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Social Security beneficiaries just received a raise. If you want to call it that, the Social Security Administration announced yesterday that it wants to increase Social Security payments by 2.5 percent over 25 years to combat inflation, and many people were not happy about it. The second thing I want to talk about today has to do with what Jamie Diamond, the CEO of JP Morgan Chase Bank, said about the economy and the geopolitical nature of what is happening in the world.
And the third thing is that Goldman Sachs says there's no need to worry about the stock market. So I want to break down these three things, and let me start by talking about what's happening with Social Security. Because the Social Security Administration says that if you depend on Social Security, you deserve a raise.
There are 72.5 million Americans who depend on Social Security; they will see a 25% increase over 25 years, which equates to an average increase of $50 a month for Social Security beneficiaries. Now, the reason many people were upset about this is because they believe this is just keeping pace. of the real inflation rate that many people are looking at, but there are a couple of issues here and let me start by talking about the delayed impact of social security payments.
Let me explain: in 2021 social security payments increased by 1.3%, in 2022 they increased by 5.9%, in 2023 by 8.7%, in 2024 by 3.2%, and in 2025 they are going to increase by 2.5%. So the first issue that many people like to talk about is that Social Security has barely kept up with inflation. What that means is that if you rely on Social Security and have a good, steady income, life is still getting more expensive, and often it gets more expensive faster than your Social Security benefits.
The second problem is that the payments you receive from Social Security are delayed by inflation. If you recall, Social Security payments in 2022 increased by 5.9%, and in 2023 they increased by 8.7%, but in 2022 inflation in the United States peaked at around 99%. So when we saw this high inflation in 2022, Social Security beneficiaries didn't see that pay raise until 2023.
So you have to see that inflation happens first, and after inflation occurs, that's when you start to see the pay raise in Social Security the following year. So if you rely on Social Security, not only do your payments not always keep up with inflation, but the second problem is that you don't get the pay raise until much later.
Then the third factor here is, of course, that Social Security increases don't always take into account different things that happen with the cost of living. So, of course, we've talked about inflation, but we've also been looking at other things that happen, like shrinkage inflation and skimming inflation.
Shrinkage inflation means you pay the same amount of money but receive less. You buy a bag of chips, but the bag is smaller. So you have to buy more chips if you want to have the same amount of chips. I'm not advocating that you eat chips; I'm just putting it into perspective because we've been seeing this kind of shrinkage inflation for everything.
And shrinkage inflation is when companies use cheaper products to sell the same amount. So you want to buy a wool suit that costs $500. Now, that suit also costs $500, but it's made of cotton instead of wool. That's another kind of inflation that isn't always taken into account in the CPI figures. Which means, hey, they're giving you a little raise, but you actually need a lot more money to have the same standard of living you had before, and that doesn't always show up in the CPI figures.
The CPI figures. This brings me to the second part of the video, which deals with geopolitics and Jamie Diamond's concerns about the economy. We now cover all of this in Market Briefs. Market Briefs is my free financial newsletter where my team works daily to break down what's happening in areas such as the economy, the stock market, the housing market, cryptocurrencies, and the global economy into a fun, witty, and easy- to-read newsletter.
Over a quarter of a million investors read it every morning, so if you haven't signed up yet, what are you waiting for? It's completely free. I have the link to join Market Briefs below in the description. Jamie Diamond says that some of his biggest concerns for the economy today have to do with government debt and geopolitical issues.
Let me read you a quote from what he said: "While inflation is slowing and the US economy remains resilient, several critical issues remain, including large physical deficits, which means large government debt, infrastructure needs, trade restructuring, and the remilitarization of the world. Today we cannot speak, although we hope for the best, about these developments." And the prevailing uncertainty demonstrates that we must be prepared for any environment.
What does this mean? That we have to be prepared for any kind of shock? If you've been watching my videos, earlier this week I posted a video where the Bank of England essentially issued a warning to businesses, saying to be prepared for any kind of economic shock. And the reason they were talking about this economic shock was particularly due to the shocks in the oil market.
Now, obviously, we know there are many problems in the Middle East. I'm not going to talk about all of those issues because I 'm not a geopolitical channel. I want to talk about the financial side of things. But the reason these issues matter is because when there are conflicts around the world, they can affect commodity prices like oil.
