12 ms·

WTF Happened in 1971? (2019)

128 points by 5350-uiop-1130 3y ago

osti 3y ago
Turned out to be another crypto ad.
- dingosity 3y ago
  Seems more than just a crypto ad; it's an ad for a philosophical libertarian utopia where we ignore actual market behaviour that doesn't support a post-consensus monetary view of the world. Not only is someone trying to get rich off of hashes, they're trying to convince you any theory which suggests burning fossil fuels to calculate hashes might not lead to increased productivity is heretical.
dingosity 3y ago
Nice page, but it doesn't seem to try very hard to create a framework to answer the question it asks. It ends with a Hayak quote which is interesting, even though it's taken out of context. You could argue taking the dollar off the gold standard is the reason metrics go wonky starting in '71. But some of the metrics go wonky slightly later after the NYC credit crisis. The suez canal was more or less blocked from '67 through '75, at a time when oil might have been more important economically than gold. And the US had to start paying it's VietNam debt during a period of high inflation. I guess what I'm saying is there's probably no one factor that made '71 special, but a collection of factors; a "perfect storm" of economic sadness.
- legitster 3y ago
  '71 was the end of the gold standard in the US. Given the Hayek quote and the crypto promotions that link to this site, the page is trying to heavily imply a goldbug argument.
- tivert 3y ago
  > Nice page, but it doesn't seem to try very hard to create a framework to answer the question it asks. It ends with a Hayak quote which is interesting, even though it's taken out of context. My assumption has been this page is part of a two-part propaganda trick: the first part is to use all these charts to raise a question, the second part is to provide a oversimple but satisfying propaganda-answer (either a return to the gold standard or cryptocurrency). The second part may be meant to be an exercise for the reader (e.g. raise the question, and then prime them to search for the answer in a way that will lead them to material advocating the oversimple but satisfying propaganda-answer). The stereotypical form of propaganda (yelling an answer forcefully at your face) isn't very effective because it's obvious and elicits resistance, so actually-effective propaganda has to have a trick to disarm that response.
endorphine 3y ago
Are there any reasonable conclusions and/or insights that we can draw from these graphs and their correlation? (Excluding anything cryptocurrency-related)
- csours 3y ago
  You need a whole lot more history than you can gather from graphs to understand what is happening here.
  - dingosity 3y ago
    Yup. Turns out reality is complex. Most of the time, anyways.
- Joker_vD 3y ago
  Absolutely none. Remember, "if you see the sign 'buffalo' on the elephant's cage, do not believe your eyes".
- dingosity 3y ago
  Going off the gold standard isn't EXCLUSIVELY crypto-currency related, but yeah, that community seems to harp on it a lot. My guess at a reasonable conclusion is "dang, there was a lot going on in the 70s, economically speaking."
- jcranmer 3y ago
  It takes a lot of chutzpah to claim that all economic badness arose from the Nixon Shock (US going off the gold standard in 1971) when several of your graphs show clear inflection points happening at very different times (e.g., 1981).
- burkaman 3y ago
  No, and the graphs don't even correlate. Scroll through and you see that 1971 is not a significant point on most of them.
VHRanger 3y ago
r/badeconomics has a recap on why this is just a freshman bad statistics take: https://www.reddit.com/r/badeconomics/comments/i9ycy9/the_brutalist_housing_block_sticky_come_shoot_the/g1qr7z6/ https://www.reddit.com/r/badeconomics/comments/i9ycy9/the_br...
- SilasX 3y ago
  Can you be more specific? That's a long, nuanced reply that suggests several legit explanations that account for some of the trends, none of which look like dismissing the whole thing as bad statistics, like you're claiming.[1] If anything, it agrees that "something happened" around 1971, and suggests multiple such things. [1] Edit: to me, "freshman bad statistics" means something like "the supposed trend is an artifact of how it was measured or transformed", but the link doesn't say anything like that -- this label is misleading at best.
  - ls612 3y ago
    The main thing is that this is entirely because they choose CPI instead of PCE to measure inflation. Also it compares a median (wages) to a mean (productivity).
    - SilasX 3y ago
      Yes, that's used to dismiss the significance of some of the asserted trends. But it also agrees that inflation really did go up: >>The change in the trade deficit (graphs 15 & 16) may be linked to the end of Bretton Woods indirectly. The end of the system created floating exchange rates. That allowed every nation to determine it's own monetary policy fully. When that happened many Central Banks behaved badly causing high inflation. The US stopped it's high inflation in the 1980s. And other real phenomena account for other trends c. 1971: >>Graph 3 is tricky. It shows how Real GDP per capita has moved away from real GDP per employee. The main reason for that is the introduction of women to the workplace. And it also agrees that some of the trends did happen, meriting investigation, but 1971 wasn't the inflection point: >>Take a look at graphs on inequality. Here I'm looking mostly at graphs 1, 6, 8, 9, 10. Notice that the inflection point isn't actually 1971. It's usually some time in the early 80s. Greater inequality between high income earners and everyone else started around then. It's a matter of debate why. A lot of economists believe it's because the modern developed economies rewards high skills more than they did in the past. Notice that the very first graph is misleading because it doesn't use total compensation. I have a hard time characterizing any of that as a "freshman statistics error".
csours 3y ago
I've noticed that most of the time, economists will only say the positive thing about the change they want to make. I really appreciate the lectures by Mark Blyth because he explicitly talks about tradeoffs. If you want to see something fun, watch game shows from the 70's and 80's and note the prices of things like toasters and cars. Adjust for inflation to today, and especially for cars, compare the features. It's pretty amazing. Anyway if someone is trying to tell you that one thing or one decision changed everything, they're at best telling you a partial truth, and more likely just lying.
