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WTF Happened in 1971? (2019)

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Re: WTF Happened in 1971? (2019)

#211

Post by spandrew »

bryanlarsen wrote: post #25

The author obviously wants you to believe that it was the abandonment of the gold standard, but there are several other theories that have more credence with mainstream economists. The early 70's was the start of a horrible period of stagflation: stagnation coupled with inflation. Some do blame the loss of the gold standard, but the leading theory is the OPEC oil crisis. Others blame market regulations, the EPA was p…

The removal of the gold standard removed partial value of gold as a world standard for credit. It makes sense that "something else" would take over that hierarchy — in this case oil (as a surrogate for energy as a higher concept).

They're not wholly unrelated and pretty obviously has driven economic policy and world relations (modern colonialism at the extreme) to some degree.

Re: WTF Happened in 1971? (2019)

#212

Post by justinzollars »

jasonhansel wrote: post #159
justinzollars wrote: post #146

Earlier quoted context omitted.

> "... more credence with mainstream economists" Do you follow main stream economists today? Ray Dalio (Bridgewater), Jeffrey Gundlach (Double Line), Raoul Pal (Real Vision), and Warren Buffet (Berkshire) have made very big bets for Gold and Gold stocks because our currency is being debased at a rate we have never seen.

Those are investors, not economists. Also: the Forbes article about Buffett buying one gold-related stock notes that: "Mr. Buffett is not a fan of gold as an investment. " (Source: https://www.forbes.com/sites/robertberger/2020/08/28/warren-... )

He has never liked it. But the fact stands he still bought it.

Re: WTF Happened in 1971? (2019)

#213

Post by mepian »

bryanlarsen wrote: post #25

The author obviously wants you to believe that it was the abandonment of the gold standard, but there are several other theories that have more credence with mainstream economists. The early 70's was the start of a horrible period of stagflation: stagnation coupled with inflation. Some do blame the loss of the gold standard, but the leading theory is the OPEC oil crisis. Others blame market regulations, the EPA was p…

I guess the Mansfield amendment of 1969, which ended the golden age of research funding in the US, could also contribute to the decline.

Re: WTF Happened in 1971? (2019)

#214

Post by jandrese »

Ericson2314 wrote: post #172
bryanlarsen wrote: post #25

The author obviously wants you to believe that it was the abandonment of the gold standard, but there are several other theories that have more credence with mainstream economists. The early 70's was the start of a horrible period of stagflation: stagnation coupled with inflation. Some do blame the loss of the gold standard, but the leading theory is the OPEC oil crisis. Others blame market regulations, the EPA was p…

I don't buy this because we could have easily kept on building nuclear power plants. There was temporarily an energy shock, but the long-term issue is insufficient demand not (energy) supply.

Nuclear Power Plants don't move people and goods around, at least not with 1970s battery technology.

Re: WTF Happened in 1971? (2019)

#215

Post by _greim_ »

Consider the lead/crime correlation, in which the increase in crime and incarceration rates starting in 1960 and peaking in 1991 mirrors a rise and fall of atmospheric lead offset 20 years prior.

The idea is that exposure to lead during childhood makes someone more likely to commit crime in adulthood. Those same factors would arguably make a person less employable, or at least less productive in whatever employment they did have.

But whereas crime rates can just as easily slide one way as the other over time, income distribution cannot.

(Disclaimer: This is purely speculative on my part. It seems plausible, but I'm not claiming it's true.)

Re: WTF Happened in 1971? (2019)

#216

Post by jkepler »

Afforess wrote: post #156
justinzollars wrote: post #146

Earlier quoted context omitted.

> "... more credence with mainstream economists" Do you follow main stream economists today? Ray Dalio (Bridgewater), Jeffrey Gundlach (Double Line), Raoul Pal (Real Vision), and Warren Buffet (Berkshire) have made very big bets for Gold and Gold stocks because our currency is being debased at a rate we have never seen.

> our currency is being debased at a rate we have never seen. Looks at $1 gasoline. Looks at $2 eggs. Looks at $3 gallon of milk. Debased. Sure thing. (Maybe gasoline is an unfair example, but essential good prices are largely unchanged in the last decade. The point stands)

True, but when you compare the price of housing, rent, higher education, or health care, or art, you'll see a different story. The Consumer Price Index (at least in the US) excludes so many things as to not be a real measure of the dollar's buying power. If the dollar isn't debasing, how do we explain so many sectors with rising prices? Is college education today really multiple times more valuable than 10 or 20 years ago, or have dollars lost real value?

Perhaps the basic consumer goods you mentioned continue to benefit from the deflationary effect of automation and technology, thus their prices fall in real terms (assuming that the dollar has lost value during the last decade, given rising prices in the sectors I mentioned).

