You keep hearing about free college, free healthcare, and “affordable” housing. Some of which, you might already be getting. But you are still living on credit card debt. Of course there is an infinite number of reasons why anyone might be living on debt or from paycheck-to-paycheck. There is, however, one reason that is shared with a great number of people: stagnant workers’ wages.
Although our grandparents may have lived relatively comfortably on a job that paid them $3 an hour, today we struggle at $15 an hour. That’s because our wages have not kept up with the cost of living. Our wages have been stagnant in relation to what we can purchase with them. Why is that? Depends on whom you ask.
Here is the usual list of reason for stagnant wages:
* Global competition – U.S. wage earners must compete with lower-wage workers outside the U.S.
* Automation – Employers search for the least costly options that will provide the same results for their companies. If cost of human labor raises above the cost of robots, employers will opt for robots.
* Decline in union membership – During our grandparents’ time union membership was around 30% of workers. Today union membership is around 10.5%.
Here is one reason that pundits do not like to talk about:
What’s the most important date on the chart above? 1971 – the year Nixon closed the “gold window.” It was in this year that the US dollar officially become completely fiat. We could no longer exchange our paper money for gold. Income Inequality and the End of the Gold Standard, SchiffGold, March 2015.
President Richard Nixon drove the final nail on the coffin of the U.S. gold standard in 1971, thereby unleashing the creation of money backed by nothing. Here is the cascading of events:
* What we call money these days is also popularly called fiat money, funny money, money out of thin air, and debauched currency.
* This kind of money is created at will by the U.S. Treasury when it prints dollar bills. It is also created by banks when they loan out funds to the general population. The balance in your account at your bank represents an IOU the bank issues to you, since your money is not sitting in some vault marked with your name, but has been lent out to other consumers holding mortgages and other loans.
* The amount of funny money in circulation is controlled by the U.S. central bank, the Federal Reserve. The Fed does this mainly by mandating what level of capital banks need to have on reserve (high level of reserves means less money available to lend out, thus less money created), and by manipulating interest rates (high interest rates produce fewer loans.
* Since around 2008, the Federal Reserve has kept interest rates at near zero. Consumers and businesses have taken advantage of the cheap money, and borrowed.
* Consumers incurred considerable credit card, mortgage, and student loan debt.
* Businesses took advantage of the cheap money to build monopolies. They bought out competitors with cheap borrowed funds. Businesses also learned that they no longer depended on their workers to produce money – if they wanted money for capital investment or other big thing, they just borrowed cheap money.
* As workers became redundant, their wages did not raise in relation to their productivity.
* In the absence of wages that keep up with rising prices, workers rely on debt.
In this episode of the Keiser Report, Max and Stacy discuss how US workers stopped being compensated for their increased productivity only once the US went off the gold standard and there was no longer any honest way to gauge value. Something happened in 1971 March 2, 2019.
Addendum:
So, where is money in the economy that used to go workers now going? It is going to investors, those whose income does not depend on wages. Low interest rates encourage those with some money not needed for basic living to buy stocks and other investment assets, thus increasing the prices of such assets. As the prices of assets raise so do the net worth of investors.
It is a commonly held belief that the Fed’s low interest rates have been responsible for inflating stock market values. Because people with more wealth tend to own more stock, to the extent that the Fed has been the cause of higher stock prices, it has worsened wealth inequality. Similarly, low interest rates have meant low borrowing costs for large corporations with direct access to capital markets (through corporate bonds). This cheap money helps to boost corporate profits which, again, flow mostly to the wealthy. How the Fed;s Low Interest Rates are Increasing Inequality, Forbes, May 2015.
But then unions fossilized mediocre educators into tenure; 
Results have been totally predictable. 
Just Vote No and friends view main stream media’s interpretation of the “news” with a decidedly jaundiced eye. Not only that, the more popular media spews gossip and calls it news. So, our salvation rests in “alternative” venues, such as Zero Hedge or California Political Review.
Just Vote No 