- m_0x 3y ago
  > If you want to see something fun, watch game shows from the 70's and 80's and note the prices of things like toasters and cars. Adjust for inflation to today, and especially for cars, compare the features. It's pretty amazing. I'm going to assume toasters and cars are far cheaper today than in the 70's and 80's considering all the features.
burkaman 3y ago
Very frustratingly vague page. I think it's supposed to be implying that this happened: https://en.wikipedia.org/wiki/Nixon_shock https://en.wikipedia.org/wiki/Nixon_shock, and that bitcoin would somehow fix all these issues. Anytime someone just lists a bunch of graphs without telling you which graphs they left out and what their analysis is, you can probably ignore them. Even in many of these cherry-picked graphs, 1971 appears to be in the middle of some ongoing trend and is not an inflection point.
- mikhailfranco 3y ago
  Yes, and No. Something happened, for sure. Presenting raw charts is a Rorschach Test for what you might imagine is the cause. The trend, in the US, was catastrophic deficits, caused by guns (Vietnam War, Apollo space program) and butter (Great Society and welfare). An unsustainable trend is ... unsustainable. Something broke... The French raided the gold from Fort Knox, Nixon called it.
perrygeo 3y ago
Hypothesis: The post-war growth in America was largely driven by cheap and abundant domestic oil. 1971 was the wake up call - we hit the peak in domestic oil production (we surpassed it again only after 2015) leading to a realization that energy was not free (shocking!) and that continued growth was dependent on foreign imports. The oil crises of 1973 and beyond were the proximate result. But our economy as a whole never really recovered; those diverging lines are the story of how we dealt with the relative scarcity - by systematically squeezing the middle class and increasing inequality rather than sacrificing growth.
- eli_gottlieb 3y ago
  Yeah, the Energy Theory of Everything has been my running hypothesis for what actually happened to shift from the postwar consensus to neoliberalism.
  - mikhailfranco 3y ago
    Depends what you mean by neoliberalism. Usually it is just a blanket pejorative, but if you mean decoupling of debt from reality, then you are correct. The 1980s of Reagan & Thatcher saw important strides in handing back the economy to market forces, but at the same time, derisking (undervaluing) credit to fund the investment necessary to backfill for government negligence. (Re)enabling market forces was good, unrestricted credit was bad.
- deleted 3y ago
  [deleted]
- dredmorbius 3y ago
  In Daniel Yergin's The Prize (and the PBS series made from it), there's a chilling sequence in which the increasing challenges of transacting oil trade in gold. In the television series, this is communicated in an interview with Gwin Follis, former chairman of Standard Oil of California, filmed in what appears to be a palace. "We made an agreement with Ibn Saud that we would give him gold. For every ton of oil we took out of his country we would give him gold. And we did at first. Then we got to be producing more and more and more, and we would try to find more gold shillings to meet the requirements so we could ship another ton. And we had to tell him we couldn't find any more gold. There wasn't that much gold. We had now such an enormous business that we cleaned the world of gold shillings." From The Prize, Part 5- Crude Diplomat at 31:24. <https://yewtu.be/watch?v=k7g5UMxDZIg&list=PLYkO4hiKyrSRjZLQunIjgCsz4GrpDGPfN&index=4?t=31m24s https://yewtu.be/watch?v=k7g5UMxDZIg&list=PLYkO4hiKyrSRjZLQu...> This illustrates a number of elements: the enormous scale of the oil business, the challenges of a gold-backed monetary system, and the challenges of an exceptionally one-sided trade. Going off the gold standard and dollarising oil sales solved several problems: - The US had an unlimited supply of dollars. - Saudi Arabia (and other oil exporters) wouldn't see their own currencies appreciating due to an unbalanced inflow of payments. - Global demand for dollars in trade meant that dollarised petroleum sales wouldn't lead to either appreciation or depreciation of that currency. - Basing international trade on a managed rather than specie / gold-backed currency meant that monetary policy could be used to adjust money supply to economic conditions. On TFA, the precipitous decline of US gold reserves beginning in 1950, the year in which the US became a net importer of oil, is illuminating.
gustavus 3y ago
I've heard multiple explanations, some of them include. 1. The moving off the gold standard 2. A large number of women started entering the workforce essentially doubling the supply of labor. 3. The rise of MBAs and downsizing really became big. 4. Outsourcing and off shoring started to be introduced during this time 5. The 70's stagflation where we say inflation and high interest rates. These all seem to be plausible factors to me.
- mortureb 3y ago
  [flagged]
  - dingosity 3y ago
    be nice.
    - timeon 3y ago
      Probably just missing '/s'.
    - mortureb 3y ago
      Well I can’t delete it anymore. I was honestly being serious, maybe a little terse.
    - omginternets 3y ago
      He's not being mean; he's just failing to present an argument.
    - next_xibalba 3y ago
      I believe the hypothesis behind this is that women entering the workforce in large numbers disrupted the labor demand/supply equilibrium while also portending major changes to family structure and aggregate social dynamics. I don't think its a very interesting hypothesis though. The increase was fairly gradual post-WWII [1]. It also seems like it probably points the causal arrow in the wrong direction. Women probably would not have entered the workforce in such broad numbers had economic conditions supported a single income earner per household. [1] https://fred.stlouisfed.org/series/LNS11300002 https://fred.stlouisfed.org/series/LNS11300002
coding123 3y ago
This gets posted once a year by different people. Still worth looking at in various economic climates.
- dingosity 3y ago
  Sure. But a better treatment might be to say "here's a lot of metrics, some of which might be related and here's a list of reasons people have proposed for the causes behind these metrics." This one reads off like BADGER-BADGER-BADGER-MUSHROOM, but it's GRAPH-GRAPH-GRAPH-HAYAK QUOTE.
- omginternets 3y ago
