War and the middle class

And it begins.

Yesterday we talked about the real threat of war… especially wars on multiple fronts. Now we have confirmation that it’s happening.

The US just committed troops to the Middle East. And US Treasury Secretary Janet Yellen publicly stated that she believes the US can afford to aid the war efforts in both the Ukraine and Israel. By the way, I pulled back the curtain on Yellen’s motivations and her allegiances in my new book Beyond the Nest Egg.

As we discussed yesterday, governments can only finance wars by printing money.

Technically, that means Yellen is right. The US can afford to support both war efforts. They can just create new dollars out of thin air to do so. But this is going to further erode the dollar’s purchasing power… which will drive our cost of living higher and higher.

So ultimately it’s the average person who must pay for these wars. But we don’t pay for them directly. Inflation is a stealth tax that steals our purchasing power away from us.

This chart tells the story perfectly:

This comes from the Economic Policy Institute. It tracks the growth of American wages alongside economic productivity increases.

And we can see the two went hand-in-hand up until 1971.

As the economy grew, regular Americans made more money. This is how we created the largest middle class in the history of the world.

But something happened on August 15, 1971 that changed everything. Since then productivity continued to scream higher… but wages stagnated.

That’s inflation at work.

You see, the act of printing dollars steals value from all dollars in circulation. But there’s a trick to it.

Those who get to use the newly printed money first get to do so before consumer prices have adjusted higher for the inflation. In other words, they get to spend new dollars before their purchasing power falls.

This allowed those who control the printing press to redirect nearly all the productivity gains we’ve seen since 1971 to themselves.

So when Yellen talks about financing multiple wars, what she’s really saying is that she is happy to keep this process going. She’s happy to redirect productivity gains away from the middle class to support her agenda.

And that means consumer prices are never coming back down. The days of $30 grocery bills are over. We’ll quantify that tomorrow.

But the key thing we must understand is that inflation undermines civil society. It hollows out the middle class and creates a great economic divide between the haves and the have-nots. This is the real threat of war… and it’s insidious.

The good news is that we can take action at the individual level. There’s an old saying that goes, “if you know what’s happening, you’ll know what to do”.

Well, what’s happening is right there in the open for all to see. What we need to do is mitigate the impact of inflation… and then make it work for us.

I’ll show you exactly how in our Finance for Freedom program. You can find it here: Bulletproof Your Money

-Joe Withrow

P.S. If you want to know what happened on August 15, 1971, just go here.