> So many modern problems can be traced to 1971. [1] That is the year that the US defaulted on our obligations under Bretton Woods effectively ending the system and causing currencies to become completely fiat, enabling governments to effectively print unlimited funny money.
Correlation != causation. Yes, the end of Bretton-Woods certainly played its part, but there are other independent causes for most of the things that can be seen in the graphs - first and foremost, the oil crises of 1973 and later and the impact of the policies of Nixon, Reagan and Thatcher, as well as simple but massive technological progress that made the economical shifts (such as the decline in agriculture and industry as a share of the economy) possible in the first place.
Automation and IT in general are the largest drivers of the latter - more efficient and powerful diesel engines made a lot of farm labor all but redundant, and IT enabled constructing and orchestrating ever larger and larger things, all the way from machines to global sized corporations, and the resulting efficiency gains of scale were mostly looted by the rich elites.
There is one straight forward causal mechanism - excessive money printing sends the monetary supply skyrocketing and directly drives inflation.
It's not hard to deal with inflation for the wealthy. You will generally have substantial wealth invested in inflation resistant appreciating assets, businesses can pass the inflation on to the customer, and so on.
But for labor it's a different story. Not only do you suffer far more from price increases with little in the way of offsetting assets, but inflation allows wages to 'secretly' grow stagnant or even decrease.
What I mean is that since e.g. 2020, the CPI has increased by 18%. So if you're not earning at least 18% more, you're more earning less than you did in 2020.
Without inflation this doesn't work. Workers' raises would actually increase their real earnings.
It's not hard to see how this single issue causally drives much of what happened in 1971 (and beyond.)
Notably the excessive money printing began somewhat before 1971 which is what caused the default that eventually happened in 71.
Everyone agrees inflation is bad; what we don't yet really know is if it's worse than unemployment. The way the existing system works is if inflation starts to rise, the Fed raises the interest rate, hiring slows and people get fired, and this constricts the existing supply of money thus reducing inflation. But if you don't do that, and instead just put up with inflation, people get and keep jobs, so all you then have to do is make sure wage growth meets or exceeds inflation.
Politically this ended up not working (no pun intended). People explain this by saying losing a job affects that person whereas inflation affects everybody, but personally I put it down to the right demagoguing inflation as the sign of an incompetent government (it turns out it was transitory and the result of supply shocks--maybe not a good reason to throw millions of people out of work).
We'll never know the counterfactual, but the US managed this economic environment better than any of its peers, so honestly I don't know what a good faith criticism would even look like.
A term you definitely want to look up is "exporting inflation" which is largely why the US has thrived while others - well not so much. [1] This manifests in many ways, but I'll offer a simple example. The US remains the largest consumer economy in the world. So imagine you're Carland where your economy is mostly selling cars, and mostly to the US. And now imagine the US prints a bunch of money causing their currency to become worth less relative to yours.
At a first level analysis this sounds great because now you get even more dollars per car! But in reality that's not what happens. Instead US customers can't afford your cars anymore and so turn elsewhere and your economy, which is dependent upon the US, would start to decline and possibly even crash. So the solution? You print money and intentionally weaken your own currency - helping to eliminate the relative US inflation! Now the US inflation has transformed into real growth (for Americans) and you've 'imported' their inflation, but can at least continue selling your cars. So your economy stumbles on for another day while the US economy only grows larger.
But in contemporary times many of the factors that enable the US to export its inflation are gradually declining. And when you look at many of our economic indicators, without any particular 'superpowers', it's not so pretty. For instance our peers in debt:GDP ratio (4 worse, 4 better) are: Greece, Italy, Bahrain, Maldives, Laos, Cape Verde, France, and Bhutan. Not exactly the economic peers one wants.
I don't doubt inflation moves between economies. I just don't think there's any evidence that US monetary policy causes the negative outcomes you're outlining through that movement. I think you can do a China, but the US doesn't do that.
