Weekly Market Update by Retirement Lifestyle Advocates

Predictable Economic Cycles

         As I write this week’s edition, I have just finished conducting a “New Retirement Rules” class that was once again well attended.  If you’re not familiar with this class, it’s a five-hour crash course on retirement planning in the current economy.

         The first hour or so of the class demonstrates to attendees using historical case studies that whenever the central bank of a country or the treasury of a country creates currency from thin air (presently referred to as quantitative easing), a predictable economic cycle follows.  Simply defined, this cycle is inflation followed by deflation.

         I explain to the class that price increases are a symptom of monetary inflation, which is technically and accurately defined as an increase in the currency supply.     

         Early on in the inflation part of the cycle, a prosperity illusion emerges, only to be replaced by an increase in consumer prices due to the expanding money supply.  Then, eventually, since the prosperity illusion is fueled by debt increases, the inflationary environment gives way to deflation.  The epitome of a deflationary period is what happened economically in the United States during the 1930s.

         There is an argument to be made that we have already transitioned at least partially into the deflationary part of the cycle.  When the United States entered the deflationary period of the 1930s, the US Dollar was not just linked to gold; the US Dollar WAS gold.  Gold pieces of various weights circulated, with a one-ounce gold piece representing $20.  $10 gold pieces contained a ½ ounce of gold, $5 gold pieces contained a ¼ ounce of gold, and so on.

         As you all know, the US Dollar is no longer gold, nor does the US Dollar have a direct link to gold.  The US Dollar is a piece of paper backed by nothing.

         This has allowed for major US Dollar devaluation, which is simply inflation called by a different name.  It is this devaluation that makes it difficult to see that the deflation part of the cycle may have already begun.

         To make my point, let’s price some of today’s assets in gold and compare current prices in gold to past prices.  Let’s begin with a single-family home.  The median price of a single-family home in 2025 is $403,600; that’s according to the Census Bureau (Source:  https://www.census.gov/construction/nrs/current/index.html).  If we go back in time to 2000, exactly 25 years prior, the median price of a single-family home was $134,010.  Some simple math might lead one to conclude that the price of a single-family home increased by about 300%.

         But did it?

         Does that increase in the nominal value of the home represent house appreciation or US Dollar depreciation?

         I’d argue the latter.  Presently, the price of gold per ounce is $3,343.  In 2000, the price of gold per ounce in US Dollars was about $285.

         Taking the calendar year 2000 home price in US Dollars of $134,010 and dividing by the price of gold per ounce in US Dollars, one finds that it would have taken 470 ounces of gold (remember the US Dollar once WAS gold) to buy a single-family home.

         Conducting the same exercise presently, one finds that it takes about 121 ounces of gold to buy a single-family home.  That’s deflation.

         Moving ahead, I am expecting that this undeniable trend will continue.

The Debt Wall is Here

         For nearly two years, I have been warning of the nearly impossible debt financing challenge that the US Government was facing.  Now, the debt funding challenge is here.

         This year, in calendar year 2025 alone, the US Government will need to find new financing for $7 trillion in US treasuries that are maturing (Source:  https://citizenwatchreport.com/treasury-faces-7-trillion-maturity-wall-borrowing-crisis-looms/).

         Add to that already staggering number another $2 trillion that will need to be financed to fund this year’s operating deficit.  That’s a total of $9 trillion that the US Government will need to finance this year.

         Can it be done?

         In my view, probably not.  Certainly not at the same interest rates the US Government is presently paying on the debt that is maturing.  At a minimum, the US Government will be forced to pay more interest on about 25% of the country’s outstanding debt.

         Ultimately, I expect that the Federal Reserve, despite the central bank’s current posture, will become the lender of last resort, further exacerbating the inflation-deflation cycle.

         This is another reason to own metals in your portfolio, and if you already own metals, it may be another reason to be patient.

Trump Eyeing Tax on the Wealthy?

         As you are undoubtedly aware, the Republicans are negotiating to finalize a tax bill; one that Trump has dubbed a “big, beautiful bill”.

         As the negotiations have been occurring, one of the ideas floated to fund no tax on tips, no tax on overtime, and no tax on Social Security is increasing the tax rate on highest highest-earning Americans.  The current top tax rate of 37% would increase to 39.6% if enacted.  At this stage, the idea seems to be lacking support among Republicans.  (Source:  https://www.cnbc.com/2025/05/09/trump-top-tax-rate-hike-wealthy-americans.html)

         Trump’s endorsement of the increased taxes on high earners was tepid at best, with Trump posting, “Republicans should probably not do it, but I’m OK if they do.”

         As I have previously stated, I expect that any new tax package will not be permanent as the tax package to be passed as a ‘reconciliation’ measure.  The good news for you is the tax-planning opportunities that exist under current law will be extended.

RLA Radio

         This week’s RLA radio program features an interview that I did with Mr. Karl Deninger of market-ticker.org.  Karl and I discuss the likely impact of tariffs and the aging baby boomer population on financial markets.  The interview is available now by clicking on the "Podcast" tab at the top of this page. 

Quote of the Week

“Drive-in banks were invented so that most of the cars today can see their real owners.”                          -E. Joseph Cossman