As stated in a comment below:
> The post-war growth in America was largely driven by cheap and abundant domestic oil... The oil crises of 1973 and beyond were the proximate result. But our economy as a whole never really recovered;
While lots of things contributed, this is almost certainly the case. Energy is an input into everything. Our current standard of living exists mainly due to energy and figuring out productive/efficient ways to consume energy.
For example if we retained all of our knowledge, all of our productive know how, but were banned from using fossil fuels and electricity we'd be essentially back to pre-industrial standards of living. When you think about it, it's self-evident, but we can't do anything modern without consuming enormous amounts of energy. Transportation, shipping, computing, agriculture, communication, heating manufacturing all of these are essentially energy consumption endeavors.
More expensive energy means all of these factors because significantly more expensive. The cost of your food goes up if every input is now paying more for energy. If maintaining a standard of living is now more expensive then cost of labor goes up without any improvement in standard of living. This drives inflation. Increasing the price of energy probably is likely a more broad economic driver of inflation than lowering interest rates. Lowering interest rates drives asset price increases heavily, but much less so on commodity and day to day price increases. Eventually those asset price increases work their way back to housing and then drive labor, but it's not very direct. Increasing the cost of energy drives up the price of everything. The only thing that tops it is direct giving of money to people.
The 1970s oil shocks cost us an enormous amount in our standard of living and drove pure inflation. Just like the oil price increases of the past few years (along with supply/labor shortages) drove our recent bout of inflation. Oil dropped in early 2020 and so did inflation. Oil peaked in mid 2022 and so did inflation. Energy prices drive your economy - anything that notably increases the cost of energy will have ripple effects on the rest your economy.
I haven't read anything that I've felt covered it fully. If you want something easy to consume on our economy and technological progress essentially being getting better at converting energy to productive work you can check out this somewhat decent link from Jancovici:
It meanders a bit for the first 5-7 mins, but does a decent job of making the argument. Min 40 also has another pretty good slide.
It does go into covering recommendations which I'm not necessarily recommending, but it does accurately summarize our economy as one of energy transformation.
The best analogy in it is this. Right now if we need to do construction and dig a 10ft x 10ft x 10ft hole we can pull out a backhoe and be done in a min. If we with all of our current knowledge had to do it without consuming energy we'd be digging by hand with a shovel, and no faster than someone pre-industrial would. When you start looking at every industry you come to the same conclusion. All of our technological know how boils down to just better ways to be more productive in converting energy. But fundamentally consuming energy to be productive is the modern economy.
One (of many things) to keep in mind when reading Vaclav’s work is that he is sloppy about distinguishing between types of energy; 1 kWh of energy in coal is “worth” much less 1kWh of electricity. They have the same units in the same way that an American dollar and a Canadian dollar are both measured in “dollars”.
As someone with an econ degree, people advocating for a return to the gold standard are so weird to me. I totally understand people having objections to how central banks manage the money supply and the impacts that has on the economy, but that doesn't mean we should give up control of it completely.
It reminds me of the 2008 housing crisis when people saw a regulation failure and their proposed response was to remove even more regulation. It would be like your home being broken into and deciding the solution is to stop locking your doors instead of trying to find a better lock. It is both defeatist and it does nothing to actually improve the situation.
Advocate for better policy. Don't advocate for no policy. The gold standard is effectively no policy because it gives control of the money supply over to control of the gold supply and gold can be both lost and found which won't happen in ways that actually support the economy.
To be honest, people are saying that we should have never abandoned the gold standard, which is a bit more nuanced.
>The gold standard is effectively no policy because it gives control of the money supply over to control of the gold supply.
Hayek (he too had an econ degree I believe) could argue that advocating for the gold standard isn't necessarily advocating for "no policy." It is advocating for a different kind of policy, one that places more trust in market mechanisms rather than central planning.
>Advocate for better policy.
No matter how good of a policy you have for predicting Roulette numbers, your policy will be just as good as choosing at random, and most likely worse. Hayek would argue that there was a "knowledge problem" and no amount of econ degrees can solve it.
>Hayek (he too had an econ degree I believe) could argue that advocating for the gold standard isn't necessarily advocating for "no policy." It is advocating for a different kind of policy, one that places more trust in market mechanisms rather than central planning.
Yes, this was why I said "effectively no policy" and compared it to removing regulation in the wake of 2008. It isn't literally "no policy" in the same way that anarchy is still technically a governing philosophy. But it is still effectively the same as no policy by taking a laissez-faire approach.
>No matter how good of a policy you have for predicting Roulette numbers, your policy will be just as good as choosing at random, and most likely worse. Hayek would argue that there was a "knowledge problem" and no amount of econ degrees can solve it.
This is what I described as defeatist. The economy isn't roulette. In roulette, it is impossible to observe, react, and predict. I don't believe that is true of the economy. It seems borderline silly to suggest we can't observe an economic trend and react to it.
Trends don't happen in roulette. Each round is independent (assuming the equipment is properly calibrated and there isn't any cheating).
That isn't true with the economy. For example, unemployment numbers in one month are strongly correlated with the numbers in both the previous and next month. This is obvious just looking at a graph of the unemployment rate[1]. I can say with a high level of confidence that the rate for September will be in the 3.5%-4% range because it has been that way since 2022. Can you honestly look at that data and tell me it is as random as roulette?
I'm doing a terrible job at trying to communicate the Austrian School of thought, apologies. But if you are really interested in the matter I would suggest reading Hayek, or any other Austrian.
These couple of articles are a good starting point:
I checked: his doctorates were in law and political science, with his undergraduate background consisting of a combination of philosophy, psychology, and economics.
The gold standard does make prices depend on gold supply, but that is roughly 2% inflation (3kt mine supply over gold stock of ~150kt).
That is roughly in line with BTC inflation at the moment, and also, as it happens, central bank inflation targets (expectations of anything more would lead people to buy gold, or BTC, or just warehouse cash).
However, the real discipline of a gold standard is to restrict debt (credit). The market for lenders and borrowers (investors) sets the (Wicksellian) interest rate, as any market should.
Governments cannot just print money to run indefinite deficits, to curry favor with the electorate. The democratic desire for low taxes and infinite subsidies cannot be consumated. There has to be fiscal discipline. That is the value of the gold standard.
You seem to be mixing inflation of the money supply with inflation of the value of money. There is strong causality there, but it isn't the only cause. Considering the money supply is the primary cause we have control over, going back to the gold standard creates greater risk of other causes like supply or demand shocks harming the economy as we would no longer be able to nudge inflation in the desired direction to counteract those other causes.
And if the primary remaining benefit of the gold standard is to rein in government spending, I would simply argue there are other ways to do that. It seems like throwing the baby out with the bath water to give up control of monetary policy in order to better control fiscal policy.
> As someone with an econ degree, people advocating for a return to the gold standard are so weird to me. I totally understand people having objections to how central banks manage the money supply and the impacts that has on the economy, but that doesn't mean we should give up control of it completely.
I think you're probably thinking about it wrong. It's not a conventional policy proposal. I think the main factor is just naked mistrust of people like you (people with an econ degree, etc), leading people to seek out simple solutions you have no control over.
Another factor is people just getting high on pure ideology, and losing interest in solving actual problems in the pursuit of that ideology.
I probably wouldn't recommend switching to the gold standard but I don't think the idea is "weird" or "no policy".
- People ran productive economies for hundreds (thousands?) of years on the Gold standard and it worked.
- It's credibly neutral and no one gets the exorbitant privilege of printing money.
- The supply expands randomly when new deposits are found but this actually works pretty well. As the economy grows we get better at finding gold so prices stay relatively flat in real terms.
- On a gold standard people will waste real resources trying to extract gold to sit in a vault but people waste real resources trying to get printed money too.
> - People ran productive economies for hundreds (thousands?) of years on the Gold standard and it worked.
