7 ms·

In 1971, the US ended the convertibility of the dollar into gold and shifted the dollar to be fiat money. Many dollar-based metrics have a similar change of slo

In 1971, the US ended the convertibility of the dollar into gold and shifted the dollar to be fiat money. Many dollar-based metrics have a similar change of slope around 1971: https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/

gruez 6y ago
I'm surprised how often this site gets linked despite being almost entirely composed of correlation graphs[1]. If you're going to argue that the end of the gold standard is responsible for many of today's economic woes, I'm going to need more rigorous evidence than a bunch of charts with arrows on them. Speaking of which, a quick search has shown that the first charts has some flaws[2]. The use of several dozen images in lieu of substantive analysis/evidence makes is reminiscent of a gish gallop[2], which is a red flag for me. [1] cellphone and cancer, anyone? https://www.explainxkcd.com/wiki/index.php/925 https://www.explainxkcd.com/wiki/index.php/925 [2] https://economicsfromthetopdown.com/2020/01/17/debunking-the-productivity-pay-gap/ https://economicsfromthetopdown.com/2020/01/17/debunking-the... [3] https://en.wikipedia.org/wiki/Gish_gallop https://en.wikipedia.org/wiki/Gish_gallop
- p1necone 6y ago
  Also, the first 𝚕̶𝚒̶𝚗̶𝚎̶ (edit: paragraph, oops) of TFA mentions that price controls on food were lifted in the USA in 1974.
  - kiney 6y ago
    I tried to google what price controls they mean. Could only find a price control program from 71 - 74. So that may just have delayed the inevitable for 3 years. https://www.nber.org/papers/w0279 https://www.nber.org/papers/w0279
- LukeShu 6y ago
  Wow, that article. After the gentle introduction I rarely made it a paragraph without having a major criticism. He notes a bunch of legitimate but ultimately pretty minor criticisms of mainstream economics[1], has one actually solid argument[2] that he doesn't bring up until his conclusion. And uses that to advocate for throwing out all of mainstream neoclassical economics and all of mainstream macroeconomics, and do something totally crazy: replace it with thermodynamics[3]. He closes saying "But I’m also a hard-nosed scientist who dislikes analysis with dubious assumptions baked into it." He uses a bunch of minor criticisms and one core dissonance to argue for throwing out the current paradigm of economic science. Those "dubious assumptions" are the core of the current paradigm of economic science: that markets basically work most of the time. Believing that he's the smartest person in the field, he discards the established methodologies and replaces them with the mis-application of a more tractable field; he's doing what is sometimes referred to as quack science. ---- [1]: Yeah maybe the framing around some analysis could be better (the bulk of his arguments). Yeah, it's problematic to use one price index for one part of a comparison, and a different price index for another. [2]: Through the article, he shows that the chart is relying on believing that markets correctly value total economic output, but that markets are getting production workers' wages wrong. He doesn't call out this discrepancy until the conclusion though. IMO, it's the only argument he makes that really "debunks" the graph. However, there are lots of arguments that I can imagine economists making as to why the market gets things right or wrong in specific cases. However, he proceeds to argue that if you don't believe the market is valuing labor correctly, then why should you believe that it's valuing anything correctly. That you should totally abandon the idea of using markets to value things. [3]: I kid you not. He writes: > When you think this way, you realize that ‘useful work’ (the amount of energy put to an end use) is a good indicator of economic output. I propose that we treat useful work per labor