Biden's fiscal year 2022 plan calls for $6.01 trillion in expenditures and $4.17 trillion in revenue, representing a 36.6% increase over projected expenditures for 2019 (before the coronavirus pandemic cause an unexpected increase in this figure). He projects a deficit of $1.84 trillion, down sharply from the past two years because of the Covid-19 pandemic, but up from $984 billion in 2019.
Total spending is expected to rise to $8.2 trillion by 2031, with deficits above $1.3 trillion over the next decade. This shows that the trajectory of inflation, which gives increasingly strong signs of its intensity through indicators such as the CPI (Consumer Price Index) and the PCE (Personal Consumption Expenditures), tends to continue rising.
And inflation, as you may already know, means a decrease in the currency's purchasing power. We are talking about the USA, but in Brazil and anywhere in the world where this same form of monetary policy is used, the consequence is the same.
It's no secret that $1 is now worth less than it was 100 years ago, but how much has the purchasing power of the US dollar declined over the years? To illustrate this, see the image below, which demonstrates its rise and fall since 1913. Using this graph, we can see how inflation and changes in the Consumer Price Index have diminished the purchasing power of the dollar over the last century.
Inflation can be seen in the constant increase in the prices of consumer goods and services over the years and occurs as the money supply outpaces economic growth.
As these prices continue to increase, the total amount of goods and services that can be purchased with a single amount of currency decreases.
That's not necessarily a bad thing. Controlled inflation provides an environment of stable asset price growth. This increases the value of homes and other real assets, for example. However, when it occurs in an uncontrolled way, it considerably reduces the purchasing power of a population, making people poorer. By analyzing this information and seeing the impacts of inflation over the years, the world's need for real hard money becomes increasingly clear.
