In this monologue, the presenter argues that the U.S. government and the Federal Reserve are deliberately obscuring true inflation and using policy tools to raise taxes and engineer stagflation. He begins by comparing historical CPI measurement methods with the alternative calculations from ShadowStats, showing that if today’s inflation were measured using older formulas, the rate would be 5‑10% instead of the official 2‑3%. He then explains a 2018 tax‑bracket indexing change that switched from the standard CPI to a CPIU that understates inflation, causing tax brackets to rise more slowly and effectively increasing taxpayers’ burden over time (bracket creep). The speaker details how quantitative easing works: the Fed creates base money (bank reserves) to buy Treasuries from primary dealers, which does not directly increase money circulating in the real economy. He distinguishes this from broad money (M2) that can be injected via direct government transfers, such as universal basic income or “helicopter money,” potentially delivered through a digital app that would replace cash. To boost inflation, the presenter suggests the government could force higher velocity by banning cash and imposing expiration dates on digital balances, compelling rapid spending. He links these demand‑side tactics with a supply‑side squeeze—encouraging people to stay home, raising unemployment while incomes rise—creating a scenario of stagflation (high inflation with high unemployment). Throughout, he cites examples, such as Japan’s stimulus checks, and references macro‑economists like Lynn Alden to support his claim that the policy mix is designed to raise tax receipts while masking the true cost to citizens.
Chapters
I'll try to go fast here. So first thing, what we want to do is we want to look at the past CPI and how that's really been a lie. And most of the viewers I'm sure, are familiar with Shadow Stat. So I've got that pulled up here. And if you're not, this is definitely a website that you should have really earmarked on your browser or whatever. And we look at the CPI as it was measured back in 1990, between 1980 and 1990 and then prior to 1980 and then what? So, and the reason I say that is because I want to be clear, this is the way the government used to measure the cpi. It's not how the gentleman that manages Shadow Stats think, thinks that it should be measured. So we're still using the measurement tools of the government themselves, just in different time periods. So we see that if we just measured inflation today the way it was measured back in 1990, that our inflation rate, let's call it since the GFC would be right around maybe call it 5% where the official inflation rate was down 2%. But then if we measured it the same, they would the same way today that we did back in the 1970s. We see going back to the GFC now we're hovering around 10%. And I think most people understand that, but they don't really think through the whole process. And I did this on a video. So one thing I'd like to point out to everyone is if you have someone say that, yeah, I know the CPI would be 10% if we measured it the same as the 1970s, but we've made improvements on the CPI now it's better. And so I'm not really worried about it too much. What I would ask that person is did we have inflation in the 1970s? Did prices go up? Because you can't have both, right? I don't think people really think that through. We can't have low inflation today and high inflation in the 1970s, because if we measured inflation in the 1970s, the the same way that it was measured today, the CPI would have been 3%. But so then if we measure today, today's CPI the way it was measured in the 70s, then we have it at 10%. So you can't have both. You can't have your cake and eat it too. So either the CPI is higher today, the real rate of inflation is higher, or the real rate of inflation was a lot lower in the 1970s. And anyone that lived through the 1970s, you know where your price is going up consistently, yes or no. So that's kind of the rebuttal I would have to anyone that thinks the measurement is just more accurate now than it was back in the 1970s. Okay. So moving on. That's kind of what everyone understands on how they lie about the cpi, how they did that in the past. But what is really shocking and I think will surprise most people and what I never heard really anybody talk about, even the guys like Dent and Schiff and, and Mike Maloney, I've never really heard them bring this up. So this is the. Let me get this. This is straight from the Fed's website. And this is a post from 2018, January that talks about the most recent tax change. Right. So everyone that was in favor of this because Trump's coming out lowering taxes and that's what we need to do to stimulate the economy and yada, yada, yada, what they didn't do is they didn't read the fine print. Because when you read the fine print, you see that this wasn't necessarily a tax decrease. It was actually a tax increase long term. And so let's dive into why. This blue line is the measurement of the typical cpi. So it's called the C. The CPIU is what it's referred to, and this red line is what they call the CP cpiu. And the difference is that the C CPIU over time understates inflation relative to the typical cpi. So what they were using for the tax brackets prior to 2018, when they came out with this bill that supposedly lowered our taxes, they used the cpi. So what that means is the tax brackets would go up faster. Okay. And what they did is they say, well, now