Most of these graphs can be explained by the Nixon shock as other people have mentioned. This also factored into what is considered backing a currency, in this case the global reserve currency. Leading up to the “Nixon shock” there was a decades long move away from direct gold to dollar conversion. The replacement was the petrodollar combined with the move to more of a fiat reserve currency. Then you had a geopolitical struggle over the 1970s with oil producing countries that exists to this day. By 1979, Iran’s revolutipn happened which pushed the U.S. closer to the Saudis, cementing the defense agreement that had been in place for decades, itself mirroring one the British had with the House of Saud. The petrodollar concept underpinned much of the next few decades and we have only begun moving away from it.
Since the debate at the end of WW2 that led to Bretton Woods, which currency or the Bancor would handle reserve currency functions, in addition to the petrodollar, the U.S. bond and treasuries specifically have been closely tied to this system. Also during the 70s, you had China begin opening up, then as a way to kind of solve the trifflin dilemma, the U.S. would grow the world economy being an importer, so long as the money found its way back with treasuries and other foreign investments. Japan began playing a bigger role here too and as everyone continued industrualizing and globalizing, the U.S. economy grew along with it because of this system. It was also a great way to sort of export inflation along the way too. A big problem in the 70s that we are seeing again today.
So if a big crash is coming, expect another Bretton Woods type agreement first with an attempt to control the strength of the dollar.
The difference this time is that there really isn’t another China to bring into this system, and in fact, many foreign countries have looked to avoid using USD all together. Just ask Russia about that.
Of course, these are just a few reasons for all of this. There are many factors, like the increase in productivity from computing, and advances in other industries that increased productivity and output.
Historically you will see patterns like this, similar ones exist between 1929-1945, 1864-1918, and so on.
Unfortunately, everytime this system is challenged, a sort of global reordering, there are economic crashes, and often large wars. We might be seeing another example of this now…
Because their productivity hasn’t increased as much as that of people with higher incomes. The productivity of surgeons and software developers increased significantly, and so their incomes, while cleaners and factory workers are not much more productive than 60 years ago.
How much more productive surgeons are? As in patients operated per working day or week? Outcomes surely have improved, but I'm wondering about speed in operation it self, not recovery.
Actually I think you should when that work is not scalable. Surgeons can very well be measured by how many patients they operate on. And quality improvements are a thing, but how much more productive is there? 1,1x or 2x or 3x? Probably not magnitude more. So really their pay should only be that much more...
If you can completely fix a hernia with 99% success at the first try without a hospital stay, you are significantly more productive than somebody that has a 50% success rate and that requires patients to stay in hospital for a week, even if you operate on the same number of patients.
Speed of operation or lumps of labor per second is not the only applicable metric and, outside of certain cases, it's not a very good one. Average patient health (arguably an ill-defined term) has many ways of being assessed:
* Fewer deaths from preventable diseases
* Breakthroughs in pharmaceutical research production
* New and improved medical devices to counter chronically debilitating sicknesses
* An increase in elective surgeries with fewer long-term effects
1971, I remember it well. It was plain to see Nixon had always been unsuitably too dishonest for any position of leadership or trust.
Modern civilization was built on the transition from barbarism during which the gold standard had been established for centuries.
Remember modern man adopted the precious metals standard in pre-historic times. i.e. Prehistoric Man. So it's been around a long time.
Investors just as shrewd as today recognized that all wealth arises from natural resources to begin with, and their scientists and geologists had millennia to identify and procure the most universally rare long-lasting element that could be accumulated and passed down the most reliably that people would actually pay for. But of course they would need to pay in some other way.
Different regimes over the millennia, both the few that are historically recorded and the remaining majority of advanced civilizations that will never be known, have had greater or lesser degrees of barbaric greed that were still endemic because of their cultural traditions, and this has always had a disparate effect on their relationship with precious metals, especially gold in particular.
It was not unique in different parts of the world for the doctrine to become all gold belongs to the king, whether gradually over time or by occasional edict.
In 1913 circulating legal tender US dollar bank notes were centralized & privatized, separated in a way from the government mint which remained the sole source of gold dollars.
The complementary silver standard had been removed politically in earlier decades. Silver dollars were therefore theoretically backed by gold. Just act like silver is not the other precious metal that civilization was built on, nobody will notice.
In 1933 began the recall of all gold & gold dollars to the king. No more circulation under penalty of law.
In exchange, the substitute bank notes were given a curated strength & stability for the remaining lifetime of the victims. Still tied to gold.
After 1960, silver moved up in price relative to stable gold, so the mint had a reason to remove silver from US coins by 1964, with even copper soon to follow.
