Why exactly was 1973 the turning point?

Why exactly was 1973 the turning point?

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computers. productivity isn't increasing as fact as it needs to to justify wage increases

Spurring of economic growth by marginal increases in debt/credit made possible by decoupling from the gold standard and increased financialization of the economy due to technology.

Every %increase in GDP is accompanied by an equal or more %increase in debt.

Elimination of the Gold Standard

gold standard

Beginning of automation of labor for blue collar workers and use of computer programs to assist service workers with shit like counting change, so there was no need to be paying someone top dollar to be fast and efficient to keep track of sales at the register by hand and count change in their head. You could get some retarded highschooler to push some buttons and be fine.

People need to accept that these jobs are going to stay low wage because they're low skill. They also need to accept that some manufacturing jobs that went overseas are gone and they are not coming back ever. Get yourself a degree and exploit overseas labor. Don't try to make those jobs come back here and expect to get paid $15/hr for doing what a Chinese or Indian laborer will do for half a peanut and some drinking water.

I keep reading this, but it overlooks that productivity was increasing dramatically together with increased automation since the beginning of the industrial revolution. Computers aren't the answer, but a collective loss of bargaining power by the employed due to increased competition due to globalisation is.

RARE FLAG

>1973
we wuz saturn n sheeeeeit

How can you argue that the 1970s was the beginning of automation? An increased degree of automation has been a thing since the industrial revolution.

Your second point is much better.

Education and healthcare bubbles kicking off
kff.org/report-section/health-care-costs-a-primer-2012-report/

politifact.com/virginia/statements/2015/mar/02/dave-brat/brat-us-school-spending-375-percent-over-30-years-/

The lifeblood of modern civilization became expensive

Greater amounts of energy are needed to maintain the complexity and there's not much trickling down to the plebs, elite members of society add and maintain complexity in society so they reap the benefits

In 1970, US oil production peaked. In 1971, Nixon closed the gold window for good. I know, he said temporarily, but it's still closed to this day. That gave even more control of the USD to private bankers. You can point to a lot of other things that have contributed as well. It basically boils down to greed.

>rare
I think you mean very slightly uncommon.

/thread

Based Tainter fan.

Idiot here. How does the elimination of the gold standard stagnate wages? I legit don't understand.

Automation wherein we have computer programs operating the machines used to manufacture. We started having cars assembled in factory lines where 90% of the labor was done by machines instead of being in factory lines where more of the labor was done either by men operating machines or men adding things to the product by hand.

I guess I should have clarified it as increased or nearly full automation

Why do these "get over it" people think the rest of the world will be happy with low-wage industrial work forever?

the whole argument about our economy being structured in such a way that those jobs are never coming back.. what happens when the countries our manufacturing moved to become the same as us, and they also don't want to do the manufacturing any more?

It doesnt. Wages stagnated because people kept trying to force the blue collar meme when it was clear as day that it made more sense to invest in higher degrees of machine labor. This led to greater division between the upper and lower class and among blue collar workers with no education, essentially locked them into their wagecuck status and made it so they couldn't move up the corporate ladder.

There were a bunch of stories coming out at the time too about people working hard to fight and compete against the machines and keep their job. Anyone who wasnt retarded just learned how to use a computer and got a raise on their salary.

We have a fiat currency which is backed by a lot of things at once:

Debt. New M2 money is created when a bank gives out a loan. At interest. When you deposit $1000 in the bank, it's allowed to loan some portion of that out. Generally 90% or more. It still says on the books that you have $1000 in the bank though. When that $900 or whatever gets deposited again, it can also be loaned out again. At interest.

The whole time, interest is accruing, and you have to pay it just to service your debts. Bankers are the beneficiaries. The more debt, the less currency is available for you to do other things with.

If you pull out any Federal Reserve Note in your wallet, it will say on it "This Note is Legal Tender for All Debts, Public and Private." That means that if I owe you $100 and offer to pay you back half of it with a $50, and you refuse and take me to court later, I no longer owe you the $50 that I offered to pay. You also have to pay taxes in USDs.