Click the link. It's impossible to have a reasonably educated conversation on this topic if you don't even understand how the US exports its inflation. It's an absolutely fundamental part of modern international economics (which is why you'll also find about a zillion links on it).
I read the top 10 articles from that link, as well as a study on the magnitude of the effect. None of them provide any evidence that printing money in the US (which is inflationary, i.e. it weakens the USD) creates inflation in other countries. Rather they show the opposite: a strengthening USD causes it. Of course this would also happen under a non-fiat currency (imagine say the US just wins a world war), so I still don't know what your point is.
You're fundamentally misunderstanding in a way akin to arguing that 'I've seen no evidence that destroyed homes cause tornadoes.'
The US printing money doesn't allow it to export its inflation, but rather exporting inflation allows the US to print far more money than other countries without comparable inflation. In fact we even relatively economically weaken other countries in the process of it.
This is why countries with comparable debt to GDP ratios are generally in very poor economic shape while the US is near its economic peak in most typical measurements.
But this superpower is fading in ways you presumably now understand, but the decades of money printer go whrrrr, and the unbelievable debt hole it left, remains.
Trying to handle a debt whose interest alone has now exceeded a trillion dollars a year is not going to be realistically possible without funny money or the emergence of some new economy booming industry akin to the birth of computing/internet.
> The US printing money doesn't allow it to export its inflation, but rather exporting inflation allows the US to print far more money than other countries without comparable consequences.
I didn't see this dynamic outlined in the link OP provided, can you point it out or explain it? Are you just saying when the USD strengthens we have more ability to print money and thus weaken it? If that's case, from a monetary policy point of view, isn't that just avoiding deflation? Or from a trade policy point of view, don't our trading partners want us to print money to weaken the dollar and thus stop exporting inflation?
This line of argument is untethered from reality. Please explain why the US exported inflation pre-Bretton Woods (we totally did) and what you'd do to stop it (nothing, because this is the natural consequence of a currency strengthening, which occurs with or without a fiat system). Please explain why currencies fluctuate even when pegged to commodities (they totally did, deflation was a huge problem in the Great Depression).
> This is why countries with comparable debt to GDP ratios are generally in relatively poor economic shape while the US is near its economic peak in most typical measurements.
Here's a list of countries around the US' ratio:
- Singapore: 1.75
- Greece: 1.59
- Italy: 1.36
- Bahrain: 1.26
- Maldives: 1.21
- US: 1.21
- Laos: 1.15
- Cape Verde: 1.12
- France: 1.11
- Bhutan: 1.11
- Barbados: 1.07
- Spain: 1.06
- Belgium: 1.05
- Canada: 1.04
- UK: 1.01
Is your argument that France, Canada, the UK, Japan, Belgium, Spain, Italy, Greece, and Singapore are all some of the best places on Earth to live despite some deep economic dysfunction (that--again--has produced absolutely no ill effects)? Or are you gonna argue that Bahrain's major problem is their debt-to-GDP ratio?
> the US is near its economic peak in most typical measurements.
> But this superpower is fading in ways you presumably now understand
You can't have it both ways: either 1971 was the beginning of the end or we're currently at peak because of our unique (to be clear it's not at all unique) ability to export inflation. The only argument you (any anyone else on your side) has left is that an unspecified reckoning will come at an unspecified time.
To be less polemic, Piketty postulates that the kind of GDP growth we've experienced the last couple centuries is wildly unsustainable (he gets into like, galactic terms, pretty entertaining). It's likely that growth levels off, like it is in places like the EU, US, China, and Japan, and we'll need new economic policies that don't assume perpetual >5% annual growth. I would guess that means debt to GDP ratios actually start mattering, but I'm not that convinced economists know anything and I know even less than they do, so yeah.
You need to take a break and actually think about what you've claimed to have read about exporting inflation.
A few hours ago you had no clue what it was, and skimming a few articles has not yet meaningfully improved upon that.
