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I agree that productivity & cheap energy played a major role in the devaluation of the traditional worker but I find it highly suspicious that the blogger does

I agree that productivity & cheap energy played a major role in the devaluation of the traditional worker but I find it highly suspicious that the blogger does not consider at all another remarkable phenomena that started in 1971: "free floating fiat currency" and the tremendous increase in the money supply. This amazing currency is "free" but chooses to float only one direction: devaluation. Maybe the increase in productivity was the perfect cover for the massive increase in the money supply and the masses had no feeling of high inflation while still paying the hidden tax.

danuker 12y ago
I agree with you. The graph is too sharp to be just technology: technology was gradually developed over years - from "nearly useless" to "automate everything". What happened is this: https://en.wikipedia.org/wiki/Nixon_Shock https://en.wikipedia.org/wiki/Nixon_Shock
howeyc 12y ago
Floating currency only matters when you buy stuff from someone else who deals in a different currency. Although you sort of right in that "globalization" could be a cause. That is, "why hire more workers at high salary when I can hire dirt cheap and ship the product here?" https://en.wikipedia.org/wiki/Containerization#Toward_standards https://en.wikipedia.org/wiki/Containerization#Toward_standa... This leads me to wonder, when wages stagnated around 1970 in USA, did they start lifting in developing world?
- msandford 12y ago
  > Floating currency only matters when you buy stuff from someone else who deals in a different currency The idea that the currency floats can also mean that the buying power consistently decreases. As the purchasing power decreases if you're in cash you lose wealth, even though on paper you're maybe even growing the number a bit. If you own productive assets this is OK because you can increase the price of your outputs faster than your inputs. Meaning you can give people raises (but more slowly than the currency depreciation) and you'll still make money. If you're an employee instead of an employer, though, you're paying the higher prices before you get the raise to be able to afford them. In this way it's possible for the central bank to perform an effective (though non-obvious) redistribution of wealth.
- leaveyou 12y ago
  "The floating currency ONLY matters when.." but the increase in money supply matters ALWAYS (especially if it's not your supply of money being increased).

danuker 12y ago

I agree with you. The graph is too sharp to be just technology: technology was gradually developed over years - from "nearly useless" to "automate everything". What happened is this: https://en.wikipedia.org/wiki/Nixon_Shock https://en.wikipedia.org/wiki/Nixon_Shock

howeyc 12y ago

Floating currency only matters when you buy stuff from someone else who deals in a different currency. Although you sort of right in that "globalization" could be a cause. That is, "why hire more workers at high salary when I can hire dirt cheap and ship the product here?" https://en.wikipedia.org/wiki/Containerization#Toward_standards https://en.wikipedia.org/wiki/Containerization#Toward_standa... This leads me to wonder, when wages stagnated around 1970 in USA, did they start lifting in developing world?

msandford 12y ago
> Floating currency only matters when you buy stuff from someone else who deals in a different currency The idea that the currency floats can also mean that the buying power consistently decreases. As the purchasing power decreases if you're in cash you lose wealth, even though on paper you're maybe even growing the number a bit. If you own productive assets this is OK because you can increase the price of your outputs faster than your inputs. Meaning you can give people raises (but more slowly than the currency depreciation) and you'll still make money. If you're an employee instead of an employer, though, you're paying the higher prices before you get the raise to be able to afford them. In this way it's possible for the central bank to perform an effective (though non-obvious) redistribution of wealth.
leaveyou 12y ago
"The floating currency ONLY matters when.." but the increase in money supply matters ALWAYS (especially if it's not your supply of money being increased).