Source: MeasuringWorth Foundation, Leverage Shares analysis

Considering the fact that total debt (and thus, “cash” created) was nearly five times higher in 2021 than in 1992, one would expect that value of a dollar to be somewhat proportionately affected. The value accrual metric (and even the dollar equivalent amount) doesn’t indicate this. Also, total debt is 12,211% higher in 2022 than in 1946, which certainly should have been reflected in a valuation far greater than the 1.5X accrual effect shown.

A further issue with the data: the values for 2023 are almost exactly the same in 2022, despite debt being 10% greater. This indicates the (lack of) sensitivity in the estimators relative to the amount of cash effectively in circulation. There are one or more of three likely reasons behind these discrepancies:

1. Relative to government spending, “pass-through” spending from beneficiaries into the economy trails outward.

2. Market forces prevent an rapid ballooning of prices in immediate order

3. The rules defining the indicators are subjected to redone, are limited in data collection to account for variances, etc.

Factors 1 and 2 might be considered as being interrelated: if spending is limited by participants despite receipt of benefits, it is relatively difficult to price goods and services upwards instantaneously. However, given that there is ostensibly cash at hand when it comes to spending beneficiaries, a continual rise of costs is inevitable as said cash gradually enters the system despite (for example) a recessive event having subsided.

(Incidentally, this is also the reason why petrodollar contracts ostensibly cushion the “true” effects of profligate dollar creation: when locked up in the central bank vaults of Riyadh, Abu Dhabi, et al, these dollars are effectively “out of sight, out of mind”. When they’re repatriated or “dedollarized”, as is the case in recent times², the cushioning begins to wear thin.)

Factor 3 is less-frequent but tangibly transformative. This is also why the likes of CPI are inherently unsuitable for observing long-term trends and capturing “true” dollar value. The indicators are supposed to be utilized for course corrections by government planners, whose remedies are persistent, continuous and also delayed in effects taking hold. Unfortunately, a large number of market participants have empirically tended to interpret the CPI “print” running “hot” or “cold” as signals for making investment decisions. For all intents and purposes, however, these indicators have increasingly limited potential for providing accurate signalling.

In a consumption-driven economy, the simplest estimation might be in terms how much consumers have to spend. This isn’t a simple task: data is released at different times (or delayed/discontinued/redefined). Throughout the course of this century until 2022, it can be seen that Americans’ spending potential is showing signs of severe strain on an annualized basis: