The Fed Has Created Stagnant Wages In An Age of Plenty
For the vast majority of people, wages have been stagnant since the 1970's. What happened in 1971? Well, that was the year that the U.S. dropped what was left of the gold standard. The major beneficiaries of that fateful decision have been the politically-connected and crony 1%.
For the vast majority of people, wages have been stagnant since the 1970's. What happened in 1971? Well, that was the year that the U.S. dropped what was left of the gold standard. The major beneficiaries of that fateful decision have been the politically-connected and crony 1%.
For the vast majority of people, wages have been stagnant since the 1970's. What happened in 1971? Well, that was the year that the U.S. dropped what was left of the gold standard. The major beneficiaries of that fateful decision have been the politically-connected and crony 1%.
Hello everybody and thank you for tuning in to the Liberty Report.
With me today is Chris Rossini, our co-host.
Chris, welcome to the program.
Good morning, Dr. Paul.
Great to be with you.
Well, very good.
We're going to be talking today about a subject I've talked about for a few years, or several decades for that matter, because I remember well the night of the Sunday night of August 15th, 1971.
I knew it was significant, but as the years have gone by, I've realized that it's very, very significant and continues to be.
And though we see now that the economy is doing rather well for some people, some aren't doing so well.
And what we want to talk about today, Chris, are the stagnant wages in the midst of plenty for a small number of people.
So I think you have a chart there, Chris, if we could get that pulled up there.
And we'll look at this chart because this is a picture of really what happened.
Because there was a time prior to August 15th, 1971, although we were on a pseudo-gold standard even before that.
We disembarked.
We got off the gold standard totally and completely in August of 1971.
And this is so dramatic that just this chart can tell a major story.
And if one looks at this chart, we look at the top line, the blue line, it shows, you know, what was happening to the bottom 90% of the people.
And in the 30s and 40s, all the way up till 1971, the growth was fantastic.
Guess what the 1% was doing?
They were doing lousy.
So the gold standard was protecting the people.
They protected their purchasing power.
It was fantastic.
Then if you follow that out and study it a little bit longer, all of a sudden it quit growing.
Real growth and real wages, stagnant wages.
And that is why so many people are unhappy right now.
But what happened to that other group that wasn't doing so well?
They are doing quite well and they're not complaining about it.
So what does this mean, Chris?
Does this mean that the friends of the Fed are the ones who are on Wall Street and in the banking business?
Or is this just sort of human nature on what's happening to us?
No, definitely not human nature.
This is consciously done.
And boy, have the few profited from this Federal Reserve system.
If there's one chart that our viewers, I wish that they would burn into their brains, this is the one, because it shows you why sound money is so important for the entire society and why the Federal Reserve and crony capitalism has been so important to the 1% that now run the casino.
And they want to make sure that gold never returns again.
This, you know, the dollar is it.
And you could see why.
They have become unbelievably rich at our expense because they diminish our money and all of our wages.
And that's why everybody's going nowhere except you read about single individuals, $150 billion, this billion.
This is why.
It's the Federal Reserve, sound money.
And the more people understand this, the more we have a chance of going back to sound money.
And it shows the unfairness of the system and the benefits to a certain group at the expense of others.
But there's a political danger to this.
Of course, one political danger is all this mischief going on with a runaway Fed increases the size of government in the welfare system and in the warfare system.
And of course, that doesn't help the average person.
But this has gone on for a long time.
But right now, wages are stagnant.
People are getting upset.
You have the Bernie Sanders of the world yelling and screaming.
Look at what capitalism is doing to us.
And look at what free markets do.
Therefore, we have to have socialism.
So now there's a high demand for more government intrusion.
At the same time, they're blaming free markets, which when you look at this and look at history, you have to realize that the problem is too much socialism.
We've had a totally socialized, manipulated, monopolized monetary system, systematically made worse since 1913 and dramatically made worse in 1971, and that's what this chart shows.
And it got much worse.
So there's the problem.
And if people don't deal with this, and this was the discovery that I made in the 1960s and early 70s about what would happen and watch in monetary policy, because it is so significant economically, it's significantly because this is the way the middle class get taxed, and this is what sows the seeds of unhappiness.
And that's what we're facing today.
If there's this wonderful plenty that's going around, people wouldn't be so happy and angry.
How can people even look and think about socialism?
It's out of ignorance because they don't understand it.
And we are witnessing the consequence of a socialized, monopolized monetary system.
And the dissension is growing and growing.
The anger is getting worse constantly.
And this is why economic understanding is so important.
Because superficially, it would look at this.
And, you know, we say things that some of the liberals would say.
The rich are getting richer and the poor are getting poorer.
It's not fair.
And we should have more equity and all these things.
But you have to look at the facts.
And that's why, Chris, you and I both agree that this is a fantastic chart for people to look at and study and figure, hey, how do we explain things if it isn't explained by looking at the function of the Federal Reserve?
And in order to keep this system alive, they need around-the-clock propaganda, and they've got it.
It needs for Americans to think that everything is okay.
And if you turn on the television or listen to the president, everything is okay.
In fact, President Trump recently tweeted, and I'm going to quote him, I have already made America great again.
Just look at the markets, jobs, military setting records, and we will do even better.
So, first of all, one man cannot make America great again, as he claims.
What made America unique in world history was freedom and a barely existent federal government.
If you could imagine, that's how the federal government used to be in America.
Barely existent.
And are we even close to that?
President Trump has grown government, welfare, warfare, all of it is all just, it's all continued to skyrocket.
But they have to keep this propaganda that everything is okay.
Look at the Dow, look at this.
But the chart that we're showing you is showing you what it's really like.
And we have to go in the opposite direction.
Government has to shrink and get rid of the Fed.
