Kevin Bae

Non-Social in a Socially Networked World

Cumulative inflation under Biden is 17% while under Trump it was only 7%

If you want to know why spending is up while the public feels pessimistic about the economy just look to cumulative inflation or compound inflation if you will.

It’s very simple but legacy news won’t report the reality. It’s the cumulative effect of inflation. It’s like the concept of compounding interest in a savings account but in reverse. In a savings account you get paid interest on your deposit. Right now you can get savings accounts with a 5% annual percentage rate. Take $100.00 and put it in the bank in January and in 12 months you’ll have $105.00. If interest rates remain the same and you do nothing with your money in the next 12 months you’ll have $110.25. The interest compounds or accumulates one year on top of the next.

This is the exact same effect with inflation. I used the government’s own inflation calculator for these numbers. Inflation in 2021 averaged 7%. If something cost you $100 in January 2021 by the end of that year that same item cost you $107.00. Inflation in 2022 averaged 6% so that same item at the end of 2022 would cost you $113.42. Inflation, so far in 2023, is averaging 3% so that same item again at the end of this year now costs $116.82 or about $117.00 rounded off for simplicity.

Biden’s Inflation – Bureau of Labor Statistics CPI Inflation Calculator

$117.00 minus $100.00 equals $17.00. $17.00 is 17% of $100. This is the cumulative effect of inflation and why this economy feels like crap. Unless you work for UPS, FedEx, or one of the big three automakers your take home pay didn’t go up 17%. At best your wages may have increased 6% over that same three year period.

Meanwhile during Trump’s 4 year term the cumulative inflation was only 7%. Inflation still was above gains in wages but the cumulative effect would have been barely noticeable. That’s why Trump’s economy felt so much better.

Trump’s Inflation – Bureau of Labor Statistics CPI Inflation Calculator

One last thing. Don’t be misled on by the media on inflation. Inflation is a devaluation of our money by increasing the amount of money in circulation. The larger the supply of money the less your money is worth. Inflation is not the same as an increase in input costs to business. That is to say inflation is not a result of the rising cost of materials and labor. They’re related in that inflation will cause the cost of some of those inputs to rise but only because the value of the money has declined. When wages are artificially pumped up by minimum wage laws that will increase the cost of goods and services to the consumer on top of the costs due to inflation.