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> 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

> 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.

ANewFormation 2y ago
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.
- camgunz 2y ago
  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.
  - somenameforme 2y ago
    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. [1] - https://search.brave.com/search?q=exporting+inflation https://search.brave.com/search?q=exporting+inflation

ANewFormation 2y ago

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.

camgunz 2y ago
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.
- somenameforme 2y ago
  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. [1] - https://search.brave.com/search?q=exporting+inflation https://search.brave.com/search?q=exporting+inflation