This seemed to be a precautionary effort in case a cold war might need to be waged using currency salvos.
But once oil skyrocketed even more threatingly there was pressure to devalue the currency to pay for it, so the dollar was going to need to be debased beforehand. The misfortunates of 1933 were no longer a strong force and inflation was run up the flagpole without as much skepticism as there should have been. So inflation it was.
In exchange Americans would be once again allowed to own gold, but only if they could afford to purchase it after it had skyrocketed which almost no average American could even consider with the pricing pressures everywhere else.
Going forward from 1971 we're just going to act like gold had not been the standard of wealth and commerce since civilization began, if not since the dawn of modern man.
I would estimate that's a serious break with tradition.
As we can see, the other shoe dropped and the recall was completed.
It wouldn’t generally, but productivity increases are not even across the entire population/workforce and, furthe, some of the productivity gains may be captured by organized groups.
Let’s say you have a population of software developers and cleaners and that the productivity of software developers doubles while the productivity of cleaners remains the same. Developers may demand higher salaries and increase the demand for some goods or services, say housing, whose price may increase, leaving the cleaners worse off. Providers of such services may organise (explicitly or otherwise) to capture part of this productivity increase (say blocking the construction of new apartment blocks), making the situation for cleaners even worse.
If the economy doesn't grow at the rate of productivity growth and the most productive people don't work less then some people will become unemployed and won't find a job.
Because people aren’t literally worse off. Just different-off. Housing is more expensive, but as others have said, there’s a growth in 2 income households so if you account for “percent household spend” instead of per capita spend it’s a more reasonable number. At the same time, a lot of that productivity has gone into leisure activités that weren’t available before. Growth in games and movies and travel etc.
No, absolutely not. House prices have grown much faster than inflation even if you introduce a fudge factor 2.
> Growth in games and movies and travel etc.
Is that like "eat cake"? Housing is incredibly more expensive, education is incredibly expensive, but don't worry movies are cheap and that more than makes up for it, right?
> House prices have grown much faster than inflation even if you introduce a fudge factor 2.
No prices have grown a lot in major metros where Software people work. I’m sure SF is insane. But also NYC according to the article has “only” grown by 200% - so it’s literally cheaper on a household level if you include wage growth (assuming you go from single income to double income), and I’m sure Cleveland has a lot less growth. According to (1) housing has only grown 150% nationwide.
It’s not “eat cake”. Houses have grown bigger over time. They gained electricity and running water and 2 car garages and high efficiency water heaters. But people also replace their now 2 car often and buy new iPhones and stream high qualitymovies from their large high def TVs. At some point houses don’t need to get bigger and theirs no more room in Silicon Valley for single family homes but there’s always room for more consumerism delivered faster priced cheaper and plenty of businesses who will deliver. Proof is that housing is becoming a smaller part of the GDP (0) despite becoming “unaffordable expensive”.
As a bonus, according to this article (2), houses are 150% larger and rentals are 200% larger since 1970s. So I guess you get what you pay for?
Maybe you should stop with the hypocrisy. The people that complain about expensive housing are the most annoying because they are the ones who least care about making housing affordable, they just pretend that they care to strike up some virtue points. The moment you mention land value taxes people are going to argue how evil it is to give everyone enough housing and how the rights of a single family owner are more important than the rights of renters and how multi family homes are ghettos and how nobody should suffer the disgrace of living in one.
Since the debate at the end of WW2 that led to Bretton Woods, which currency or the Bancor would handle reserve currency functions, in addition to the petrodollar, the U.S. bond and treasuries specifically have been closely tied to this system. Also during the 70s, you had China begin opening up, then as a way to kind of solve the trifflin dilemma, the U.S. would grow the world economy being an importer, so long as the money found its way back with treasuries and other foreign investments. Japan began playing a bigger role here too and as everyone continued industrualizing and globalizing, the U.S. economy grew along with it because of this system. It was also a great way to sort of export inflation along the way too. A big problem in the 70s that we are seeing again today.
So if a big crash is coming, expect another Bretton Woods type agreement first with an attempt to control the strength of the dollar.
The difference this time is that there really isn’t another China to bring into this system, and in fact, many foreign countries have looked to avoid using USD all together. Just ask Russia about that.
Of course, these are just a few reasons for all of this. There are many factors, like the increase in productivity from computing, and advances in other industries that increased productivity and output.
Historically you will see patterns like this, similar ones exist between 1929-1945, 1864-1918, and so on.
Unfortunately, everytime this system is challenged, a sort of global reordering, there are economic crashes, and often large wars. We might be seeing another example of this now…