we're going to use this measurement of inflation that understates it. So that means the tax brackets will raise at a slower pace. Let's take this to its extreme so we can really get our mind around this. Let's say that you're someone right now that's making $50,000 a year. And, and your effective tax rate is 15%. And let's say right now the effective rate for someone making $100,000 would be 50%. And so if over the next five years we get substantial inflation and your wages or your income goes up with the rate of inflation, taking it from $50,000 a year up to $100,000, your purchasing power hasn't increased at all. It hasn't gone. It's zero. You can still buy the same amount of goods and services, although you're making $100,000 now, instead of $50,000, but now let's just assume that the CPI showed that there was zero inflation. Well, the tax bracket, you'd be in a 50% effective tax bracket. So you see what, what's happened is your, your wages or income has gone up, but your purchasing power has stayed the same. But you're paying a higher percentage of your purchasing power to the government in the form of taxes. So by this little switch that they made that's in the fine print, they really increased your taxes over the long run, especially if they lie about the CPI moving forward, like they most likely will compared to the measurements that we just talked about. When you look at the 1970s relative to the 90s and the way it's measured today, assuming they're going to still understate inflation, they can let inflation run at 10% and everyone and then say it's at 2 or 3%, and everyone thinks that we've got this Goldilocks economy, while at the same time, not only is the prices of what you pay for on daily basis going up, but your taxes as a percentage of your overall purchasing power is increasing every single year. This is how they can raise taxes and tax receipts without you even knowing about it. So let's say that we have quantitative easing the way we've been doing it, and that's where the Fed comes in and buys assets directly from the primary dealer bank usually, or a bank under their umbrella. So, and this is on the right here, the primary dealer banks have accounts with the Fed. So their main checking account is on the Fed's balance sheet, just like we saw before, the that the additional deposits of customers are on the liability side of the commercial bank's balance sheet, that the bank reserves are a liability on the Fed's balance sheet. That's kind of like the checking account for the banks themselves. And as of 2008, it's also the checking account for the Treasury. So the treasury general account is there as well. We'll get into that in just a moment. So if the Fed buys assets from the banking system, which is what quantitative is, a quantitative easing is, and let's say that we've got a Treasury for $100, so the government would issue a Treasury. The primary dealer bank comes and they buy that from the government. Now it's on their balance sheet as an asset. You can see that with my wonderful drawing. Your drawings are great. I love your whiteboard drawings. Yeah. Where's the cat? I'm not drawing in front of it. I have to draw like this. And it looks like I'm drunk kind of when I'm doing it anyway, you get the idea. So we've got the bank reserves on the asset side of this bank's balance sheet along with the Treasuries they bought from the government. Well, when they sell this to the Fed, when the Fed does quantitative easing, the Fed prints up base money. They don't print up broad money that we just discussed, they print up base money and they add that hundred dollars to the bank reserves of the bank and then those Treasuries go from the bank's balance sheet, the asset side, over to the Fed's balance sheet. So that's an asset on the Fed's balance sheet. So after the transaction, the asset side of the bank's balance sheet just goes from having bank reserves and Treasuries to just having bank reserves. It's just an asset swap is what Jeff Snyder talks about. So if we have $100 worth of treasuries, go to the Fed's balance sheet on the outside, they print up more base money, more bank reserves and just deposit that into the bank reserve checking account for XYZ bank they bought the mortgage backed securities from or the Treasuries. So my point with outlining this is to show you that this transaction has only a few base money. It hasn't affected the money circulating in the real economy at all. So the Fed could print up literally $10 trillion worth of this base money and buy these assets from the banking system and it wouldn't really increase inflation. Theoretically, it wouldn't have a causal effect because the money that's circulating in the economy is still the exact same. That's why in my videos I always call it like, because we think about taking a bunch of money and just stuffing it under our mattress, right? And then it's not circulating. I always say it's under the Fed bed. So it's like they've got this mattress and they just stuff $10 trillion under there and it doesn't do anything, doesn't create inflation. The only thing it does is increase the capacity of the balance sheet, the banking system. So how are they going to go into this? How are they going to achieve this objective of stagflation? And notice I'm saying stagflation, I'm not saying inflation, that's key. The difference in stagflation by definition is you have inflation, but the unemployment rate is high. Here's why I think that's what they're going to, to shoot for. Well, first