And this is what Jamie Diamond is talking about. I'll show you. I quote: "We have been closely following the geopolitical situation for some time now. Recent events show that conditions are treacherous and worsening. Now, obviously, this matters for a lot of humanitarian issues, but I'm going to focus on the financial aspect, which is energy.
And oil is used for everything. You need it to put gas in your car, which is what you think about." Most people, but it really influences the prices of everything. Because if you want to ship wheat from a farm or a bread producer, a truck has to transport that wheat, and the truck needs energy to transport that wheat.
And then when you get that bread from the distributor to a warehouse or a store like Walmart or Costco, you also need more money to do that. And so, as energy costs start to rise, that can affect the prices of everything from gas to bread to bananas and really everything because energy costs affect the prices of everything.
That's why you have to pay attention to this because, of course, there are humanitarian issues, but also because of how this can affect the prices of things. What's going to happen, of course, nobody knows. But that's why you have to pay attention to what's happening in the markets. But Goldman Sachs says you don't really have much to worry about, which brings me to the third part of the video that I wanted to highlight because Goldman Sachs also released its own report where it said, "Don't worry about the CPI data." Earlier this week, we learned the latest CPI inflation figures, which said that inflation was slightly higher than expected.
But Goldman Sachs said it ran its own numbers and according to them, by the end of September, inflation had essentially fallen to 2%, meaning that inflation, according to Goldman Sachs, is no longer a concern. They said this is good news for the economy and good news for the stock market because it means the Federal Reserve will have more fuel to continue cutting interest rates more aggressively.
Now, of course, this comes at an interesting time because just a few days ago we had the inflation report, which came in a little better than expected. We also received a report on the labor market that said the labor market was a little weaker than expected. And that created a mix of headlines for everyone, asking what the Federal Reserve is going to do now because the Federal Reserve has been betting that the labor market is strong.
They've been betting on falling inflation so they can keep lowering interest rates. Now, for the Federal Reserve, a weaker labor market is fine as long as inflation is falling. But many people are worried that inflation isn't falling; perhaps inflation will worsen. And if Inflation is getting worse.
What will that mean? Will interest rates keep falling? Because if interest rates are cut for a period of time when inflation is still a problem, it could worsen the inflation problem and put us in a deeper economic mess. Now, of course, nobody knows what's going to happen. But what does this mean for you?
It's the same thing I say every day: be a financially sophisticated investor. What does that mean? You have to do three things: Number one, you have to be financially prepared. Number two, you have to be financially educated. Number three, you have to understand financial trends. When it comes to being financially prepared, what does that mean?
Build a system, have some cash savings to protect yourself, have savings so you can capitalize on investments, and get rid of your credit card debt if you have any. Don't worry about what's happening in the stock market; just pay off your credit card debt first because the stock market wants to see a 10% return a year.
That would be considered a good return. If you have credit card debt, you 're paying between 15% and 25% a year in interest. So pay off the credit card debt first. Credit card. What does it mean to be financially educated? It means learning to invest, learning to analyze an investment, learning to read a stock chart, learning to read a financial statement, learning to underwrite a real estate transaction.
Learn to analyze an investment and find good investments and an investment strategy for you. Are you going to be a medium-cost investor in dollars who will passively put their money into the markets, or do you want to look for good opportunities by investing in specific companies? Your strategy will depend on what suits you, but you have to understand how to analyze your investments.
Of course, investing has its risks. You are never guaranteed to make money when you invest; in fact, you will lose money at some point, and that is why you should always do your own due diligence. Never blindly trust some random guy on YouTube. But you want to be investing in your education when times are good so that you can find good opportunities when times are not good.
Because the reality is that uncertainty creates opportunities for those who are financially educated. And then the third part of all this is understanding financial trends. I have talked about this countless times, but understanding financial trends is all about understanding where changes are happening in the economy so that you can take advantage of them.
They do this because as you see money changing in the economy, you can step in and invest in those changes. If you see an opportunity, you'll want to be one of the people who can invest in those opportunities. That way, you can capitalize on the changes happening in the economy. But all of this comes back to your financial education and how you're investing in your own financial education. I'll see you tomorrow on YouTube, and we'll keep you updated on Market Briefs.
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