What a gold standard is supposed to do is put a limit on how much money creation can take place. We ignored that limit with Vietnam and The Great Society, and defaulted on our gold obligations. It literally almost crashed the US, until the Petrodollar system was set up with Saudi Arabia.

Gold Standard removal and introduction of fiat currency, I'd say.

>Inflation

People produce more.
People earn more.
The value of the money they earn has decreased to the point that it just stagnated.

government inflates currency artificailly. Saving value becomes meaningless as FIAT currency is designed to become worthless over time, unlike what usually happens to valuable commodities such as precious metals. It does, however, incentivize higher levels of goods comsumption I guess

I originally wondered if it had to do with how many hours people worked but the timing is off by like 15 years. The number of hours people work slowly decreases until like mid 1950s wher eit stays around 40.

If people are overworked it will cause wages to rise until that is no longer the case.

So, to be literal, you're saying that wages stagnated because of inflation?

Foreign direct investment
Outsourcing of manufacturing
Immigration Act of 1965

They won't become the same as us because the corporations that own the means of production over there are taking more than they give to those people. Sweatshop workers in poorer countries are making cents for every $120 pair of Nike shoes they stitch together. Natural resources are being mined and drained from them at an alarming rate. There are no labor laws and the companies are keeping damn near all the profit for themselves. That's why they stationed operations in those countries in the first place.
They won't ever catch up. The business owners wont let them. They will remain relatively poor forever compared to the average American. They will never be a problem until they make labor laws. And if they ever do, that's when the companies will roll out complete automation.

Inflation has been much, much higher for sure in the 1950-1980s period than today, that I know for sure.

Entry of females into workforce.

Regardless of whether the money will become more worthless over time, shouldn't higher profits and productivity lead to higher wages in the moment?

You're thinking of inflation rate.

Fiat money isn't the problem because the could just as easily force deflation as they could inflation.

The only real arguement you could say is that high income individuals can invest in capital and low income individuals cannot so the inflation that they did cause negatively effected lower income people more than it did higher income people.

Immigrants

Finance perspective here:

In 1971, Nixon ended the Bretton Woods system. This was system set in place since WWII under which the US dollar became the defacto gold standard. The price of an ounce of gold was set at US $35 per ounce, and all other foreign currencies that participated in the BW system had to keep their exchange rates pegged to the dollar with a margin of +/- 2%.

In practice, this meant that, if you are Canada, and the Canadian dollar appreciates in value beyond the pegged 2% of the US dollar, the central banks of Canada were expected to buy their own currency on the exchange markets in order to depreciate it back to its appropriate value. If your currency began to depreciate against the US dollar, the banks sold it on the exchanges to appreciate its value.

This system worked as long as the US maintained perpetual imbalances of payments (meaning the USA had to constantly inflate the value of the dollar year after year to keep up with the other currencies and maintain economic growth). By the late 1960s, everyone caught on that this system was creating a dollar that was heavily overvalued. Investors began to lose confidence in the dollar's ability to maintain its status as the gold standard of currency. This tension culminated in the 1971 Smithsonian Act which attempted to push the value of gold up to $38 an ounce to give other foreign currencies some breathing room to let their currencies inflate.

This proved to still not be enough because the economy was still exploding with technological growth. Ultimately, the solution we arrived at was to allow all currencies to float against each other and be determined through supply and demand relations. This resulted in the relative stagnation in real wage growth that we see today. Instead of currencies increasing in real value, they just perpetually balance out against each other. It is much harder for any currency to get an advantage now without a "gold standard"

Inflation grows at higher rates since the country prints enough money to get people to not want to save it but low enough to keep the economy from crashing. With the gold standard it was much harder to just print money since each bill needed to be backed at certain amount of gold

Wages on the other hand don't grow at the rate of inflation since people rarely notice their money slowly getting devalued. Even when people get raises it's usually only enough to cover the inflation. But after many years you can start to see $X an hour with a Y% raise each year doesn't matter if inflation is at a rate of Y% each year.

You technically don't need a gold standard to beat this, only laws that guarantee workers wages get adjusted for inflation before any raise or bonus. And you need workers to understand exactly how much they are getting. 35K isn't the same as last year or the year before that. If they are willing to work for piss poor wages they'll get piss poor wages(whether they believe it or not), but if the dollar gets devalued very slowly no one realizes until it's too late.

The breakdown of Bretton-Woods in 1971.

>CLIMATE CHANGE

Dollar was unpegged from gold standard.

Ran out of space but to end: In 1973, both the Bretton Woods and Smithsonian Acts were completely discarded, resulting in the growth patterns you show in your pic.

What good does a 2% raise do if inflation is 2%? In part, yes. I'm saying that debt loads also play into it. If your company has to put 25% of its revenues towards servicing debt, that's money that it can't pay you.

>You technically don't need a gold standard to beat this, only laws that guarantee workers wages get adjusted for inflation before any raise or bonus.

That's what I thought.

> If they are willing to work for piss poor wages they'll get piss poor wages(whether they believe it or not), but if the dollar gets devalued very slowly no one realizes until it's too late.

I'd argue that some people (particularly unskilled workers or people who are unable to relocate for a job) have no choice in the matter. A lot of blue collar workers just take what they can get.

...

This.

The last true hard limit to mass money creation.

Shouldn't this be obvious? I mean, would you prefer a million dollars worth of gold bars or in printed currency? The american dollar is still stable enough that it's safe, but unless you're skilled in finance, in 10 years those million dollars are going to be worth a lot less.
>shouldn't higher profits and productivity lead to higher wages in the moment?
not when everything revolves around debt and interest. Some things are less expensive than they were a few decades ago, but having savings became impossible unless you know where to invest. It turned into a world of finance, where most major companies are public (with shareholders usually owning something like 90% of them), and everyone is focused on short-term gain

That was an interesting and educative read, thanks. The part I don't understand, though, is:

>This resulted in the relative stagnation in real wage growth that we see today. Instead of currencies increasing in real value, they just perpetually balance out against each other.

Why do currencies balancing against each other hinder real wage growth?

The US economy, for example, was almost isolated up until the 1990s. Trade wasn't a huge factor.

Thats when US oil production peaked.

Ever since then the US had to import the oil it needs. Paid for with debt. This is a major drain on the economy.

So yes. the US has been in a slow steady decline for 40 years now.

It will collapse pretty soon under the debt load.

ok thats nice and all but what doe that have anything to do with wages?

This. Anytime between now and about 2022 or 2023, in the absence of some new fantastical energy source that can replace oil.

Then logically, if interest rates were lowered, the economy would grow at a faster rate and wages would be higher. So it's a banking issue, right?

So one solution would be to break up the larger banks and increase competition.

I see your chart and raise a chart

Richard Nixon and the beginning of the oligarchy

you're not an idiot
just an absolute ignotant
learn basic austrian economics, then mainstram economics, compare and make your own conclusions

I'm trying to learn. That's why I asked.

Unless I know what I'm trying to learn, I won't learn anything.

Gold standard to Fiat.

Mass immigration from 3rd world countries. Fact.

It is not the Gold Standard which changed it, as some suggest, but it is the compterization. With automation an computerization, people could amass wealth on much larger scale, thus increasing the gap between rich and poor.

We've been on a ZIRP (Zero Interest Rate Policy) policy for a while, specifically to alleviate the strains of servicing the debt. Some governments have even gone to a NIRP policy. That is full fucking retard.

And yes, the banks need to be broken up and quite a few people probably need to be fed into wood chippers, but you need to back up and think about what you do with currency. You purchase goods and services with it. There is real shit that the currency represents. See this post:

The solution is that we're going to have to accept that a lot of the promises that the government has made aren't going to be kept, our standard of living is going to change, and our economy needs to be drastically simplified and reorganized. It is built around having the world reserve currency, which allows us to print currency and export it to the world for real goods. Oil is the big one that I'm looking at. We import somewhere around 50% of what we consume.

Well there are a lot of other factors at play here. In practice, the currencies' value being determined by supply and demand relationships should produce relative equilibriums that are constant across multiple currencies (i.e. one US dollar trades for 1.50 pounds which trades for 3 australian dollars which trades back for US 1 dollar). However, you have to also consider that the US takes advantage of this situation with military projection and making itself the only currency with which oil is traded in order to maintain the value of the US dollar.

Real wages can only increase when nominal wages rise with the rate of inflation. This isn't so. Factory workers in the 1950s made like $12 an hour. Today, they make around $16 in many places. A 33% rise in real wages doesn't mean shit to a 200%+ rise in inflation. That is the real issue here.

When currencies are fixed to gold, you can't have runaway inflation. When they float like most do today, you can manipulate them by printing more money, refusing to print money, issuing federal bonds, etc. in order to appreciate and depreciate the prices as the central banks see fit. This rarely, in practice, is done to benefit the common worker. It's now done to be economically imperialistic against other countries.

R A R E
P O K E B A L L

>all the retards itt unironically advocating for the gold standard
welp, I guess I am done, no use in coming here anymore, Sup Forums has become bluepill central.

>he thinks inflation and curreny devaluation are the same thing
>he thinks currency devaluation causes inflaltion
>he thinks printing money is correlated to a rise in inflation

holy fucking shit. That's it. Read some fucking books nigger. I'm out of this bluepill shithole

Stagnate wages isn't a problem if it keeps in trend with or ahead of inflation but going off the gold standard to fiat allowed for printing money virtually without limit to monetize national debts. With cheap money available to elites, feds setting low interest rates below inflation rates meaning putting money into savings makes it lose value, and supply/demand coming into play wages haven't kept up with inflation while cost of living has been rising.

That only makes sense if you think red pill= communism
>he thinks currency devaluation causes inflaltion
are you retarded?

Deflation = taking currency out of the general money supply to depreciate its value

Inflation = printing and adding more currency to the general money supply to appreciate its value

How the fuck does printing money NOT cause inflation?

>Today a gallon of milk costs $5, and there are 5 trillion dollars in circulation
>If 5 trillion more are added, a gallon of milk must now cost $10
>If 2.5 trillion are taken away, a gallon of milk must now cost $2.5

Meanwhile your hourly wage stays at $10/hour despite any of this happening.

Could you offer your explanation of the sudden shift in the 1970s, if it isn't the gold standard abandonment?

So you explain the ways in which the value of the dollar was kept high.
If the value of the dollar was successfully kept high after Bretton Woods, why haven't wages kept up with inflation?

Also, you're arguing from an American perspective, but wage stagnation is an international phenomenon.

fiat currency, us leaving gold foot in '71 something?

That is it.

I hate that fucking meme chart. how many times does it need to be debunked? Every time it's posted some faggot starts shitposting about automation and computers and blah blah blah.

raegan tax cuts on the rich

Neoclassical economics, which assumes the production function is Y = zF(K, N) where z is the total factor productivity and N is labor and dF(K,N)/dN = w > 0 is decreasing in N (this is marginal product of labor).
My guess is that since the Consumption function is given by C = wN + pi - T (where wN = w(h-l) where h is the time constraint and l is leisure) that pi (firm profit, which since firms are consumers, increases the budget constraint) is not an exogenous variable and as wage falls, pi increases, which implies net consumption (wN + pi -T) increases with increasing total factor productivity, but since the 70's most of the gains have been in pi rather than in w, which creates wealth inequality as wealthy people invest in firms and take the profit while poor people don't. This would violate the assumption that marginal product of labor = wage though, which would imply firms are not maximizing profit. So idk

this. because of the trickle down economics wages decreased. increasing the taxes will increase the wages

>are you retarded
no, I am actually knowledgable instead of you memeing NEET faggots. It has been proven countless times in research papers all over that there's not correlation between the two. You can even see devaluation that brings to a lowering of inflation.

