A new study from JP Morgan finds real incomes for Americans are negative since Bidenflation started in 2022.
In modern times that has never happened outside of recession.
This is odd considering Biden was allegedly an economic miracle -- as fangirl Paul Krugman put it “It may be hard for normal human beings... to appreciate the awesomeness” of Biden’s economy.
The culprit, of course, is fake inflation numbers. Because if you undercount inflation you overcount growth.
Fake it enough and stagnation can look very awesome. On paper.
The problem is this has been going on for a long time. Zoom out and the average American has flatlined for 25 years.
The Big Mac Index
We can estimate the undercount with the humble Big Mac, which is the gold-standard for measuring true inflation.
The Economist magazine actually publishes a Big Mac Index comparing currency exchange rates to what they should be in Big Macs as a way to detect currency manipulation.
Or fake statistics.
The reason is the Big Mac is the same everywhere in the world, and it captures a wide range of prices -- wages, rents, food, energy, gasoline, insurance, regulation.
Moreover, official CPI is infested with statistical games -- including so-called hedonic adjustment where they cancel out price hikes saying maybe the product’s better, like it’s a smaller carbon footprint.
Or so-called substitution effects, where people stop buying stuff that got expensive -- they switch from steak to chicken. Which also hides inflation -- the new basket’s not the old basket.
So doing it with Big Macs is apples-to-apples.
According to McDonalds, a Big Mac in 2019 set you back $4.39 and. Today it’s $5.79 -- 32% higher.
The kicker is offical inflation is only 25%.
In other words, we’re about 7% poorer — $5,000 per household — than statistics say.
In just 6 years.
It gets worse when you zoom out.
Since the year 2000 the official narrative is the US economy per person grew 3.85% per year while inflation was 2.5%. So 1.35% real annual growth.
That’s pretty rough. But at least it’s growth.
But Big Macs didn’t go up 2.5% per year. They went up 4% per year.
Meaning it wasn’t 1.35% annual growth.
It was negative. 25 lost years.
Real-World Prices
If that sounds crazy, walk through the numbers.
Since 2000 official household income in nominal dollars doubled. But prices actually rose faster.
Gasoline and house prices went up 2 and a half times. College tuition -- and steak -- is up 3 times. Health insurance went up 4 times.
That means the hours of work required to buy a new home went from 12,000 in 2000 to 18,000 hours today. Health insurance went from 110 hours to 173.
And, yes, a Big Mac went from 9 minutes in 2000 to 15 minutes today.
All 3 imply we’re a third poorer.
While statistics claim we’re 40% richer.
The Rich Got Richer
To be fair, anybody with assets made out like bandits since 2000. Thanks to the Fed’s artificially low interest rates that pumped home equity and stockmarkets.
Since 2000 houses went up 250%.
Stocks are up 480%.
But given the bottom half of Americans own just 6% of financial assets, they’ve been treading water for 25 years. Floated by personal debt that tripled from $6.5 trillion in 2000 to $19.5 trillion today.
I actually wrote an article on this a few months ago, why Boomers own everything.
What’s Next
Trump’s trying to reverse decades of stagnation hidden by fake numbers. Without game-changing cuts to federal spending and regulation it will take decades to fix.
Given Americans are no longer saving money while just one in six young Americans are financially secure, they don’t have much slack.
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