Inflation Continues to Chew Up Your Paycheck

Inflation continues to chew up your paycheck.

While consumer prices rose 0.7% in January, income from all sources, including wages, salaries, interest dividends, rental income, unemployment, Social Security, etc. was essentially flat.

And when adjusted for inflation, real personal income fell by 0.5%.

In other words, you didn’t put any more money in your pocket in January. But you’re paying more — for everything.

Looking at the bigger picture, real incomes have fallen 7.5% from stimulus-inflated 2021. Going back to January 2020, real incomes are up a paltry 3.7%.

Keep in mind, this is aggregate data. There are more people in America than there were last year. Adjusted for population growth, the numbers become bleaker. Real personal income fell 10.1% from a year ago and was only up 1.8% from January 2020.

 

As you can see from the graph, Americans are losing ground fast.

While real income shrinks, Americans are spending more as inflation runs up the price of everything.

Consumer spending rose by 0.8% in January from December (seasonally adjusted), and by 11.6% year-over-year.

When you factor in 7.5% annual CPI, it becomes clear that Americans are spending a lot more, but they getting a whole lot less for it. Most of the increase in spending simply represents rising prices.

And the reality is even worse. These numbers are based on a government-rigged Consumer Price Index. Using an honest CPI of 15%, all of the spending increase is eaten up by inflation — and then some.

Simply put, you’re spending more and getting less. And try as you might, you can’t outrun the inflation dragon.

This obliterates a myth you’ll often hear in mainstream media – the notion that inflation isn’t really that bad for the average American. After all, wages rise too. But as this data shows, wages rarely rise at the same pace as prices. That means inflation puts a significant squeeze on the pocketbook, at least in the short term.

Of course, you don’t need us to tell you that. You’re living it.

Economists and pundits talk about inflation as an academic exercise. They rarely reflect on the fact that rising prices have real impacts on real people. And if you happen to be somebody living on a fixed income or savings, you’re really screwed as inflation is rapidly eating away your purchasing power and your income streams aren’t increasing at all. Inflation always causes the most pain for the poor and elderly.

The focus on rising prices obscures the real villain in all this.

Greedy corporations and mysterious supply chain problems aren’t causing inflation. It’s the Fed. As economist Milton Friedman once said, inflation is always and everywhere a monetary phenomenon. Properly defined, inflation is an increase in the money supply. Rising prices are a symptom.

And the Fed has increased the money supply in spades. Over the last two years, the central bank has printed trillions of dollars out of thin air and injected them into the economy.

The Fed is supposed to make the economy more stable. But it’s clear the real impact is the exact opposite. The Fed causes great harm. And as Ron Paul pointed out in a recent article, it hurts the average American worker the most.

The truth is workers are inflation’s main victims.”

All you have to do is look at the data to see the truth in his words.