  What's frustrating for someone like me, who doesn't know much about economics, is that it's unclear exactly how we're meant to "look at it". It's just data without theory and context -- it's impossible to draw any meaningful conclusions.
  - coding123 3y ago
    The first graph is quite clear - demand a better world.
jan_Sate 3y ago
Nice graphs. But there's no answer provided in the page. So, now that I'm wondering, w exactly tf happened in 1971?
- dingosity 3y ago
  Monaco won the European Song Contest. Very clearly that is the reason the economic world goes weird after 1971. </snark>
- ursuscamp 3y ago
  This page is supposed to be a conversation starter, I think. You present the page to someone, then get them interested in the mystery so you can tell them what happened. I don't think there's any doubt the conclusion you're supposed to reach is that it supports an Austrian economics view about the negative effects of our current monetary regime, and de-linking the USD from gold.
nathell 3y ago
My first instinctive reply upon seeing the title is ‘Bretton Woods toppled down’. I guess that might be part of an answer. Not sure how important one.
- orwin 3y ago
  Peak extraction of conventionnal oil in the US. The eurocrisis correspond to peak conventionnal oil in the north sea (2005 for gas, 2008 for oil) and in north Africa (it's peak extraction: if we improve technique, we can probably get double than what we extracted)
bediger4000 3y ago
I always thought it was Nixon taking the wind out of the metaphorical sails. He was so bad, even Republicans of the day were grossed out. Cancelling the space program, domestic surveillance abuse, the extremely cynical Southern Strategy, the Viet Nam war, tons of things done to destroy idealism and trust in institutions.
- refurb 3y ago
  Jeeze, blaming Nixon for the Vietnam War is laughable. By the time he came into office the US was already on the way out (Lyndon Johnson was already pulling troops out).
  - bediger4000 3y ago
    I'm not blaming him for the war that had been ongoing since the 40s, but rather what he did during his administration. He and Kissinger bombed Cambodia. There's some evidence to suggest that Nixon and Kissinger manipulated the 1968 peace talks to give Nixon an election advantage. https://www.nytimes.com/2017/01/02/us/politics/nixon-tried-to-spoil-johnsons-vietnam-peace-talks-in-68-notes-show.html https://www.nytimes.com/2017/01/02/us/politics/nixon-tried-t...
    - refurb 3y ago
      Seems odd to single out Nixon's conduct during the war, not the administration that escalated the war, and started it under questionable circumstance.
- woobar 3y ago
  > He was so bad, even Republicans of the day were grossed out. Nixon was so bad that he won 1972 re-election with 520 out of 528 electoral votes. Or 60.7% of popular vote.
  - dragonwriter 3y ago
    > Nixon was so bad that he won 1972 re-election with 520 out of 528 electoral votes. What happened after that, including both politically for Nixon and in terms of further information about the use of the national security apparatus for domestic political purposes during the Administration (including during the 1972 re-election campaign) that occurred after what happened personally politically for Nixon? (While the question asks what happened in 1971, most of the graphs that show anything show something very minor separation for the first few years after 1971. I think “Nixon icky” is an…incomplete…hypothesis, to the extent that any of the graphs show something real, but I don’t think “but he was re-elected by a wide margin in 1972” is a sufficient dismissal, either.)
legitster 3y ago
This page is a good education in how to misinform with data. Slap an arrow across as many different graphs, establish something resembling a pattern, and like a good magic trick, have the viewer do the research and (seemingly) come up with the "correct" explanation. In this case you are supposed to find out that that 1971 was the end of the Bretton Woods system (and probably, more importantly to the Bitcoin promoters who run this website, the final end of the Gold Standard in the US). However, now that you know the purpose of the magic trick, it's easier to peak in and see the misdirection. There are basically two things going on: - The end of the Gold peg changed a lot about how things were valued, nearly overnight. So a lot of graphs relating to real values based in currencies had enormous changes, even if the fundamentals underlying them did not substantially change. This even impacts inequality metrics - since the money supply was no longer artificially limited, you see high-earners holding on and collecting more of it - rather than, say, fine art or T-Bills. And graphs that mark depreciation against gold are obviously going to be slanted. - The gold peg failed in the first place because of rapidly changing demographic and consumer trends. You can see this where the arrow was lazily plopped in the middle of sweeping curves or trends. Like the rising cost of chicken starting in 1934. Or the numbers of divorces. Or the rise of dual income families. For most the graphs on this page, 1971 is not a significant date at all.
morninglight 3y ago
What happened? Are you kidding? or just a kid? https://www.history.com/topics/vietnam-war/vietnam-war-timeline https://www.history.com/topics/vietnam-war/vietnam-war-timel... ..
briandilley 3y ago
Unix epoch starts Jan 1st 1970 - could this have anything to do with it? As in, we started getting better at keeping records and more detailed data because of computers?
maartenscholl 3y ago
There is a graph showing the house prices in Amsterdam in the Netherlands, and an arrow pointing at 1971 - but unlike the US, the Netherlands left the gold standard already in 1936, and according to that graph the house prices went lower for several decades after 1936.
- mikhailfranco 3y ago
  It's mostly oil price shock, combined with coming off the gold standard, caused by huge US deficits (Vietnam, Apollo, 'Great Society'). But hey, you did have a Nazi invasion, which is not a good thing. I assume it took some time to recover.
b0in 3y ago
As others mentioned this is a libertarian/crypto site so it's going to gloss over the loss of labor union influence that really sped up in the 70s (we can argue later about why this happened). A correlation was graphed already, though it's comparing top 1% income share vs union membership: https://en.wikipedia.org/wiki/File:United_States_union_membership_and_inequality,_top_1%25_income_share,_1910_to_2010.png https://en.wikipedia.org/wiki/File:United_States_union_membe... This one includes graphs on the top 10% and also "middle-class" but i was only able to skim the article to make sure it didn't sound insane: https://www.theatlantic.com/business/archive/2012/06/who-killed-american-unions/258239/ https://www.theatlantic.com/business/archive/2012/06/who-kil...