as an alternative measure of labor productivity. The author carefully words this so that it sounds reasonable. "'useful work', yeah, that sounds like a good way of defining 'productivity'." There are two big things wrong here: 1. How do we quantify "useful"? My first reaction was: OK, sure, but the measures that you're proposing to use this instead of are measures that let the market decide what's useful and how to value that. That's the type of thing that markets are supposedly pretty good at most of the time. If you want to argue that the market's getting it wrong in this case, that'd be one thing. But lets see how he proposes quantifying it, if not by markets... 2. ...oh, "useful" is just a fluff word, and he pulled a switch-a-roo with "work"! The casual reader might think that he's talking about something somehow connected to labor, but he's not! He's talking about physics-class thermodynamics "work". My jaw dropped, I laughed out loud. He's seriously proposing that we stop measuring the productivity of labor by any human-level measure of value delivered, and instead measuring it by how much electricity and fuel is used! He even says this: > ‘Useful work’ is based on the laws of thermodynamics. The standard measure of productivity, in contrast, is based on the dubious assumptions of neoclassical economics. Yes, because thermodynamics is totally relevant here. But hey, it's a hard science™, so it's always better than drivel coming from the soft sciences, right?
hyko 6y ago
In 1972, NASA landed astronauts on the moon for the last time. Coincidence? Yes. Edited to add: when you think of all the myriad social, demographic, economic, and political changes that have occurred in the last 50 years, focusing on some shiny yellow metal as some sort of first cause is an abdication of reason. It actually pisses me off that someone is peddling this horse manure to promote their private money scams, and they have the brass neck to blame all the world’s ills on public monetary policy in order to enrich themselves. Economics may well be the dismal science, but it is luminary enough to instruct us that restoring gold convertibility to the US dollar has zero chance of solving problems such inequality and government budget deficits.
- roenxi 6y ago
  Well, maybe. I'm looking at the "Official US Gold Reserves" chart about half-way down, and it looks like the US was accumulating gold 1900-1935, then bleeding gold 1955-1970, then couldn't cope with the losses so bumped the economic malaise to other parts of the economy. Cutting back on luxury spending, like sending people to the moon, could be connected to a general belt-tightening, in line with a sudden curtailment of per-capita energy growth (World per Capita Energy Consumption, 3/4 of the way to the bottom of the page). It would be a bit suspcious if in 1972 there are astronauts were on the moon, then after 50 years of exponential real economic growth there is nothing going on, even to show off.
  - logicchains 6y ago
    >then bleeding gold 1955-1970, then couldn't cope with the losses so bumped the economic malaise to other parts of the economy. That's literally want happened. From https://en.wikipedia.org/wiki/Exorbitant_privilege https://en.wikipedia.org/wiki/Exorbitant_privilege: "As American economist Barry Eichengreen summarized: "It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries had to pony up $100 of actual goods in order to obtain one."[2] In February 1965, President Charles de Gaulle announced his intention to exchange its U.S. dollar reserves for gold at the official exchange rate. He sent the French Navy across the Atlantic to pick up the French reserve of gold and was followed by several countries. As it resulted in considerably reducing U.S. gold stock and U.S. economic influence, it led U.S. President Richard Nixon to end unilaterally the convertibility of the dollar to gold on August 15, 1971 (the "Nixon Shock"). "

