in 1972 the median price of a home was about $22,000 by 1982 that had tripled to $66,000 the price for a barrel of oil in 1972 was $3 by 1982 that had become $30 in fact if you had $1,000 in 1972 it would have lost approximately 60% of its value within the space of the next 10 years to become worth the equivalent of $400 by 1982 this may sound completely absurd but this is something that actually happened this phenomenon known as inflation completely destroyed the savings of everyday Americans in fact over the last four years
the US dollar has been losing its purchasing power at a record Pace again since June of 2020 the US dollar has lost approximately 20% of its purchasing power during this period of time the price of a home has already gone from $320,000 to $420,000 a 30% increase the price for a loaf of bread went from being 1. $4 in June of 2020 to $2 today a 40% increase all of this leading to the largest inflation spike in the United States we saw since the 1980s this is a chart that shows us the rate at which
the US dollar is losing its purchasing power and in 2022 it reached some scary levels since then we've seen the rate of inflation come down quite a bit today it stands just above 3% but many are getting concerned by the fact that it seems to be staying stuck at these levels and in the last coup couple of months it has even begun to show signs of turning back up in fact this 3% level is the exact area where inflation began to pick back up in 1972 leading to that decade of incredibly High inflation levels that
we just talked about and we do see some similarities in the way that inflation has been behaving over the last few years compared to the early Innings of the 1970s inflation spiral if this is really the case it could be that the worst has yet to come for the US Dollar's purchasing power before we dive into whether this is actually a risk make sure not to miss our Black Friday discount that we're doing on our service the reason we teach people about macroeconomics is for a maximum number of people to protect their wealth and ideally
profit from the endless number of opportunities that our modern Financial system offers to Traders throughout 2024 we've had a crazy ride allowing our clients to benefit massively from the trade ideas that we've sent out part of what allowed us to achieve this kind of performance throughout 2020 before are the massive price appreciations that we've seen on assets like gold the US Stock Market and cryptocurrencies gold has risen by over 25% since the beginning of 2024 and so has the S&P 500 these are absolutely record price appreciations not to mention Bitcoin that has risen by over
100% are these massive asset appreciations not a reflection that the US dollar is losing its purchasing power yet again and that inflation in the United States is picking back up for for example this is what gold was doing in 1972 it was appreciating violently just a few months before inflation in the US began to pick up unfortunately it's not as simple as that gold stocks Bitcoin are not part of What's called the Consumer Price Index or the CPI this is a basket of consumer items that are measured each month to gauge what inflation looks like
in the United States and there's a very good reason for why Financial assets are not included in this basket because they don't really impact the average person's day-to-day budget or at least they're not nearly as relevant as things like shelter the price of bread chicken eggs the price of gas at the petrol station the price of Medical Services transportation services these are all things that are included in the Consumer Price Index and this is what it looks like going back to the 1970s this is the version of the Consumer Price Index that takes into account
all of the things that I just mentioned and this is another version of the Consumer Price Index but that strips out food and energy this is what's also known as the core Consumer Price Index now you're probably thinking why on Earth would they remove food and energy from inflation data food and energy are probably the two most important things required for the survival of any human and believe it or not the version without food and energy is actually the preferred measure of inflation That central banks like the Federal Reserve used to gauge inflation now the
reason for this is that food and energy prices can be very volatile and influenced by external factors and don't necessarily always reflect the true underlying inflation in the US indeed when we look at the normal Consumer Price Index against this core Consumer Price Index we clearly see that the core Consumer Price Index is a lot more steady and stable than the normal one and unfortunately core inflation in the United States is the one that looks very sticky today or in other words it doesn't really want to come back down to more reasonable levels you see
the Federal Reserve the US Central Bank typically aims for around a 2% inflation rate and between 2012 and 2020 they were actually pretty good at keeping inflation at around those levels but then the pandemic hit trillions were injected into the financial system and since then inflation has never really returned to normal levels in order to find out where it's going next we need to decompose this core CPI into its different components and when we do that we see that the vast majority of this sticky inflation we have today is being driven by shelter or in