apienx 3y ago
Peter Schiff claims that the U.S. technically defaulted on is debt in 1971. Holders of Federal Reserve Notes were handed dollars instead of the promised gold.
actuallyrizzn 3y ago
This is a page for goldbugs/sound money advocates. The presumed culprit is the fed/fractional reserve banking. It's a pretty good assumption, especially considering that all the other major 70's things that occurred were things that rectified in spite of the trend continuing.
ZoomerCretin 3y ago
The first graph shows productivity and real _disbursed_ income. Health insurance is a very large proportion of compensation now. There has been a large decoupling of compensation from productivity. What happened was unions were neutered (Taft-Hartley), and businesses took advantage by stomping them out whenever they could. Businesses also merged and acquired their way to become the enormous behemoths that they are today. There is a large amount of inequality in productivity between the Fortune 500 and other US firms. The Fortune 500 is responsible for 60-70% of US GDP despite employing only 16-20% of American workers. All the bargaining power in the world isn't going to help the 80% of us working for non-F500 firms. What we need is a combination of greater union power (wildcat strikes, closed shops, sectoral bargaining, heavy restrictions on employer interference in unionization efforts), and a greater antitrust effort to break up the monopoly firms. I guess a better question would be if we consider employment the only valid source of income. There are plenty of examples of tax-and-spend welfare states that simply redistribute income from rich earners/gainers to fund public services.
RestlessMind 3y ago
Nice collection of graphs. But looking closely, you can see that all those graphs conflate multiple trends and not everything happened exactly in 1971 but sometime in the 70's, or even 80's. 1. Ditching gold standard - this obviously happened in 1971 and had a big impact. But there were other equally important changes. 2. Women entering workforce - this started in late 60's and continued throughout 70's and 80's. You can see "Dual-income working couples" graph, which plateaued in the late 80's 3. Reagan revolution - Reagan changed the discourse both culturally and from a policy perspective. He enacted tax cuts, deregulation, deficit funded growth etc . See the "income growth, from 1917-2012" chart. Income for top 1% earners starts ticking up from mid 80's. Or the "income share of top 1% relative to bottom 90%" starts picking up around 1980. Same with the uptick in "Income inequality in the United states" - starts in 1980. 4. Inflation - oil shock of 1973, with rest of the decade spent fighting it. Interest rates were jacked up to 18% or beyond at some point. Only in the early 80's did things stabilize (Reagan's "morning in America" campaigning). This is also reflected in many graphs with notable changes around mid-80's.
virtuous_sloth 3y ago
The fiscal-progressive nature of the New Deal earlier in the century was so successful it created the middle class in the post-war era (90% marginal tax rates!) and it was being followed up by a socially-progressive era of the civil rights movement in the 60s and the powers that be had to make a concerted effort to derail both. The takeover of the political dialog by economism using the Freshwater/Chicago school of economics started in earnest around this time and was so remarkably successful that Democratic presidents were spouting the neo-liberal conservatism[0] hogwash by the time of Clinton. I am a member of the Cory Doctorow school[1] of political thought. [0] https://crookedtimber.org/2018/03/21/liberals-against-progressives/#comment-729288 https://crookedtimber.org/2018/03/21/liberals-against-progre... [1] https://pluralistic.net/tag/political-science/ https://pluralistic.net/tag/political-science/
dragfuture 3y ago
Oil production in the United States peaked in 1971.
TradingPlaces 3y ago
1. Boomers entering workforce en masse (oldest boomers turned 25 in 1971). 2. Women entering workforce en masse.
mikhailfranco 3y ago
Flagging this is wrong. It needs to be discussed. Interesting topic. The vibrant threads show many people have opinions. Please unflag.
dang 3y ago
Related: WTF Happened in 1971? - https://news.ycombinator.com/item?id=31471602 https://news.ycombinator.com/item?id=31471602 - May 2022 (102 comments) WTF Happened in 1971? (2019) - https://news.ycombinator.com/item?id=25188457 https://news.ycombinator.com/item?id=25188457 - Nov 2020 (454 comments) WTF Happened in 1971? - https://news.ycombinator.com/item?id=24135845 https://news.ycombinator.com/item?id=24135845 - Aug 2020 (5 comments) WTF Happened in 1971? - https://news.ycombinator.com/item?id=20811004 https://news.ycombinator.com/item?id=20811004 - Aug 2019 (44 comments)
- deleted 3y ago
  [deleted]
Rzor 3y ago
This is all you need to know and it probably won't be mentioned anywhere fully here: https://news.ycombinator.com/item?id=31474372 https://news.ycombinator.com/item?id=31474372 >beginning of globalization, the decline of American manufacturing jobs, the decline of union jobs. The 70s were the beginning of the end for heavy industries in Pittsburgh.
deleted 3y ago
[deleted]
willis936 3y ago
It's fun to look back on these things with the context of system dynamics. We can grade the quality of models and predictions to help figure out where we're headed. https://www.youtube.com/watch?v=kVOTPAxrrP4 https://www.youtube.com/watch?v=kVOTPAxrrP4
Communitivity 3y ago
Amateur opinion, but President Nixon was president in 1971, and I wonder if a lot of it is increased greed primarily due to two things. This increased greed also manifests as more short-term thinking. To paraphrase Fast and Furious, "I live my life one quarter at a time". First, decreased consumer and investor confidence in the future after the combination of Watergate, removal from the gold standard, and the Nixon Shock policies [1]. Second, the Wharton MBA program's rise, and the Wharton view, as explained to me, that employees should be treated as renewable resources, not to some extent as family. [1] https://en.wikipedia.org/wiki/Nixon_shock https://en.wikipedia.org/wiki/Nixon_shock