FWIW - I wrote this after starting to respond to the strong USD vs exporting inflation nonsense. Again you're having a 'I don't understand why destroyed homes cause tornadoes' moment.
I enjoy a good debate but this nonsense on loop paired with your somewhat bizarre belief that places like Japan are great to live (for average locals) is too much.
wtfhappenedin1971 has approximately 17,000 graphs showing wage suppression. I will 100% eat shit on this if you can show real evidence that QE (printing money, whatever) is the main cause of wage suppression.
It is exactly what has happened over the past 4 years, spread out over 50 more gradually. Since January 2020 CPI is up 23%. If you received a 5% raise each year the past 4 years, you'd have a real lower wage today than you did 4 years ago. People are not inclined to complain about "gifts" of raises, yet those raises quantifiably do not keep pace with inflation. The problem is that this is invisible for the vast majority of people. How can I be earning less even though I'm now making $xxxx more than last year? Workers' wages stagnate while companies are able to reap the benefits of reduced labor costs.
You can also see this with things like the minimum wage. In 1968 the federal minimum wage was $1.60. Inflation adjusted that's $14.42. Places like California/Washington think they're being progressive with their minimum wage ideas, but it's simply trying to take us back to before 1971, except with all of the problems that the 50 years in between have caused such that the quality of life that money will provids will likely remain dramatically lower than it would have provided in 1971.
> People explain this by saying losing a job affects that person whereas inflation affects everybody, but personally I put it down to the right demagoguing inflation as the sign of an incompetent government (it turns out it was transitory and the result of supply shocks--maybe not a good reason to throw millions of people out of work).
The problem is, prices didn't fall (mostly due to corporate greed - corporate profits exploded in comparison with inflation [1]), and many people are worse off than they were prior to the pandemic, even after some of them got wage increases that in many cases didn't even come close to matching inflation.
The Biden administration could have done more to combat this but didn't, and Trump campaigned on that failure. The real issue is that the US desperately lacks any viable third party option which means, combined with the radicalization of the Republicans over the last decades, that there is no way of holding the Democrats accountable without electing ever more utter crazies.
> The problem is, prices didn't fall (mostly due to corporate greed - corporate profits exploded in comparison with inflation [1])
Sure, but again this is a political problem. I don't the WH was promising prices would fall; I think the Fed was saying they'd get inflation back to 2% while also balancing their employment mandate. People may have expected prices to go down, but again that's a political problem.
Full agree on the greed thing though, and that would have been an easy out for the WH: somehow publicly punish gougers.
> and many people are worse off than they were prior to the pandemic, even after some of them got wage increases that in many cases didn't even come close to matching inflation.
I'm parroting here, but didn't wage gains outpace inflation? Do you have different data? Are there other ways in which people are worse off (there might be)? My current understanding is that inflation wasn't a big deal, wage gains outpaced it, but Republicans demagogued it.
> The Biden administration could have done more to combat this but didn't, and Trump campaigned on that failure
Agree! The Biden admin was uniquely bad at politics.
> The real issue is that the US desperately lacks any viable third party option which means, combined with the radicalization of the Republicans over the last decades, that there is no way of holding the Democrats accountable without electing ever more utter crazies.
You lost me here. I'm a fan of ranked choice voting and getting money out of politics, but any third party would be subject to all the corrupting dynamics affecting the other two.
Correlation != causation. Yes, the end of Bretton-Woods certainly played its part, but there are other independent causes for most of the things that can be seen in the graphs - first and foremost, the oil crises of 1973 and later and the impact of the policies of Nixon, Reagan and Thatcher, as well as simple but massive technological progress that made the economical shifts (such as the decline in agriculture and industry as a share of the economy) possible in the first place.
Automation and IT in general are the largest drivers of the latter - more efficient and powerful diesel engines made a lot of farm labor all but redundant, and IT enabled constructing and orchestrating ever larger and larger things, all the way from machines to global sized corporations, and the resulting efficiency gains of scale were mostly looted by the rich elites.