The fruits of increased productivity used to be
distributed across society. Everyone benefited as the economy became more productive,
new technologies emerged and new industries were born. Prosperity spread
across society as jobs were created, poverty was reduced and a robust
and thriving middle class emerged in America.
Then came the 1970’s and something suddenly changed. Wages
decoupled from productivity and workers no longer benefited from improvements
in the economy. This trend has continued unabated since the mid-70’s, with
wages essentially flatlining, despite continued growth in productivity.
A very small percentage of the population has continued
to benefit from the increased productivity, but the vast majority have been
excluded. The result has been a major concentration of wealth to the top 1%
in society, while everyone else has been left with crumbs. Thus, you can see
the widening gap between the red and orange lines in the chart above.
It has become so absurd that the top 1% now own roughly
50% of the world’s wealth. From the late 1920’s until the mid 1970’s, the
share of total wealth held by the wealthiest families had been declining
steadily. Wealth was being distributed across more families throughout
society. But this trend reversed course in the 70’s.
The chart below shows that the top 0.1% (1/10 of 1%) now
holds as much wealth as the bottom 90% combined. The bottom 90% had
previously held 35% of total net household wealth versus just 9% for the top
0.1%. Times have certainly changed.
Why is This Bad for Society?
Before you think that I am a communist arguing for
re-distribution of wealth from the productive classes in society to the lazy,
let’s dive a bit deeper.
The concentration is far greater than free markets would
ever permit. This level of concentration is only possible with rampant
crony-capitalism. A large percentage of those in the top 1% acquired their
wealth through connections to central bankers or government officials that
tilted the playing field in their favor.
The banking system acquired it through usurping the power
to print money in the United States via the Federal Reserve Act of 1913.
Their partner banks are granted the ability to create money out of thin air
at near-zero interest rates. Those banks turn around and lend out this
money at anywhere from 5% to 30% and simply sit back and collect the
interest. It is a good gig if you can get it.
This isn’t the type of wealth that is achieved through
hard work and ingenuity, but through backroom deals, war profiteering,
kickbacks and the subversion of the democratic process. The Treasury is
supposed to control the money supply in the United States and this power was
stolen via nefarious methods. While it is true that the Treasury still owns
and operates the printing presses, the Federal Reserve has control of
the money supply through its power to create credit with interest rates and
reserve requirements. Since credit is the largest component of the money supply
by far, the FED is really in control of money in the U.S.
If you haven’t read it yet, I recommend G. Edward
Griffin’s “The Create from Jekyll Island” to
catch up on the creation of the Federal Reserve. If you prefer visual
content, check out Century of Enslavement: The History of The Federal Reserve, The Biggest Scam In The History Of Mankind – Hidden Secrets of
Money 4, or Zeitgeist
the Federal Reserve System.
It is bad for society because the concentration of wealth
in the hands of few creates massive inequality. This in turn generates
financial stresses, resentment and a class system that will inevitably
increase crime and violence. Consumption dries up when the masses no longer
have disposable incomes and the economy can grind to a halt.
It ultimately violates the non-aggression principle, as
much of this wealth is attained via crooked politics and pay-for-play schemes
that are backed up with government force. Those that try to compete with the
big banks or largest corporations have little chance of success, as the
government sets the barriers to entry incredibly high to maintain the status
quo and keep their campaign contributors happy.
A thriving middle class is good for society, yet the
middle class in the United States has been decimated over the past being 30
years. Meanwhile, the percentage of people living below the poverty line has
rocketed higher and the homeless population in major cities continues to
grow. It has become increasingly unsafe to be outside at night in many urban
hotspots, as the impoverished become desperate and resort to theft and
violence as a means to get by.
So, what happened in the 1970’s to cause this major shift
in the concentration of wealth?
Many
economists appear stumped when pondering this question or try to place blame
on cultural changes. But I think it is clear for anyone with an objective
outlook that the major event impacting our economic system in the early
1970’s was Nixon’s unilateral cancellation of the direct international
convertibility of the United States dollar to gold.
To placate the critics, Nixon publicly stated his
intention to resume direct convertibility of the dollar after reforms to the
Bretton Woods system had been implemented. Of course, attempts at reform
proved unsuccessful and by 1973 the Bretton Woods system was replaced de
facto by a regime based on freely floating fiat currencies that remains
in place to the present day.
Leading up to Nixon’s decision to de-link the dollar from
gold were multiple requests to redeem dollars for gold. The money supply was
increasing and Germany did not want to also devalue their currency. In May
1971, West Germany left the Bretton Woods system. In the following three
months, this move strengthened its economy.
Simultaneously, the dollar dropped 7.5% against the
Deutsche Mark. Other nations began to demand redemption of their dollars for
gold. Switzerland redeemed $50 million in July and France acquired $191
million in gold.
Nixon responded with the “suspension” of the convertibility
of the dollar into gold, ordering the gold window to be closed such that
foreign governments could no longer exchange their dollars for gold. He was
attempting to prevent a run on the dollar and secure his ability to print
more money to pay for the Vietnam war and domestic deficit spending.
Within a few years of taking this monumental
step, stagflation reared its ugly head and there was increased instability
of floating currencies. The dollar plunged by a third during the 1970’s. In
the end, breaking the solemn promise that a dollar was worth 1/35th of an
ounce of gold doomed his Presidency, and marked the beginning of the worst 40
years in American economic history.
Not only did the dollar lose value, but unemployment
rates trended higher and economic growth slowed. We’ve also had an
increasingly number of stock market crashes and financial panics, as economic
volatility has increased absent a gold-backed dollar. There has been a
magnification of the boom-bust economic cycle, which hurts the majority in
society while enriching the select few.
Gold imposes fiscal restraint on governments. Their
ability to deficit spend, start new wars of aggression around the globe, give
handouts to secure re-election, pay back donors, etc. is all impeded by a monetary
system in which the value and supply of the money is linked to a limited
asset such as gold.
It should then come as no surprise that the 1% in society
hold antagonistic views towards gold. Just look at what has transpired since
Nixon ended convertibility in 1971.
Thus, we will continue to see the elite use their media
lackeys, tenured economists, purchased politicians and their captured media
outlets to demonize gold and the potential return to a gold standard. It is a
huge threat to the their ill-gotten wealth and power.
Gold is not only a sound investment for protecting your
wealth, hedging against inflation, providing a safe-haven asset and
generating significant returns during bull runs, but it is also a moral
investment. Moving your money out of fiat and into precious metals (and
cryptocurrencies) is a form of voting with your wallet. You are voting for a
more fair and balanced economic system, fiscal constraint, free markets and
the decentralization of wealth and power in society.
We advocate for avoiding central bank fiat money whenever
possible, moving from big banks to member-owned credit unions, investing in
assets that can’t be easily confiscated and fraudulently stolen, limiting
your third-party risk, transacting via gold-backed or cryptocurrency-backed
debit cards or directly in gold, silver or bitcoin when possible.
We are already seeing massive outflows from the rigged
stock markets. For 10 straight weeks, a total of $30 billion has left,
marking the longest streak of outflows since 2004! Much of that went to
emerging markets, but a good portion has been going into cryptocurrencies and
is will increasingly flow into gold and silver.
Are you positioned for the financial paradigm shift that
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