osti 3y ago

Turned out to be another crypto ad.

dingosity 3y ago
Seems more than just a crypto ad; it's an ad for a philosophical libertarian utopia where we ignore actual market behaviour that doesn't support a post-consensus monetary view of the world. Not only is someone trying to get rich off of hashes, they're trying to convince you any theory which suggests burning fossil fuels to calculate hashes might not lead to increased productivity is heretical.

Nice page, but it doesn't seem to try very hard to create a framework to answer the question it asks. It ends with a Hayak quote which is interesting, even though it's taken out of context. You could argue taking the dollar off the gold standard is the reason metrics go wonky starting in '71. But some of the metrics go wonky slightly later after the NYC credit crisis. The suez canal was more or less blocked from '67 through '75, at a time when oil might have been more important economically than gold. And the US had to start paying it's VietNam debt during a period of high inflation. I guess what I'm saying is there's probably no one factor that made '71 special, but a collection of factors; a "perfect storm" of economic sadness.

legitster 3y ago
'71 was the end of the gold standard in the US. Given the Hayek quote and the crypto promotions that link to this site, the page is trying to heavily imply a goldbug argument.
tivert 3y ago
> Nice page, but it doesn't seem to try very hard to create a framework to answer the question it asks. It ends with a Hayak quote which is interesting, even though it's taken out of context. My assumption has been this page is part of a two-part propaganda trick: the first part is to use all these charts to raise a question, the second part is to provide a oversimple but satisfying propaganda-answer (either a return to the gold standard or cryptocurrency). The second part may be meant to be an exercise for the reader (e.g. raise the question, and then prime them to search for the answer in a way that will lead them to material advocating the oversimple but satisfying propaganda-answer). The stereotypical form of propaganda (yelling an answer forcefully at your face) isn't very effective because it's obvious and elicits resistance, so actually-effective propaganda has to have a trick to disarm that response.

endorphine 3y ago

Are there any reasonable conclusions and/or insights that we can draw from these graphs and their correlation? (Excluding anything cryptocurrency-related)

csours 3y ago
You need a whole lot more history than you can gather from graphs to understand what is happening here.
- dingosity 3y ago
  Yup. Turns out reality is complex. Most of the time, anyways.
Joker_vD 3y ago
Absolutely none. Remember, "if you see the sign 'buffalo' on the elephant's cage, do not believe your eyes".
dingosity 3y ago
Going off the gold standard isn't EXCLUSIVELY crypto-currency related, but yeah, that community seems to harp on it a lot. My guess at a reasonable conclusion is "dang, there was a lot going on in the 70s, economically speaking."
jcranmer 3y ago
It takes a lot of chutzpah to claim that all economic badness arose from the Nixon Shock (US going off the gold standard in 1971) when several of your graphs show clear inflection points happening at very different times (e.g., 1981).
burkaman 3y ago
No, and the graphs don't even correlate. Scroll through and you see that 1971 is not a significant point on most of them.

VHRanger 3y ago

r/badeconomics has a recap on why this is just a freshman bad statistics take: https://www.reddit.com/r/badeconomics/comments/i9ycy9/the_brutalist_housing_block_sticky_come_shoot_the/g1qr7z6/ https://www.reddit.com/r/badeconomics/comments/i9ycy9/the_br...

SilasX 3y ago
Can you be more specific? That's a long, nuanced reply that suggests several legit explanations that account for some of the trends, none of which look like dismissing the whole thing as bad statistics, like you're claiming.[1] If anything, it agrees that "something happened" around 1971, and suggests multiple such things. [1] Edit: to me, "freshman bad statistics" means something like "the supposed trend is an artifact of how it was measured or transformed", but the link doesn't say anything like that -- this label is misleading at best.
- ls612 3y ago
  The main thing is that this is entirely because they choose CPI instead of PCE to measure inflation. Also it compares a median (wages) to a mean (productivity).
  - SilasX 3y ago
    Yes, that's used to dismiss the significance of some of the asserted trends. But it also agrees that inflation really did go up: >>The change in the trade deficit (graphs 15 & 16) may be linked to the end of Bretton Woods indirectly. The end of the system created floating exchange rates. That allowed every nation to determine it's own monetary policy fully. When that happened many Central Banks behaved badly causing high inflation. The US stopped it's high inflation in the 1980s. And other real phenomena account for other trends c. 1971: >>Graph 3 is tricky. It shows how Real GDP per capita has moved away from real GDP per employee. The main reason for that is the introduction of women to the workplace. And it also agrees that some of the trends did happen, meriting investigation, but 1971 wasn't the inflection point: >>Take a look at graphs on inequality. Here I'm looking mostly at graphs 1, 6, 8, 9, 10. Notice that the inflection point isn't actually 1971. It's usually some time in the early 80s. Greater inequality between high income earners and everyone else started around then. It's a matter of debate why. A lot of economists believe it's because the modern developed economies rewards high skills more than they did in the past. Notice that the very first graph is misleading because it doesn't use total compensation. I have a hard time characterizing any of that as a "freshman statistics error".

csours 3y ago

I've noticed that most of the time, economists will only say the positive thing about the change they want to make. I really appreciate the lectures by Mark Blyth because he explicitly talks about tradeoffs. If you want to see something fun, watch game shows from the 70's and 80's and note the prices of things like toasters and cars. Adjust for inflation to today, and especially for cars, compare the features. It's pretty amazing. Anyway if someone is trying to tell you that one thing or one decision changed everything, they're at best telling you a partial truth, and more likely just lying.

