanks to the help of Satoshi, at least we can at least throw off the shackles of .gov and the banksters.

Utter chaos or controlled crash, I keep coming to the same conclusion over and over.  The only difference is the timeframe. The more chaotic the events, the faster we reach the inevitable conclusion.  Thus, the most chaotic of outcomes might be 2 years or so. The more controlled may be 20. Reality will likely be somewhere in between.



TL;DR I'm not buying OP's perspective on inflation. Shit will only get progressively worse. SOMETHING will happen at some point to trigger a quick escalation of our already collapsing global economy. The question we're all asking is when, and constantly seeking clues... At least I am.

Your graph shows an inflation rate of 3.4% per year for Rentals over a 24 year span, and appears to have no correction for the changing size of houses which have more then doubled since the 50's, we would expect rentals to have grown proportionally and thus we can easily explain a full percentage point or more that way leaving us again with the 2.5% official number passing the sanity check.

Bitch about the inflation rate that ACTUALLY exists, and the failure of wages to KEEP UP WITH INFLATION if you want, but don't throw out BS numbers and conspiracy accusations that serve more as a measure of your gullibility and anger then the economy.  Your making yourselves look like clowns who don't know the first thing about math or economics and this discredits all your predictions and proscriptions for the economy.

You're not just keeping it up with the times.
It's not longer the time when people cared about what the material contain not the title , it's time for materials that scream "DISASTER" "COLLAPSE" "pANICC" "Run for your livesss" with fake evidence behind it.
People want to see disasters want to see collapse in every damn numbers.
Those people have said that the us will fail in 2000, 2001, 2002 and they can't understand why is 2014 the us is still there , so it's the EU and the euro.

I sometimes think if it's not turning into a diseases , this unstoppable desire for disasters.

The US financial collapse fear mongering was started by a select few in order to run up gold and silver prices (specifically). We saw the gold/silver bubble burst. Now we are seeing a second wave of this fear mongering because of bitcoin/alt-coins in order to run up their prices. Is the same thing going to happen to crypto?

Ultimately I think there will be a global financial meltdown but it's only starting to brew.

Disclaimer: I own crypto, gold, silver, copper, land, ammo, fiat, stocks.

Yeah, I have a bachelor's and a master's in this kind of stuff, and your OP is still pretty shit. It's not wrong, mind you. Inflation and deflation are two actual real options with real theories, math, and consequences behind them. It's just that the inflation school tends to omit the consequences when it teaches about it, and use rather misleading words, like "hoarding" to try to persuade (we typically call that "saving").

Please take a look at the housing price index in Australia... You will find it will make the graphs you see in the OP of a so-called "stable economy" seem not so stable.

The Fed is stuck.  If they take their printed money and put it into the economy, give it to the people. it will get spent, and the V will go up, creating a dangerous inflation.  So instead they just leave it with the banks until they can hopefully repair their balance sheets before everything goes bust again.  Unfortunately the banks are just blowing up the same bubble as last time.  The Stock market is higher, yet we are damn sure not better off.  And don't even get me started on the Derivatives WMD.

Yeah, that derivatives bubble is just incredible, I could hardly believe the numbers. It was actually the only time I had ever seen the word "quadrillion" in use...

It's too bad Bitcoin can't get into the derivatives market. It Bitcoin market cap ever got to one quadrillion... *drool*

Unfortunately, nobody can be stopped from giving out an option or other derivatives on BTC. If BTC is successful enough, the derivatives will come...

They're already here for the well-connected.

I have some Bitcoin derivatives with my personal broker Mr. Zhou.  Thanks to high leverage these make up the bulk of my savings.  I've also got a lot of Martian real estate and some Mt.Gox shares.

There's no need to. They simply calculate (at least in this case) CPI based on how the government calculated inflation in 1990 and separately in 1980, after Federal Reserve Chairman Paul Volcker had the U.S. Bureau of Labor Statistics change the way the calculated the CPI.

I can't speak for their calculations on middle 20% unemployment figures though. If someone can legitimize or justify how they get there, I'd love to hear!  

This week Forbes did have the balls to come out this week and say that the real unemployment rate is DOUBLE the official rate from the U.S. Bureau of Labor Statistics, putting it over 14%!

I would love to believe that this dream can continue onward to infinity. Unfortunately it won't... This system is buckling hard right now and there is no way to save it.

The charts in the OP aren't a good indication for the actual health of the system. The downfall of this system will be related to major international tensions. Natural enemies have the power to destroy each other. The incentive is measured by the amount of relative damage caused inverse to the damage sustained.

The USA doomed us all to this outcome when it violated the Bretton Woods Agreement.

^I already invested in 5 55-gallon drums of potable water, 2 ARs, shitloads of ammo, 3 bigass bear traps, and a lovely Eternal Care^TM cemetery plot for me and the missus.

I see the first cracks of imminent economic collapse, our doom creeping closer with the cold clockwork precision of a ticking egg timer -- to snap our spindly necks like a sprung rat trap.

I'm scared, pungopete468!  What should I do?!

There's really nothing you can do outside of what you are already doing. Don't forget to buy books...

Gold isn't safe from confiscation, nothing of any significance we do in the financial system is anonymous anymore. There's really no good options on the table.

This is complete bullshit because the real wages in Australia haven't kept up with inflation.

Use REAL wages data not fake gov data

Cost of living in Australia is beyond insane and wages haven't kept up

It's not FEAR MONGERING if we really are on the brink of a FINANCIAL COLLAPSE.
The hardest part is the timing, since the "intense pain" has been delayed for so long.

The interesting thing which shadow stats point out is that we are already, even now in a condition of collapse.  The condition of the current generation is inferior to the condition of two prior generations, the boomers having enjoyed the peak and squandered their patrimony.  Primarily hedonic adjustments offset this.  (They are a real thing, with real effects on quality of life, but they make the numbers incommensurate, and thus make historical reasoning corrupt.  Hedonic adjustment factors should be separate series', for econometric purposes.)  The collapse which is so widely feared is just an acceleration of existing trends.  Pain which increases gradually is less directly objectionable than pain with immediate onset, but the effect is no less debilitating.  And the acceleration is present, measurable.

I'm old enough to remember the promo for a late-1980's book called "The Great Depression of 1990".
The author was wrong and the 90's produced the biggest Bull (stock) market in American history.
I tend to expect the collapse to be dramatic and obvious. Your view that it's here already* is really interesting.
*Of course the Gov is broke, but that is nothing new.