The Sterling Report · Insights · Macro

Why an 8% raise did not get you ahead this year

The Fed printed roughly $22.5 trillion into existence to get here, and your paycheck is racing a number nobody told you about.

2 August 2026  ·  The Sterling Report

Everyone gets handed the same headline number every quarter: GDP grew, or it did not. Buried beneath that number is a second one nobody puts on the evening news. It is the one that tells you what is really happening.

GDP growth = population growth + productivity growth + debt growth

The engine running on one cylinder

For most of modern history, the first two parts of that formula carried the load. People got hired, and each hour of work produced a little more than the hour before it. Debt was there, but it was the supporting act.

That is not the economy we are living in anymore. Population growth has stalled, and demographics do not reverse on a news cycle. Productivity is barely moving. Which leaves debt growth doing almost all the work of growth itself.

Debt has to be serviced on a schedule, the way a mortgage does, whether the economy underneath it is producing more or not. But that is not even the real story.

Here is the mechanism, and it is more literal than most people expect. That debt comes up for refinancing on a rolling cycle, historically about four years. It has stretched closer to six as governments extended debt maturities since 2022.

When the debt comes due, rates bite, the most stretched borrowers start to break, and growth slows. Then the central bank steps in with rate cuts and freshly printed money. The cycle resets, and everyone rolls their debt forward again.

That safety valve only exists for one kind of borrower, and it is worth being precise about why.

Why a company goes bankrupt and a government just prints

When a business needs money, it borrows it, usually from a bank or by selling bonds. A bond is really just a fancier IOU: give me money now, I will pay you back later with interest. If that business cannot pay it back, it goes bankrupt. The lender loses money, the doors close, end of story.

A government borrows the exact same way, selling its own bonds to investors and promising to pay them back with interest. But if it cannot pay it back, it does not go bankrupt. It has its central bank create new money out of thin air and quietly cover the gap instead. No default shows up on paper.

New money now exists that did not exist yesterday. That is the entire difference between a company and a country. A company that runs out of money dies. A government that runs out of money prints more.

So what does all that new money do once it lands in the economy? There is an easier way to see it than staring at a Fed balance sheet.

The Monopoly board nobody is watching

Imagine a game of Monopoly. Everyone starts with the same cash, and every property has a fixed price printed right on the board. Boardwalk costs $400, and that is that. Now imagine the banker, halfway through the game, hands everyone double their starting cash but adds no new property.

What happens next is not hard to guess. People start happily paying far more than $400 for Boardwalk, because there is twice as much cash chasing the same number of squares. Boardwalk did not get more valuable. The cash did the opposite and got less valuable.

That is debasement in one sentence: the board did not change, the money did.

What this costs your paycheck

This is exactly the trap a paycheck is living in right now. Someone gets an 8 to 10% raise this year and feels like they should be getting ahead. Bigger number on the paycheck, more cash in hand.

But macro investor Raoul Pal’s own research shows the Fed and Treasury are effectively creating new money equal to roughly 8% of the entire existing money supply every single year. Once you add ordinary inflation on top of that, at 2 to 3%, the real hurdle comes out closer to 11% a year. That is the rate you actually have to beat just to stay even.

An 8 to 10% raise is not a win against an 11% hurdle. It is treading water while it feels like swimming forward. That is why a whole generation can be earning more money than any generation before it and still feel like they are living hand to mouth.

They are not doing anything wrong. The finish line just keeps getting pushed further out, right as they think they are closing the gap. A savings account paying you 4% is not a gain either. It is a loss, just a slower one.

By 1980 standards, the median American’s paycheck has fallen dramatically behind the assets that build real wealth. Home price-to-income ratios have roughly doubled since then. Pal’s own research puts the erosion sharper still, once you account for what a family would need to hold to keep pace with that 8% printed every year.

Why this suddenly feels so much worse

Here is the part that explains why this feels newer and sharper than it used to, and it is not just the money supply. The government’s own debt tells the identical story, on the identical timeline. In the years leading into 2008, both were growing at a steady, unremarkable pace.

Over the twelve years after 2008, both roughly doubled. By early 2020, just before COVID, federal debt had climbed to roughly $23 trillion and the money supply to roughly $15.4 trillion. It was a slow, steady climb, matched almost step for step between the two.

Then COVID hit, and both bent upward at once. In the six years since, federal debt has added another $16.5 trillion, reaching roughly $40 trillion today. That is more added in six years than in the twelve years before it.

The money supply moved in lockstep. Another $7 trillion has been added since 2020, with year-over-year growth peaking at roughly 27% in early 2021. That speed was never seen during the entire 2008 to 2015 stretch, or even the high-inflation years of the 1970s and 1980s.

Debt and money supply are not two separate stories running side by side. They are the same story, told twice. The government borrows, the borrowing has to be serviced, and servicing it without real income to back it means the money supply grows to cover the gap. That is why both accelerated on exactly the same timeline.

So this does not feel like an abstract, slow-moving story anymore. Both engines shifted into a completely different gear after 2020. People are feeling the difference in real time, even when they cannot quite name why.

Now put a third measure alongside the money supply, median US home prices, and the story stops being a chart and starts being personal.

