Monday, June 14, 2021

"It Gets Ugly: Dollar’s Purchasing Power Plunged at Fastest Pace Since 1982 And It Won’t Bounce Back"

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"It Gets Ugly: Dollar’s Purchasing Power Plunged 
at Fastest Pace Since 1982 And It Won’t Bounce Back"
by Epic Economist

"The purchasing power of every dollar in circulation is sharply collapsing right now, and experts are warning that lost value won't bounce back even if economic conditions improve. The decay of our currency is actually a lot more acute than it appears. Americans are already realizing their dollars don't buy nearly as much as they did in the past. And to make things worse, the price of everything is skyrocketing. All of this is happening because by attempting to increase consumer price inflation, the Federal Reserve is decreasing the buying power of the consumer dollar, so consumers end up paying more for the same products. In that way, the Fed is actually decreasing the purchasing power of labor paid in those dollars, which means, the value of your labor is being suppressed in the name of higher inflation. Therefore, every hour you dedicate to your work just to afford to have a nice and comfortable lifestyle - and oftentimes, having to spend time away from your family and your loved ones - is sadly worthing less than ever before.

That's what Wolf Richter exposed in a recent article published on his website Wolf Street. Richter explained that, in essence, what the Consumer Price Index (CPI) tracks is the “loss of purchasing power of the consumer dollar,” and thereby the loss of purchasing power of labor denominated in dollars. And new data shows that the purchasing power of the consumer dollar has plunged to a new all-time low. According to the Bureau of Labor Statistics, the Consumer Price Index jumped 0.6% in May, after having jumped 0.8% in April, and 0.6% in March – all three the steepest month-to-month increases in almost 12 years. For the three months combined, CPI has jumped by 2.0%, or by an annualized rate of 8.1%. That is to say, in a three months span, the purchasing power of U.S. consumers collapsed by 8.1% compared to the same period one year ago.

However, by adjusting those rates on an annualized basis, the numbers are even worse. Recent data divulged by the BLS suggests that this month, the purchasing power of the consumer dollar - which includes everything denominated in dollars for consumers, even their labor - has dropped by 0.8%, and over the past three months it fell 2.4%, marking the biggest three-month plunge in purchasing power since 1982, amounting to a drop of 9.5%. Even more worrying is the fact that the current plunge in purchasing power is permanent, and the purchasing power loss we will experience in the future will also be permanent. Richter outlines that the only factor that might make it seem like a "temporary" loss is a period of consumer price deflation. The same has happened in 2008 after the economy faced the most severe recession since the 1930s. "The rest of the time, we’ve had lots of decline in purchasing power. And that has proven to be rock-solid “permanent,” and we never got that lost purchasing power back," he said.

Bearing in mind that a 10 percent drop in the value of the dollar represents a 10 percent loss of buying power, this means that not only the products we buy are getting more and more expensive, our money is also becoming gradually worthless. The current monetary policies are actively destroying our currency, suppressing our purchasing power, and downgrading our living standards. In one recent article published by FXStreet, the financial analyst Chuck Butler alerted that inflation can be shown in dollar weakness, and a weak dollar invites inflation to be imported into the country from other countries. So with inflation soaring right now, and the dollar losing purchasing power, our economy is already facing a double whammy, and things are about to get a whole lot worse as the weak dollar trend has just started to show its early effects. We're going to witness a widespread loss of wealth as our money turns into valueless paper, and the financial hardships faced by most Americans will only intensify while our living conditions deteriorate."

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