gruez 6y ago

I'm surprised how often this site gets linked despite being almost entirely composed of correlation graphs[1]. If you're going to argue that the end of the gold standard is responsible for many of today's economic woes, I'm going to need more rigorous evidence than a bunch of charts with arrows on them. Speaking of which, a quick search has shown that the first charts has some flaws[2]. The use of several dozen images in lieu of substantive analysis/evidence makes is reminiscent of a gish gallop[2], which is a red flag for me. [1] cellphone and cancer, anyone? https://www.explainxkcd.com/wiki/index.php/925 https://www.explainxkcd.com/wiki/index.php/925 [2] https://economicsfromthetopdown.com/2020/01/17/debunking-the-productivity-pay-gap/ https://economicsfromthetopdown.com/2020/01/17/debunking-the... [3] https://en.wikipedia.org/wiki/Gish_gallop https://en.wikipedia.org/wiki/Gish_gallop

p1necone 6y ago
Also, the first 𝚕̶𝚒̶𝚗̶𝚎̶ (edit: paragraph, oops) of TFA mentions that price controls on food were lifted in the USA in 1974.
- kiney 6y ago
  I tried to google what price controls they mean. Could only find a price control program from 71 - 74. So that may just have delayed the inevitable for 3 years. https://www.nber.org/papers/w0279 https://www.nber.org/papers/w0279
LukeShu 6y ago
Wow, that article. After the gentle introduction I rarely made it a paragraph without having a major criticism. He notes a bunch of legitimate but ultimately pretty minor criticisms of mainstream economics[1], has one actually solid argument[2] that he doesn't bring up until his conclusion. And uses that to advocate for throwing out all of mainstream neoclassical economics and all of mainstream macroeconomics, and do something totally crazy: replace it with thermodynamics[3]. He closes saying "But I’m also a hard-nosed scientist who dislikes analysis with dubious assumptions baked into it." He uses a bunch of minor criticisms and one core dissonance to argue for throwing out the current paradigm of economic science. Those "dubious assumptions" are the core of the current paradigm of economic science: that markets basically work most of the time. Believing that he's the smartest person in the field, he discards the established methodologies and replaces them with the mis-application of a more tractable field; he's doing what is sometimes referred to as quack science. ---- [1]: Yeah maybe the framing around some analysis could be better (the bulk of his arguments). Yeah, it's problematic to use one price index for one part of a comparison, and a different price index for another. [2]: Through the article, he shows that the chart is relying on believing that markets correctly value total economic output, but that markets are getting production workers' wages wrong. He doesn't call out this discrepancy until the conclusion though. IMO, it's the only argument he makes that really "debunks" the graph. However, there are lots of arguments that I can imagine economists making as to why the market gets things right or wrong in specific cases. However, he proceeds to argue that if you don't believe the market is valuing labor correctly, then why should you believe that it's valuing anything correctly. That you should totally abandon the idea of using markets to value things. [3]: I kid you not. He writes: > When you think this way, you realize that ‘useful work’ (the amount of energy put to an end use) is a good indicator of economic output. I propose that we treat useful work per labor as an alternative measure of labor productivity. The author carefully words this so that it sounds reasonable. "'useful work', yeah, that sounds like a good way of defining 'productivity'." There are two big things wrong here: 1. How do we quantify "useful"? My first reaction was: OK, sure, but the measures that you're proposing to use this instead of are measures that let the market decide what's useful and how to value that. That's the type of thing that markets are supposedly pretty good at most of the time. If you want to argue that the market's getting it wrong in this case, that'd be one thing. But lets see how he proposes quantifying it, if not by markets... 2. ...oh, "useful" is just a fluff word, and he pulled a switch-a-roo with "work"! The casual reader might think that he's talking about something somehow connected to labor, but he's not! He's talking about physics-class thermodynamics "work". My jaw dropped, I laughed out loud. He's seriously proposing that we stop measuring the productivity of labor by any human-level measure of value delivered, and instead measuring it by how much electricity and fuel is used! He even says this: > ‘Useful work’ is based on the laws of thermodynamics. The standard measure of productivity, in contrast, is based on the dubious assumptions of neoclassical economics. Yes, because thermodynamics is totally relevant here. But hey, it's a hard science™, so it's always better than drivel coming from the soft sciences, right?

hyko 6y ago

In 1972, NASA landed astronauts on the moon for the last time. Coincidence? Yes. Edited to add: when you think of all the myriad social, demographic, economic, and political changes that have occurred in the last 50 years, focusing on some shiny yellow metal as some sort of first cause is an abdication of reason. It actually pisses me off that someone is peddling this horse manure to promote their private money scams, and they have the brass neck to blame all the world’s ills on public monetary policy in order to enrich themselves. Economics may well be the dismal science, but it is luminary enough to instruct us that restoring gold convertibility to the US dollar has zero chance of solving problems such inequality and government budget deficits.

roenxi 6y ago
Well, maybe. I'm looking at the "Official US Gold Reserves" chart about half-way down, and it looks like the US was accumulating gold 1900-1935, then bleeding gold 1955-1970, then couldn't cope with the losses so bumped the economic malaise to other parts of the economy. Cutting back on luxury spending, like sending people to the moon, could be connected to a general belt-tightening, in line with a sudden curtailment of per-capita energy growth (World per Capita Energy Consumption, 3/4 of the way to the bottom of the page). It would be a bit suspcious if in 1972 there are astronauts were on the moon, then after 50 years of exponential real economic growth there is nothing going on, even to show off.
- logicchains 6y ago
  >then bleeding gold 1955-1970, then couldn't cope with the losses so bumped the economic malaise to other parts of the economy. That's literally want happened. From https://en.wikipedia.org/wiki/Exorbitant_privilege https://en.wikipedia.org/wiki/Exorbitant_privilege: "As American economist Barry Eichengreen summarized: "It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries had to pony up $100 of actual goods in order to obtain one."[2] In February 1965, President Charles de Gaulle announced his intention to exchange its U.S. dollar reserves for gold at the official exchange rate. He sent the French Navy across the Atlantic to pick up the French reserve of gold and was followed by several countries. As it resulted in considerably reducing U.S. gold stock and U.S. economic influence, it led U.S. President Richard Nixon to end unilaterally the convertibility of the dollar to gold on August 15, 1971 (the "Nixon Shock"). "