m_0x 3y ago
> If you want to see something fun, watch game shows from the 70's and 80's and note the prices of things like toasters and cars. Adjust for inflation to today, and especially for cars, compare the features. It's pretty amazing. I'm going to assume toasters and cars are far cheaper today than in the 70's and 80's considering all the features.

burkaman 3y ago

Very frustratingly vague page. I think it's supposed to be implying that this happened: https://en.wikipedia.org/wiki/Nixon_shock https://en.wikipedia.org/wiki/Nixon_shock, and that bitcoin would somehow fix all these issues. Anytime someone just lists a bunch of graphs without telling you which graphs they left out and what their analysis is, you can probably ignore them. Even in many of these cherry-picked graphs, 1971 appears to be in the middle of some ongoing trend and is not an inflection point.

mikhailfranco 3y ago
Yes, and No. Something happened, for sure. Presenting raw charts is a Rorschach Test for what you might imagine is the cause. The trend, in the US, was catastrophic deficits, caused by guns (Vietnam War, Apollo space program) and butter (Great Society and welfare). An unsustainable trend is ... unsustainable. Something broke... The French raided the gold from Fort Knox, Nixon called it.

perrygeo 3y ago

Hypothesis: The post-war growth in America was largely driven by cheap and abundant domestic oil. 1971 was the wake up call - we hit the peak in domestic oil production (we surpassed it again only after 2015) leading to a realization that energy was not free (shocking!) and that continued growth was dependent on foreign imports. The oil crises of 1973 and beyond were the proximate result. But our economy as a whole never really recovered; those diverging lines are the story of how we dealt with the relative scarcity - by systematically squeezing the middle class and increasing inequality rather than sacrificing growth.

eli_gottlieb 3y ago
Yeah, the Energy Theory of Everything has been my running hypothesis for what actually happened to shift from the postwar consensus to neoliberalism.
- mikhailfranco 3y ago
  Depends what you mean by neoliberalism. Usually it is just a blanket pejorative, but if you mean decoupling of debt from reality, then you are correct. The 1980s of Reagan & Thatcher saw important strides in handing back the economy to market forces, but at the same time, derisking (undervaluing) credit to fund the investment necessary to backfill for government negligence. (Re)enabling market forces was good, unrestricted credit was bad.
deleted 3y ago
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dredmorbius 3y ago
In Daniel Yergin's The Prize (and the PBS series made from it), there's a chilling sequence in which the increasing challenges of transacting oil trade in gold. In the television series, this is communicated in an interview with Gwin Follis, former chairman of Standard Oil of California, filmed in what appears to be a palace. "We made an agreement with Ibn Saud that we would give him gold. For every ton of oil we took out of his country we would give him gold. And we did at first. Then we got to be producing more and more and more, and we would try to find more gold shillings to meet the requirements so we could ship another ton. And we had to tell him we couldn't find any more gold. There wasn't that much gold. We had now such an enormous business that we cleaned the world of gold shillings." From The Prize, Part 5- Crude Diplomat at 31:24. <https://yewtu.be/watch?v=k7g5UMxDZIg&list=PLYkO4hiKyrSRjZLQunIjgCsz4GrpDGPfN&index=4?t=31m24s https://yewtu.be/watch?v=k7g5UMxDZIg&list=PLYkO4hiKyrSRjZLQu...> This illustrates a number of elements: the enormous scale of the oil business, the challenges of a gold-backed monetary system, and the challenges of an exceptionally one-sided trade. Going off the gold standard and dollarising oil sales solved several problems: - The US had an unlimited supply of dollars. - Saudi Arabia (and other oil exporters) wouldn't see their own currencies appreciating due to an unbalanced inflow of payments. - Global demand for dollars in trade meant that dollarised petroleum sales wouldn't lead to either appreciation or depreciation of that currency. - Basing international trade on a managed rather than specie / gold-backed currency meant that monetary policy could be used to adjust money supply to economic conditions. On TFA, the precipitous decline of US gold reserves beginning in 1950, the year in which the US became a net importer of oil, is illuminating.

gustavus 3y ago

I've heard multiple explanations, some of them include. 1. The moving off the gold standard 2. A large number of women started entering the workforce essentially doubling the supply of labor. 3. The rise of MBAs and downsizing really became big. 4. Outsourcing and off shoring started to be introduced during this time 5. The 70's stagflation where we say inflation and high interest rates. These all seem to be plausible factors to me.

mortureb 3y ago
[flagged]
- dingosity 3y ago
  be nice.
  - timeon 3y ago
    Probably just missing '/s'.
  - mortureb 3y ago
    Well I can’t delete it anymore. I was honestly being serious, maybe a little terse.
  - omginternets 3y ago
    He's not being mean; he's just failing to present an argument.
  - next_xibalba 3y ago
    I believe the hypothesis behind this is that women entering the workforce in large numbers disrupted the labor demand/supply equilibrium while also portending major changes to family structure and aggregate social dynamics. I don't think its a very interesting hypothesis though. The increase was fairly gradual post-WWII [1]. It also seems like it probably points the causal arrow in the wrong direction. Women probably would not have entered the workforce in such broad numbers had economic conditions supported a single income earner per household. [1] https://fred.stlouisfed.org/series/LNS11300002 https://fred.stlouisfed.org/series/LNS11300002

coding123 3y ago

This gets posted once a year by different people. Still worth looking at in various economic climates.

dingosity 3y ago
Sure. But a better treatment might be to say "here's a lot of metrics, some of which might be related and here's a list of reasons people have proposed for the causes behind these metrics." This one reads off like BADGER-BADGER-BADGER-MUSHROOM, but it's GRAPH-GRAPH-GRAPH-HAYAK QUOTE.
omginternets 3y ago
What's frustrating for someone like me, who doesn't know much about economics, is that it's unclear exactly how we're meant to "look at it". It's just data without theory and context -- it's impossible to draw any meaningful conclusions.
- coding123 3y ago
  The first graph is quite clear - demand a better world.