In 2008, the typical American home sold for about $234,000. By early 2020 it was $329,000. Today it is around $411,000, up roughly 75% since 2008. Over that exact same stretch, the money supply roughly tripled.

Home prices did not rise because houses got better or scarcer. They rose because there is more money chasing the same number of houses. It is the Boardwalk story from earlier in this issue, played out with real front doors and real mortgages instead of a board game.

And here is the part that lands hardest. Even though home prices only rose 75% while the money supply rose roughly 200%, that 75% still outran what most paychecks could keep up with. That is the entire reason a house that felt reachable to a parent’s generation now takes years longer to save for. Nothing about the house itself changed.

The bet everyone is making

Pal’s research puts the correlation between US equity markets and global liquidity at a remarkable 97% roughly. Not earnings. Not the news of the week. Liquidity: the sheer amount of money moving through the system.

Which means price-to-earnings ratios are not really valuation signals anymore. Value investors have used that number for a century to decide if a stock is cheap or expensive. They are monetary indicators now. That is why value investing, as it has been practised for generations, keeps failing to work the way it used to.

This has happened before, and there is a known way out. After World War II, the US faced a similar debt overhang. Interest rates were deliberately capped near 2.5% through a policy called Yield Curve Control while GDP grew at 5%.

Equities rose 750% over the following decade, and it took about 15 years to fully unwind. History offers messier alternatives too, outright default or a real inflation overshoot among them. That is exactly why the orderly path is the one worth rooting for.

Bring the formula back one more time.

GDP growth = population growth + productivity growth + debt growth

Debt cannot keep carrying this alone forever, and the fix everyone is quietly counting on has to come from the other two variables.

The first fix, and likely the sooner one, is AI lifting productivity: machines doing more work per hour without needing more people to do it.

The second, slower fix is robotics effectively adding to the population side of the equation. A machine that can work in the physical world functions, economically, a lot like an extra worker who never sleeps.

If both arrive in time, debt growth can shrink back down to being the supporting act it used to be, instead of carrying the whole formula on its own.

We are hoping this arrives before the debt side of the formula gets out of hand on its own terms. That is the honest, unresolved tension sitting underneath everything else in this issue.

What it means for the aware family

This is not a call to panic, and it is not a stock tip. It is a recalibration of what “safe” means. A savings account is not safe if it loses to that 8% of printed money every year. A wage is not keeping pace if it is measured against the old inflation number instead of the real hurdle rate.

Understanding the mechanism does not hand you a prediction. It hands you the right question to keep asking.

The part most people are walking past: picture the Kowalskis. Two working incomes, a modest retirement account, and a mortgage they refinanced in 2021 near the bottom of the rate cycle after COVID. They are not doing anything wrong. They are just measuring their progress against a number, 2 to 3% inflation, that was never the real hurdle.

The question worth sitting with at their kitchen table is not “are we saving enough.” It is whether they are saving in a way that can outrun the 8% being printed every year. Or whether they are falling further behind while the balance on the screen looks like it is growing.

That is a harder question. It is also one they can only ask once they know which number is lying to them.

The takeaway

Almost everyone is watching the same number, the 2 to 3% inflation figure on the news. Almost nobody is watching the number sitting underneath it: the roughly 8% of the entire money supply being freshly printed every single year.

Inflation tells you what happened to prices of the stuff you buy. The 8% tells you why your buying power is shrinking whether prices moved much or not.

Two of the three engines that used to grow an economy have gone quiet, and the third has been running hot enough to disguise the silence. Nobody can tell you with certainty whether the productivity miracle everyone is counting on shows up before the debt clock runs out of room to keep resetting. It has not shown up cleanly yet.

What this framework gives you, in the meantime, is the one thing worth having: the ability to see which number to watch.

Signal, not noise.

Sources

• Raoul Pal, “The Everything Code” — Global Macro Investor / X, 7 July 2026. Primary source for the GDP formula, the 97% liquidity correlation, the 8% and 11% debasement and hurdle-rate figures, and the Yield Curve Control historical precedent. [x.com/RaoulGMI]
• Federal Reserve, H.6 Money Stock Measures — the official M2 money supply release. Source for the $7.5T (2008), $15.4T (2020) and $22.5T (current) money-supply figures cited in “Why this suddenly feels so much worse.”
• Federal Reserve Bank of St. Louis, FRED — Federal Debt: Total Public Debt (GFDEBTN) — source for the $10T (2008), $23T (2020) and $39.5T (current) federal debt figures. [fred.stlouisfed.org/series/GFDEBTN]
• USAFacts, “How much debt does the US have?” — independent confirmation of the current $39.5 trillion federal debt total (June 2026).
• U.S. Census Bureau / U.S. Department of Housing and Urban Development, via FRED — Median Sales Price of Houses Sold for the United States (MSPUS) — source for the $234,000 (2008), $329,000 (2020) and $411,000 (current) median home price figures.

Slone Sterling is an independent research voice and has no affiliation with any company named above.

Slone Sterling — pen name. This is an educational framework, not a prediction of market or employment outcomes and not investment, financial, legal, tax, or career advice.

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