I think we're in a period of both dollar inflation (due to the Fed's monetary policy and government's continued debt spending) and deflation (due to technology/automation and the Eurodollar system's global demand for dollars), resulting in dollar debasement while many everyday consumer items retain their nominal price or even decline in dollar terms.

Re: WTF Happened in 1971? (2019)

#217

Post by candiodari »

xfs wrote: post #148
pjc50 wrote: post #60

Earlier quoted context omitted.

The thing is, there was a lot going on in the 1968-1971 period. Everything from civil rights to the moon landings. The collapse of Bretton Woods is important, but we have to ask why and what pressures led to that point.

I find Yanis Varoufakis' account of the history leading up to the collapse of Bretton Woods very telling: As the combined costs of the Vietnam War and the Great Society began to mount, the government was forced to generate mountains of US government debt. By the end of the 1960s, many governments began to worry that their own position, which was interlocked with the dollar in the context of the Bretton Woods system,…

You can summarise this argument, and several of the other arguments in this thread as: It was large-scale government spending financed by seignorage/inflation instead of taxes that did this. "Free money" for politicians, hidden from the electorate. Not just in America, but as a global phenomenon.

With GREAT emphasis on the fact that is was not the large-scale spending that did it in, but the hidden aspect of it.

You correctly identify the catch-22 for governments: once one government (arguably France I guess, or at least they forced the world to follow them, I guess they didn't start it) showed you could do this, other politicians in other governments had little choice but to follow suit.

In a way you can say that the breaking of the gold standard was the problem. But that's like saying in a heart attack the heart is the problem. It's not wrong, but it's of course not the root cause: it's (usually) the decades-long excess of cholesterol in your arteries, mostly due to unhealthy eating habits, that's where you should look to the root cause. Hiding increasing government expenditures is the root cause.

Re: WTF Happened in 1971? (2019)

#218

Post by patrickk »

christophilus wrote: post #75
bryanlarsen wrote: post #25

The author obviously wants you to believe that it was the abandonment of the gold standard, but there are several other theories that have more credence with mainstream economists. The early 70's was the start of a horrible period of stagflation: stagnation coupled with inflation. Some do blame the loss of the gold standard, but the leading theory is the OPEC oil crisis. Others blame market regulations, the EPA was p…

Another plausible explanation I’ve heard is that you had a massive influx of new consumers (baby boomers) entering the workforce. You almost can’t avoid inflation in that scenario.

Another one adding to your point is huge number of women entering the workforce all at the same time. You are drastically increasing families' spending power and discretionary income = inflation.

Of course, when you double the supply of something, the price drops, which could partially explain stagnating wages. But in the early post-WWII decades it was a big win. Nowadays the negative consequences of moving away from traditional family roles are more obvious.

Re: WTF Happened in 1971? (2019)

#219

Post by justinzollars »

throwaway2048 wrote: post #154
justinzollars wrote: post #146

Earlier quoted context omitted.

> "... more credence with mainstream economists" Do you follow main stream economists today? Ray Dalio (Bridgewater), Jeffrey Gundlach (Double Line), Raoul Pal (Real Vision), and Warren Buffet (Berkshire) have made very big bets for Gold and Gold stocks because our currency is being debased at a rate we have never seen.

none of those people are economists, and that is in no meaningful way a statement on bretton woods

We have had 3 crisis in 20 years. Safe to say they have gotten some things totally wrong.

Re: WTF Happened in 1971? (2019)

#220

Post by iguy »

tboyd47 wrote: post #165
jrk wrote: post #144

Earlier quoted context omitted.

> The period of growth was a period of massive decline in the price of energy. This is referring to the decades before 1970, not after the oil crisis. > We've since had 50 years of stagnation in energy prices. This is the period of 1970-2020. The price of oil has oscillated (jumping around, as you say) during this period, but the overall price of energy has not had a clear long-term trend. The earlier poster's argume…

Thanks. I prefer the Nixon dollar float theory. The OPEC oil crisis was only 6 months. And as you say, oil prices in general have not had a clear trend. So those don't seem related to what is being presented on WTF Happened in 1971. When the government can print money willy-nilly, it can finance any boondoggle it wants to. This free money would pull qualified people away from more productive endeavors. It makes sense…

> The OPEC oil crisis was only 6 months

No, prices were super-high for more than a decade, before returning to let's say roughly double the pre-crisis price for the 90s, then spiking again.

Or regarding recent decades as normal, 1922-1972 was a window of steady low prices.

https://i.insider.com/58593c27ca7f0c20008b6b76?width=800&for...

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