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Tuesday, April 28th, 2026, Maneco64, home of alternative economics and contrarian views. Well, yesterday I saw a post from Gold Telegraph and he said billionaire investor Ray Dalio is warning warning the US economy has slipped into a stackflationary environment. I have highlighted it in numerous times.
Review how gold reacted during the 1970s. Uh so what do I think about that? Well, I actually think Ray Dalio needs to dig a little deeper. I know he's a billionaire, a very clever guy, but uh we need to look at how GDP is calculated. We need to look at uh the uh fact that uh the United States has been running huge budget deficits the while this century, actually since 2020.
And uh what it really means because I think uh things are even worse than we're being told and the reason I say that is because being a proponent of the Austrian School of Economics, being a proponent of free markets and the private sector and small government. I I would say that things are a lot worse.
Uh we've been almost in a depression, I would say. Uh we've definitely been in a stackflationary uh recession since 2020. And you can do this exercise that we're going to go through here uh yourself. Go back as far as you want and you'll realize why things are so bad. Of course, for the top 1% or even maybe the top 10% things are not as bad, but for the bottom 90 and especially the bottom 50% things are not great and that's why there's so much social upheaval, so much unhappiness out there.
And this is not just the United States. I'm not having a go at the US. It's even worse here where I am in the UK. It it's really bad in the EU or the continent, Western Europe. Everywhere around the world, very bad in Japan, too, of course. And that's why we're seeing so much domestic uh upheaval as I said earlier and political instability in the West.
So, one thing we need to to look at uh first is how uh US GDP or GDP in general is calculated. And I've spoken about this many times here on the channel and I pointed it out that uh the uh way they calculate GDP and the uh deficit spending that we're we've been seeing since 2020 is basically covering up for a much worse economy.
So, here we go. And I went through chat GPT. I could have gone through Google as I used to do before, but it's very easy. Uh so, in the US GDP or gross domestic product is most commonly calculated using the expenditure approach. So, the equation is GDP equals consumption, so household spending on goods and services, investment, uh plus investment, which is business spending on capital, residential construction, and inventory changes.
Plus G. What's G? That's the the key one here, government spending. So, federal, state, and local government expenditures on goods and services. And you will see why this is so important in a in a second. Uh plus X minus M. Well, what's that? Well, exports minus imports. Very easy. Goods and services produced in the US are exports and sold abroad, of course.
Uh imports are goods and services produced abroad and bought in the US. But my point here is um if we look at uh government spending, and I said the G is very important. Uh the government uh in the US since 2020 has been spending a lot more than it takes in. So, it's running a a deficit, and that's why the national debt is going up so much.
That's why we're almost at 40 trillion, the US national debt. So, for example, in 2020, the budget deficit was 14.5%, which is humongous, of course. That was during uh the COVID uh fiasco, right? The COVID crisis. Uh but then uh in 2021, you you would have thought with things getting better, it would have improved a lot more.
But no, it it was 12% the deficit. And don't ask ask me when was the last time they had a surplus. I think it was during the Clinton administration, but even that, it was an accounting gimmick. I think you need to go to the '60s for the last time they ran a surplus. Uh yes, things have improved slightly, but if you look at 2022, 2023, 2024, 2025, basically the US has been running a 6% deficit every year on average and and it's not going to get better.
That big beautiful bill uh is going to make sure of that. Uh and uh I think with what's happening in the Middle East, uh we've the economy was already slowing down in the fourth quarter. The fourth quarter GDP was was pretty low. Uh I think it was growing at a rate of less than 1% annualized. And I think it's going to get worse uh this year.
But what we need to look at just So just keep that in mind. In the last 4 years, uh the deficit is average around 6%. Um and you can see this chart here. And the 2 years prior to that, it averaged 13% each year or thereabouts. And then uh if you think about uh those numbers, 6% and 12% or 13%. Um let's look at GDP growth.
Every year since 2020 up until 2025. So 2020 GDP growth was minus 2.2%. So that was definitely a recession. And uh but if the government had run a balanced budget that year, right? Because that government should run balanced budgets just like we should as well. That GDP would have been if you uh add 14.5 to minus 2.2 uh it would have been minus 16.7.
It it it would have been If it wasn't for the government, it would have been a depression, right? 2020. 2021, you might think, "Wow, great. GDP grew by 6.2%." But you If you subtract subtract that extra government spending of 12% because that was the deficit you actually get uh minus 5.8 GDP, right?
So, another really bad well, depression-like level, right? Uh and uh as you can see here from 2022 to 2025 uh it's not grown more than 3%. The highest was 2024 at 2.8. 2025 was 2.1. So, if you take that average of six it's actually been growing at less Well, it's been shrinking by more than 3% uh each year uh since 2022.