actually Let me go over, let me try to follow my outline before I get ahead of myself. So let's figure out how they're going to increase the demand side of the equation. Because inflation really is the amount of money that circulating in the economy, chasing a certain amount of goods and services and how fast that money circulates, we call that velocity. So I think the way that they're going to increase M2 money supply, which is broad money, just in layman terms, that's just how much money is in the real economy. They're going to do that through ubi, We've already seen it with the unemployment checks that are these additional unemployment checks, these stimulus checks, whatever you want to call it. I think that they're going to continue that maybe not up to the election because we could have kind of a stalemate there, but I think they're going to continue in a different way. I'll get into that more in a moment. I've got that written down on my notes. But they, they create this UBI long term helicopter money, whatever you want to call it. This increases the money supply in the real economy. Now this is different than quantitative easing, what the Fed has been doing. A lot of people call that money printing and it is to a certain degree, but that's just bank reserves that are held at the Fed. So we're talking about the difference between base money, which really can't get out into the economy unless the commercial banking system lends it into existence, the difference between that and broad money which the government can spend, the Fed monetizes. So the government spends it by giving checks to everybody. And the Fed prints up these bank reserves to buy those Treasuries that are issued at auction from the primary dealer banks in this shell game, again, I'm getting too technical here. But the bottom line is the amount of money in the real economy increases. So how do they get velocity up? Well, I think that's where they're going to ban cash. And I think, Jason, you've been talking about this. So how do they do that? Well, we all know that logistically they had a big problem getting these checks to the individual, you know, the individual taxpayers. And a lot of these checks went to people who were dead. And I mean, it's typical government stuff. So I think the next round, and when they make this permanent, if they do, and again, there are no certainties, only probabilities. I'm just talking about my base case here. They're going to have something like an app on your phone so you download this app. And of course everyone will want to do it because everyone wants the free money. And everything the government does or one of these policies or acts, as Ron Pauly says, the results are always the opposite of whatever the name is. So I always call this the Freedom app because it will take away your freedom a lot more than it'll give you more purchasing power, that's for sure. So you download this Freedom app and you get your Fed coins, let's say, directly transferred to your app. And then when you go to Starbucks or whatever you do, you just swipe your phone and it's got the barcode and bam, that just comes straight off of your Fed app. So that's how they circumnavigate the banking system to increase the money supply, but with velocity, what they can do if you're not spending the money fast enough. And again, I want to get sidetracked for a moment because Japan, this did the same thing where they did these stimulus checks. But what was interesting about the Japanese, they have a 30% savings rate. So they didn't go out and spend it, they actually saved it. So it defeated the purpose. It actually decreased the amount of velocity. So I think the Fed is going to learn from the Japanese experience and they're going to give you, let's say, $2,000 of these fed coins per month to start. But then they're going to say you have to spend it within 30 days or, or poof, it's gone from your phone, it's gone from the Fed app, we'll call it. And if that doesn't increase velocity enough, then they'll say, okay, now it's gone in 15 days. So everyone has to go out there and spend that money within 15 days or else they lose it. Right. So this is how they're getting that velocity higher, therefore the inflation rate higher. But the unemployment, this comes in where if you're paying people more than they're making on the job to stay at home, which, you know, Lynn Alden, she's a brilliant person. She's in the macro space on Fintwit, She's a superstar. But I had a conversation with her the other day where she pointed out some shocking statistics that the average income of an American over the past, call it two or three months has actually increased as U6 unemployment. That, that's the broad measure of unemployment, has gone up over 15%. And if you measured it correctly, I would argue that it's up over 20%. So we've got Great Depression, like unemployment, while the incomes of the average Americans are going up. So typically, an economist would look at unemployment, say, oh, no, no, that's bad, that's bad. That's going to create deflation. And I mean, it's bad in the sense if you're trying to increase. Increase inflation because the demand side of the equation goes down. But see, what they're doing is they're saying, okay, well, let's increase the demand side. How do we decrease the supply of goods? Well, we can just make everyone stay at home instead of going to work and producing these goods and services. That's why I say it's this ace up the sleeve. If they're trying to get this inflation. Sa.