other words housing and apartment rent prices and indeed home prices have been rising in the United States over the last 4 years as we mentioned earlier but you can see that has slowed down considerably over the last year and a half the median price of a home in the US has actually been trending slightly lower over the last year now the shelter CPI isn't yet reflecting this fully the government data on shelter inflation is a little bit lagging compared to what's actually happening on the housing market for several reasons that I won't get into this
video but the main takeaway is that the housing market in the US has cooled down considerably over the last couple of years and there isn't for now any strong signs that it's going to pick back up anytime soon because if we overlay a chart of something called existing home sales for the us and we shift it Forward by around a year and a half we see that this line predicts what home prices are going to do over the next 18 months this data is basically telling us the number of homes being sold in the United
States at any given point in time typically when the number of homes being sold ramps up that leads to an increase in home prices a pretty straightforward relationship and the same thing happens when the number of homes being sold collapses that leads to a decline in the price of homes today home sales are at pretty depressed levels the combination of high mortgage rates and a weakening economy are likely responsible for this but as you can see it also probably means that home prices are are going to continue staying cool over the next year or so
so coming back to our core CPI data this suggests that this large portion of core inflation in the United States is likely to get smaller over the coming months okay but what about things like Medical Services transportation services and other core services that still make up quite a significant portion of inflation today well the biggest influence on the price of services in the US economy by far is Wages or salaries and indeed the growth of wages in the United States has been considerable since the pandemic at one point we reached the highest levels of wage
growth of the last 25 years of data and it is still sitting at higher than average levels to this day this elevated wage growth is definitely contributing to the sticky inflationary pressures we have today and again many are concerned that wage growth is going to pick back up today and Lead inflation higher once again however for now the trend in wage growth is to the downside and if we add the data of job openings in the United States and once again we shift this data forward by just under a year we see that job openings
predict what wage growth is going to look like over the next year and right now there has been a pretty steady decline in job openings so not suggesting that wage growth should be picking back up anytime soon and this makes sense because if there's an abundance of job openings in the economy then people can easily find a job and they can be quite confident in negotiating for a higher wage so a high number of job openings in the us directly puts upwards pressure on wage growth if Less jobs are available on the other hand then
workers will be less likely to ask for a higher wage because they may be more concerned about keeping the job that they already have now there's also another element to consider when it comes to wages and that's where we have to come back to food and energy prices because if the prices of food at the supermarket are rising people will naturally ask for a higher wage to afford basic life Essentials and the same thing goes for oil if prices at the gas pump are high it makes it more expensive for people to get to work
and that will push workers to ask for a higher wage not only that but if oil prices are rising that increases the cost to manufacture and transport most consumer goods so food and energy prices can have absolutely massive impacts on inflation the price of wheat corn rice natural gas oil all of these are food and energy Commodities that can be impacted by things like weather patterns Supply shortages and of course geopolitical tensions and oil probably being the most influential commodity out of all of these in fact in the 1970s two consecutive oil shocks occurred as
a result of the yam kapore war in 1974 and the Iranian Revolution in 1979 these were instrumental to Spur the high inflation of the 1970s and again many people are worried about something similar happening today in the current geopolitical context there is some good news however the United States has ramped up its oil production significantly over the past 30 years thanks in large part to fracking so today the US is a lot less dependent on Middle Eastern Nations for its oil the US is producing a record 13.1 million barrels of oil per day this is
unrivaled By Any Other Nation Saudi Arabia for example produces 9 million barrels of oil per day so to summarize there is still no evidence for us that we should be expecting an acceleration of United States inflation anytime soon and this is a view that we've held since June of 2022 when inflation peaked of course that still means that the US dollar will continue losing its purchasing power it's just that it's likely to do so at the usual rate that's why it's imperative for all individuals to invest in order to protect their wealth at Bravo's research
our approach is to speculate on the price of assets based on our knowledge of the market we provide trades that we believe have good odds of providing returns in a short period of time and we cut positions that are going against us very quickly in other words we're professional Risk Managers make sure to use the Black Friday discount that we're doing to have access to our entire trading strategy