nice libertarian niggernomics you got there. I am not going to debate with an uneducated retard that is educated by cartoon videos on the internet, especially one that makes retarded "milk costs duh, then costs duh" examples to try and explain macroeconomic movements

>Could you offer your explanation of the sudden shift in the 1970s, if it isn't the gold standard abandonment?
There's many factors, not just one. You could use that graph to claim that women participation to jobs is what started that trend. You can easily debunk OP's interpretation by pointing out that the gold standard was abandoned because nobody was following it. Basically the gold standard was abandone de facto (in practice) much earlier than that divergence point so there's no causation between those things


Now I'm out for good, my pizza has arrived

if that was the case, it wouldn't have started in the 70's. Reagan rolled with a system that started before him. Only lefties like to associate him with muh "neoliberalism"

t. angry keynesian social-democrat

Cuurency is overprinted. Inflation, not official inflation which is always lower, cuts your real wages. Banks and governments profit on being on top of the system and have access to the newly created money before its effects on inflation.

Check www.mises.org

>There's many factors, not just one.

Such as?
Come on, you can type while eating.

Normalization of recreational drug culture.

Look at OP chart and notice that y-axis units are not $.

also,
>It has been proven countless times in research papers all over that there's not correlation between the two
are you serious? Devaluation of currency is one of the several methods of purposely producing inflation. You do it so your imports become more expensive.

If inflation was all bad, it wouldn't exist as it's easily preventable in most cases, but not necessarily desireable. Countries do it to control wages and incentivize exports. I'm not a libertarian advocating for the return of the gold standard by the way, I recognize how useful fiat currency can be

Capitalist realized they can keep all for themselves. Seize the means of production

Feminism doubling the workforce. Wonder why you have two people working to own a house now?

>all these blue-pilled faggots itt ignoring the real cause
Feminism caused labor availability to boom, and therefore wages to stagnate

/thread

>Capitalist realized they can keep all for themselves
capitalist keep very little of the production to themselves. The biggest consumers of food and manufactured goods in the entire world are poor and middle-class people from first world countries

It does have a lot to do with women entering the workforce. Labor supply increasing decreases wages and corporations no longer have to raise wages to keep workers when they can just fire dissidents and hire new people. Back then, one person on a union job could feed and house a family of four, whereas now two adults will struggle for economic stability, rather than attempt to attain prosperity.

Consumption of basic commodities yes, but look at the wealth distribution and its development in the last decades.

Being this naive. I can't even pay my workers what I did ten years ago.

Money no longer has any real trade value other than the value people give it. Leading to unbridled inflation.

Came here to post this

>wealth distribution
what the fuck is wealth? You can say 0.1% of the people in a country have 30% of the wealth but do they really? Do they personally consume 30% of the water, 30% of the food, do each have 10,000 iphones laying around their giant 50-football stadium sized palaces? Rich people mostly use their money to invest in their own businesses, pay their employees, etc. The money they personally gain is usually kept in shit like government bonds and the stock market, so it's actually part of what the government spends and how most other companies keep afloat.

The irony behind all this is that the wealth has actually BEEN redistributed in the past 40 years, but not from the rich to the poor, but to the "poor" working class from rich countries to the poor working class or poorer countries. How much do you think the average chinese worker was making in the 60's? Their wages have certainly increased

Trade with China opened about that time didn't it?

Really, you think it started with Nixon? I pray for you, sweet summer child. It has always been there.

Nixon shock and fiat currency

>Rich people mostly use their money to invest in their own businesses, pay their employees, etc.
Or you know, they use it to lobby for favorable treatment and stash the rest in offshore tax havens.

action.oxfamamerica.org/stoptaxdodging/data-table/

A difference between marginal product of labor and marginal product of capital.

>conflating personal income and business income
Way to out yourself as a dumbass.

>Corporations are people! They should have the rights of citizens!
>Corporations aren't people! Personal income isn't business income!

>increasing the taxes will increase the wages
>giving more of your earning to the state means you will earn more money :^)

>>giving more of your earning to the state means you will earn more money :^)
yes. what's the problem. I'm a proponent of the Trudeauist school of economics btw