jan_Sate 3y ago

Nice graphs. But there's no answer provided in the page. So, now that I'm wondering, w exactly tf happened in 1971?

dingosity 3y ago
Monaco won the European Song Contest. Very clearly that is the reason the economic world goes weird after 1971. </snark>
ursuscamp 3y ago
This page is supposed to be a conversation starter, I think. You present the page to someone, then get them interested in the mystery so you can tell them what happened. I don't think there's any doubt the conclusion you're supposed to reach is that it supports an Austrian economics view about the negative effects of our current monetary regime, and de-linking the USD from gold.

nathell 3y ago

My first instinctive reply upon seeing the title is ‘Bretton Woods toppled down’. I guess that might be part of an answer. Not sure how important one.

orwin 3y ago
Peak extraction of conventionnal oil in the US. The eurocrisis correspond to peak conventionnal oil in the north sea (2005 for gas, 2008 for oil) and in north Africa (it's peak extraction: if we improve technique, we can probably get double than what we extracted)

bediger4000 3y ago

I always thought it was Nixon taking the wind out of the metaphorical sails. He was so bad, even Republicans of the day were grossed out. Cancelling the space program, domestic surveillance abuse, the extremely cynical Southern Strategy, the Viet Nam war, tons of things done to destroy idealism and trust in institutions.

refurb 3y ago
Jeeze, blaming Nixon for the Vietnam War is laughable. By the time he came into office the US was already on the way out (Lyndon Johnson was already pulling troops out).
- bediger4000 3y ago
  I'm not blaming him for the war that had been ongoing since the 40s, but rather what he did during his administration. He and Kissinger bombed Cambodia. There's some evidence to suggest that Nixon and Kissinger manipulated the 1968 peace talks to give Nixon an election advantage. https://www.nytimes.com/2017/01/02/us/politics/nixon-tried-to-spoil-johnsons-vietnam-peace-talks-in-68-notes-show.html https://www.nytimes.com/2017/01/02/us/politics/nixon-tried-t...
  - refurb 3y ago
    Seems odd to single out Nixon's conduct during the war, not the administration that escalated the war, and started it under questionable circumstance.
woobar 3y ago
> He was so bad, even Republicans of the day were grossed out. Nixon was so bad that he won 1972 re-election with 520 out of 528 electoral votes. Or 60.7% of popular vote.
- dragonwriter 3y ago
  > Nixon was so bad that he won 1972 re-election with 520 out of 528 electoral votes. What happened after that, including both politically for Nixon and in terms of further information about the use of the national security apparatus for domestic political purposes during the Administration (including during the 1972 re-election campaign) that occurred after what happened personally politically for Nixon? (While the question asks what happened in 1971, most of the graphs that show anything show something very minor separation for the first few years after 1971. I think “Nixon icky” is an…incomplete…hypothesis, to the extent that any of the graphs show something real, but I don’t think “but he was re-elected by a wide margin in 1972” is a sufficient dismissal, either.)

legitster 3y ago

This page is a good education in how to misinform with data. Slap an arrow across as many different graphs, establish something resembling a pattern, and like a good magic trick, have the viewer do the research and (seemingly) come up with the "correct" explanation. In this case you are supposed to find out that that 1971 was the end of the Bretton Woods system (and probably, more importantly to the Bitcoin promoters who run this website, the final end of the Gold Standard in the US). However, now that you know the purpose of the magic trick, it's easier to peak in and see the misdirection. There are basically two things going on: - The end of the Gold peg changed a lot about how things were valued, nearly overnight. So a lot of graphs relating to real values based in currencies had enormous changes, even if the fundamentals underlying them did not substantially change. This even impacts inequality metrics - since the money supply was no longer artificially limited, you see high-earners holding on and collecting more of it - rather than, say, fine art or T-Bills. And graphs that mark depreciation against gold are obviously going to be slanted. - The gold peg failed in the first place because of rapidly changing demographic and consumer trends. You can see this where the arrow was lazily plopped in the middle of sweeping curves or trends. Like the rising cost of chicken starting in 1934. Or the numbers of divorces. Or the rise of dual income families. For most the graphs on this page, 1971 is not a significant date at all.

morninglight 3y ago

What happened? Are you kidding? or just a kid? https://www.history.com/topics/vietnam-war/vietnam-war-timeline https://www.history.com/topics/vietnam-war/vietnam-war-timel... ..

briandilley 3y ago

Unix epoch starts Jan 1st 1970 - could this have anything to do with it? As in, we started getting better at keeping records and more detailed data because of computers?

maartenscholl 3y ago

There is a graph showing the house prices in Amsterdam in the Netherlands, and an arrow pointing at 1971 - but unlike the US, the Netherlands left the gold standard already in 1936, and according to that graph the house prices went lower for several decades after 1936.

mikhailfranco 3y ago
It's mostly oil price shock, combined with coming off the gold standard, caused by huge US deficits (Vietnam, Apollo, 'Great Society'). But hey, you did have a Nazi invasion, which is not a good thing. I assume it took some time to recover.

b0in 3y ago

As others mentioned this is a libertarian/crypto site so it's going to gloss over the loss of labor union influence that really sped up in the 70s (we can argue later about why this happened). A correlation was graphed already, though it's comparing top 1% income share vs union membership: https://en.wikipedia.org/wiki/File:United_States_union_membership_and_inequality,_top_1%25_income_share,_1910_to_2010.png https://en.wikipedia.org/wiki/File:United_States_union_membe... This one includes graphs on the top 10% and also "middle-class" but i was only able to skim the article to make sure it didn't sound insane: https://www.theatlantic.com/business/archive/2012/06/who-killed-american-unions/258239/ https://www.theatlantic.com/business/archive/2012/06/who-kil...

apienx 3y ago

Peter Schiff claims that the U.S. technically defaulted on is debt in 1971. Holders of Federal Reserve Notes were handed dollars instead of the promised gold.

actuallyrizzn 3y ago

This is a page for goldbugs/sound money advocates. The presumed culprit is the fed/fractional reserve banking. It's a pretty good assumption, especially considering that all the other major 70's things that occurred were things that rectified in spite of the trend continuing.