And of course annual CPI has been running really hot as you can see here by by this uh this picture on the screen. 1.2% in 2020. Uh yes, that was low, but the economy was shrinking massively. Same thing for 2021. 4.7% 4.1 2.6 last year. And I would uh venture to say that uh they tinkered, excuse me, with the CPI data in 2022 to make it look lower.
You could add another percent there. Uh they always change the methodology. So, what I'm trying to say here to Mr. Dalio and to you and to the whole world is that we already uh in a stagflationary environment environment and we have been for the last 6 years and it's going to continue. And uh Yeah, and it's Uh I would say it's worse than the recession, really.
It's more depressionary and that's why things feel really bad. Um and that's why there's so much wealth inequality as we've seen as I've spoken about how the top 1% uh or even the top 10% now owns like 2/3 of all all the wealth. The bottom 50, uh they're like they're like at uh around 3, 4 or somewhere around 5%.
A a a lot of unhappiness out there and that's not just the United States. It it's throughout uh the Western world. And uh it all goes back to the Keynesian fallacy, right? That government needs to kick-start the economy and they've been doing this for decades. Uh it's been in spades since '08, since they bailed out Wall Street, City of London, and uh started printing trillions and trillions.
And that's why gold uh and silver have done so well uh since the beginning of this century is because we are in a I would argue stagflationary, really, depression. Um yeah, Uh, recession at best, depression at, you know, uh, more likely I would say at worst. Um, so, what's the solution here? Well, the solution, unfortunately, is for people, uh, to rein in spending.
Ha. But, uh, do you see that happening in in in Washington, D.C.? It It doesn't seem like, uh, either Democrats or Republicans are going to improve things in terms of government spending. Uh, right now, uh, President Trump and the administration, they want even more, uh, defense spending. They want defense spending up to 1 and 1/2 trillion dollars.
That will make things even worse. Here in Europe as well, um, they want to deficit spend even more to grow the military, uh, to uh, combat an imaginary threat, right? The Russian threat. You know, Russia doesn't want to take over Western Europe. It's too much of a basket case. Russia has enough problems on their own and it's a big enough country, wealthy enough country, but that that's what they're going to do.
And and here in the UK as well, uh, yeah, it it's not improving it it and the political situation within the Labour Party. And I don't talk about politics too much, but things could get worse. We could see a new Prime Minister come in. Uh, Keir Starmer is in trouble. And if there is a a new Prime Minister, a new leadership, they will be even more to the left.
Yes, there's a lot of talk about wealth taxes and things like that, but ultimately for me the solution to this problem is to get government out of the way. Government is too big, is spending too much, and the bigger government is the less prosperous we all are. Unfortunately, there's this fallacy and I'm going to recommend a book today.
There's the fallacy that uh is reflected by what Frederick Bastiat said over 150 years ago. And what did he say? Well, he said the state is that great fiction by which everyone tries to live at the expense of everyone else. So, all these equations, GDP, CPI, deficits, uh These are all a Keynesian like construct because when the West adopted uh interventionism, which is Keynesianism, the Keynesian philosophy, it had to measure things and keep track of things to convince people that the government is doing the right thing.
Uh I would argue though that in in a world where the the government is really small and that by that I mean central government, local government, like very small, the role of government is to administer the rule of law, protect life, liberty, and property, right? Uh we wouldn't have to worry about these equations because government wouldn't be involved.
We'd have sound money. We wouldn't have to worry about inflation because there wouldn't be any central bank and and the banking sector if they inflated their reserves out of thin air, yes, people would uh twig on to it eventually and that bank would probably go under and no one would bail that bank out and things would be a lot better.
So, the book is The Law by Frédéric Bastiat. I'm going to put a link to it below in the description. You can get a free PDF or you can buy the book. Uh highly recommended. Yes. So, what's said here about the law before I wrap up for today? Well, it says published in the last last year of his brief and battled life, The Law is Bastiat's most famous work and justly so, a master's masterpiece of style, brevity, and common sense.
The law concisely presents the classical moral case for liberty and limited government. In persuasive power and enduring impact, it ranks with the great essays of John Stuart Mill and Thomas Paine. For more than a century, The Law has been changing the thinking of thousands about the relationship between relationship of men and state.
Here again is Frédéric Bastiat's ringing challenge to the dominant political forces of his day and our own. So, a little bit about him, born 1801, died 1850, was a French economist, statesman, and writer. His uncompromising defenses of free trade, the market economy, and individual liberty pitted him against politicians both right and left.
His writings include Economic Sophisms, which championed free trade, Economic Harmonies, treatises on economic principles plus a host of essays including the state and what is seen and what is not seen. To this day his witty aphorisms and incisive arguments are quoted by public figures, speakers and writers everywhere.
So there you go. With that, I'm going to wish you all a very good day. Take care. Bye.
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