You know, and it's not like this was not predictable, because this is the wonderful aspect of Austrian economics.
They have studied this.
They have made predictions.
Their predictions have been more correct than any other system of economic policy.
And we've lived with Keynesian socialist economic policy and inflationism and central banking, and it's all a total failure.
But Mises said early on that it will destroy the middle class.
And he also said that the system that we have and socialism especially will not function.
He claimed that the system that we have will morph into socialism.
So, if he were alive today, he might say, Hey, look, this is what I'm talking about.
You know, the interventionist system, the planned economy, Keynesianism won't work, so people are going to come along and shift it into socialism.
Our job is to prove Mises wrong, you know, his predictions.
And it can be, and I don't think he would be saddened by this if we could wake up enough people and say, This is where the culprit is.
And the middle class has been getting wiped out.
And you know, there are more jobs, there's no button.
They'll say, How can you guys say this?
There's more jobs than anything, but their income isn't going up.
And this is rather typical.
This is predictable that when there's an inflation of the money supply, some people will benefit.
Not all people will benefit the same.
Some prices will go up and hurt some people at a different rate.
And wages predictably generally never keep up with the cost of living increase.
And that's what they're facing right now.
Even today, we hear about even the government statistics are admitting that prices are going up, the consumer prices.
Of course, they've been going up all along, but they've been in denial.
And they say, well, there is no inflation so that they wouldn't have to justify raising the wages.
But the magnificent thing about the market is what it does to real wages.
Those years that we pointed out in the chart, real wages were going up.
That was all the kind of, you know, in a sense, the dollar was rather stable because it was defined precisely at $35 an ounce.
So real wages were going up and people felt better about it under those circumstances.
And right now they're not feeling very good.
And it looks like the people who benefit have been able to accomplish what they want.
But actually, though, I give them a little bit of a pass because in economics you can increase the money supply, but it's unpredictable exactly where it will go.
And just remember from 08 and 09 and all the QEs, I think the economists were dumbfounded.
They thought that if they do inflate, there'll be more jobs and solve the problems and everybody will be happy.
I think to a degree they believe that, but they do not have control.
And this is the important thing about Austrian economics and human action because you don't know exactly what the people will do.
You don't know whether they'll save it, spend it, waste it, or be taxed or whatever.
And this to me is so important in understanding this message of the middle class being wiped out because it is the source of the anger.
And this is the big issue politically speaking.
It's always been used and yet right now because we have this Goldilocks recovery and everybody's supposed to be happy, they have to figure out, well, why is everybody seem, so many people seem to be unhappy.
Education's Role in Wealth Creation00:04:24
And of course the articles we read are 40 to 50 percent of the people are still suffering.
Their cost of medical care and education going up, they're still paying education bills, which is all a consequence of this.
So I think our message is important.
I hope we develop the skills that this message will be overheard and that we can spread it because I quite frankly think that without the understanding of what we're talking about, we're not going to have a very good ending to this.
It's going to get much, much worse rather than better.
I think it's going to get worse anyway, even in the shifting from what we see today to one where we have sound money.
There will be an adjustment, but if you know what it's all about and you have confidence in it, it's sort of like the patient that one has and described to him, yes, you have a serious disease, you require this surgery, you have cancer, but we can cure you if you do the right thing and we do it and you can be healed.
And that's the way this is.
We have to convince the people that more government will not work.
And that's been tried.
That's what the 20th century is all about.
And it's a lingering belief that is absolutely wrong.
Even in this century, we see the socialists and the communists coming alive and saying, yes, what you need is more government.
I don't think that's going to be the solution, Chris.
No, Dr. Paul, and I'll finish by making a point that as we saw, most of the income goes to the 1% today because of the RIG system.
But it's important to keep our eye on the ball and not blame the 1% per se.
There's always going to be a 1%.
It's a part of humanity.
There's always going to be people that are superior skilled as entrepreneurs, inventors.
Those people need to breathe free air and create things and become rich off of it.
It's wonderful, as long as they're not using force or government.
But we don't have free markets and stuff where people can use their talents.
Instead, it's politicized.
It's cronyism.
And the Fed is the heart of cronyism.
And that chart shows us that the average person benefits from gold, from sound money.
And it doesn't matter.
There was a 1% back then, too.
But it's not like it is today.
And we're just a few ideas away from going back to a sound monetary system.
Just need to understand it.
That's very good.
And I think that's a very important point that you make about the 1%.
Because, yes, we complain about people becoming super wealthy because of the transfer system that occurs with the Federal Reserve and the fiat system.
And the enemies of liberty will use this as another excuse for socialism if they say, well, what we want to do is stop people from being wealthy.
So there is a subjective factor involved in this.
People who want power and also people who are greedy and also people who resent success because they produce things.
But this can be sorted out.
It's easily sorted out.
Where is the money coming from?
The very wealthy.
Are they getting an assistance from the government or aren't they?
And for the most part, they're getting assistance indirectly or directly with the Federal Reserve.
But we should not come down hard on people who are successful.
Matter of fact, there's a burden on their part because they have to, if they're successful, they're successful because they're providing a good or a service that the people want.
So the people decide whether they're going to be successful.
And their job is to deliver that service.
And that's why you have to have free market pricing of everything and make sure that if a person does well, if a company does well, they produce more and they serve the people in many ways.
But the people get the vote the way they spend the money.
That's what free markets would be all about.
But we have to have a clear understanding about what freedom is and liberty.
It's an individual issue and it's a right to own property and the right to have voluntary contracts socially and economically.
If you obey those few rules, believe me, it wouldn't take us very long to sort all this out and make sure that we have the maximum amount of people who are responding to both peace and prosperity and be very pleased with it.
I want to thank everybody for tuning in today to the Liberty Report.