ZoomerCretin 3y ago

The first graph shows productivity and real _disbursed_ income. Health insurance is a very large proportion of compensation now. There has been a large decoupling of compensation from productivity. What happened was unions were neutered (Taft-Hartley), and businesses took advantage by stomping them out whenever they could. Businesses also merged and acquired their way to become the enormous behemoths that they are today. There is a large amount of inequality in productivity between the Fortune 500 and other US firms. The Fortune 500 is responsible for 60-70% of US GDP despite employing only 16-20% of American workers. All the bargaining power in the world isn't going to help the 80% of us working for non-F500 firms. What we need is a combination of greater union power (wildcat strikes, closed shops, sectoral bargaining, heavy restrictions on employer interference in unionization efforts), and a greater antitrust effort to break up the monopoly firms. I guess a better question would be if we consider employment the only valid source of income. There are plenty of examples of tax-and-spend welfare states that simply redistribute income from rich earners/gainers to fund public services.

RestlessMind 3y ago

Nice collection of graphs. But looking closely, you can see that all those graphs conflate multiple trends and not everything happened exactly in 1971 but sometime in the 70's, or even 80's. 1. Ditching gold standard - this obviously happened in 1971 and had a big impact. But there were other equally important changes. 2. Women entering workforce - this started in late 60's and continued throughout 70's and 80's. You can see "Dual-income working couples" graph, which plateaued in the late 80's 3. Reagan revolution - Reagan changed the discourse both culturally and from a policy perspective. He enacted tax cuts, deregulation, deficit funded growth etc . See the "income growth, from 1917-2012" chart. Income for top 1% earners starts ticking up from mid 80's. Or the "income share of top 1% relative to bottom 90%" starts picking up around 1980. Same with the uptick in "Income inequality in the United states" - starts in 1980. 4. Inflation - oil shock of 1973, with rest of the decade spent fighting it. Interest rates were jacked up to 18% or beyond at some point. Only in the early 80's did things stabilize (Reagan's "morning in America" campaigning). This is also reflected in many graphs with notable changes around mid-80's.

virtuous_sloth 3y ago

The fiscal-progressive nature of the New Deal earlier in the century was so successful it created the middle class in the post-war era (90% marginal tax rates!) and it was being followed up by a socially-progressive era of the civil rights movement in the 60s and the powers that be had to make a concerted effort to derail both. The takeover of the political dialog by economism using the Freshwater/Chicago school of economics started in earnest around this time and was so remarkably successful that Democratic presidents were spouting the neo-liberal conservatism[0] hogwash by the time of Clinton. I am a member of the Cory Doctorow school[1] of political thought. [0] https://crookedtimber.org/2018/03/21/liberals-against-progressives/#comment-729288 https://crookedtimber.org/2018/03/21/liberals-against-progre... [1] https://pluralistic.net/tag/political-science/ https://pluralistic.net/tag/political-science/

dragfuture 3y ago

Oil production in the United States peaked in 1971.

TradingPlaces 3y ago

1. Boomers entering workforce en masse (oldest boomers turned 25 in 1971). 2. Women entering workforce en masse.

mikhailfranco 3y ago

Flagging this is wrong. It needs to be discussed. Interesting topic. The vibrant threads show many people have opinions. Please unflag.

dang 3y ago

Related: WTF Happened in 1971? - https://news.ycombinator.com/item?id=31471602 https://news.ycombinator.com/item?id=31471602 - May 2022 (102 comments) WTF Happened in 1971? (2019) - https://news.ycombinator.com/item?id=25188457 https://news.ycombinator.com/item?id=25188457 - Nov 2020 (454 comments) WTF Happened in 1971? - https://news.ycombinator.com/item?id=24135845 https://news.ycombinator.com/item?id=24135845 - Aug 2020 (5 comments) WTF Happened in 1971? - https://news.ycombinator.com/item?id=20811004 https://news.ycombinator.com/item?id=20811004 - Aug 2019 (44 comments)

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Rzor 3y ago

This is all you need to know and it probably won't be mentioned anywhere fully here: https://news.ycombinator.com/item?id=31474372 https://news.ycombinator.com/item?id=31474372 >beginning of globalization, the decline of American manufacturing jobs, the decline of union jobs. The 70s were the beginning of the end for heavy industries in Pittsburgh.

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willis936 3y ago

It's fun to look back on these things with the context of system dynamics. We can grade the quality of models and predictions to help figure out where we're headed. https://www.youtube.com/watch?v=kVOTPAxrrP4 https://www.youtube.com/watch?v=kVOTPAxrrP4

Communitivity 3y ago

Amateur opinion, but President Nixon was president in 1971, and I wonder if a lot of it is increased greed primarily due to two things. This increased greed also manifests as more short-term thinking. To paraphrase Fast and Furious, "I live my life one quarter at a time". First, decreased consumer and investor confidence in the future after the combination of Watergate, removal from the gold standard, and the Nixon Shock policies [1]. Second, the Wharton MBA program's rise, and the Wharton view, as explained to me, that employees should be treated as renewable resources, not to some extent as family. [1] https://en.wikipedia.org/wiki/Nixon_shock https://en.wikipedia.org/wiki/Nixon_shock