The Gold Standard (paper currency backed up rocks) only started in 1870. While gold (and silver) coins were used for some monetary needs, most (local) economies actually ran on credit:
> - The supply expands randomly when new deposits are found but this actually works pretty well. As the economy grows we get better at finding gold so prices stay relatively flat in real terms.
Say what you will about fiat, people haven't started wars of conquest to expand the maximum size of their economy because of it. Defining that as "waste of resources" is a massive underestimate.
> As someone with an econ degree, people advocating for a return to the gold standard are so weird to me
I mean, I understand. People really like simple things they can understand. And people hate inflation. It's clearly a bad idea, but I understand the appeal if you were raised in a blue-collar household and think debt is evil.
I suspect that all of those things happened at once.
The trigger might have been the end of the gold standard on August 15, 1971. I suspect that we had been going too long without an increase in the gold backing our money supply, and after decades of temporary fixes to the Breton Woods system, things fell apart then. Afterwards, although we moved to a superior fiat currency, most people didn't really believe in the new system for at least a decade. (And the popularity of bitcoin seems to prove that some people still believe that fixed monetary supply is a good thing!)
This allowed the other factors, plus the shock of having to rely on foreign oil, plus the rise of reactionary tax policy, to really mess up the economy in ways that we haven't really fixed yet. Yes, we stabilized the dollar by the early 80s, and yes we have started to ween ourselves off of foreign oil, but the low income taxes on the highest earners remain in place, along with lots of loopholes that make it easy for billionaires to pay almost no taxes.
I don't know the long-term consequences of carrying so much public debt (relative to GDP), but it seems that the only possible way to reduce it (without making things worse) is to tax the rich, which is now going to be incredibly difficult since they have so much power at the moment.
Yeah. I would also agree that there are multiple explanations floating out there, and it's not entierly clear what exactly is happening in the economy that have lead it to where it is today.
Could be a combination of all of them, could be that a few root causes. Not entierly clear imo.
I think the primary cause of the stagnation in the 1970s was a failure to continue to increase energy production. Other factors probably contributed, or contributed to us not making the transition to nuclear.
... Rent-seeking administrative bureaucracies, which seriously dilute the effectiveness of education, healthcare, government, town planning, infrasfucture investment ... everything.
The trends for admin in universities and hospitals is literally off-the-charts exponential. Nothing exponential lasts forever.
Baby-Boomers will all die, eventually, but I hope their parasitic hippie socialism dies with them.
Before this dude gets downvoted to oblivion, there has been a lot of thought about how the introduction of women into the workforce has (theoretically) caused wage stagnation.
Basically, there are twice as many eligible workers in the economy now, and so labor groups lost lots of bargaining power.
I don't necessarily buy this explanation - but there have been some somewhat serious efforts to quantify this effect when looking at wage stagnation.
I'd love to work 2.5 days a week and raise my own kids. Might help with that whole fertility crisis thing.
The mistake wasn't bringing women into the workforce, it was doing so on terms that nakedly favored capital and screwed labor, men and women alike. We should probably revisit those at some point.
I believe the hypothesis behind this is that women entering the workforce in large numbers disrupted the labor demand/supply equilibrium while also portending major changes to family structure and aggregate social dynamics.
I don't think its a very interesting hypothesis though. The increase was fairly gradual post-WWII [1]. It also seems like it probably points the causal arrow in the wrong direction. Women probably would not have entered the workforce in such broad numbers had economic conditions supported a single income earner per household.
Hypothesis: The post-war growth in America was largely driven by cheap and abundant domestic oil. 1971 was the wake up call - we hit the peak in domestic oil production (we surpassed it again only after 2015) leading to a realization that energy was not free (shocking!) and that continued growth was dependent on foreign imports. The oil crises of 1973 and beyond were the proximate result. But our economy as a whole never really recovered; those diverging lines are the story of how we dealt with the relative scarcity - by systematically squeezing the middle class and increasing inequality rather than sacrificing growth.
In Daniel Yergin's The Prize (and the PBS series made from it), there's a chilling sequence in which the increasing challenges of transacting oil trade in gold.
In the television series, this is communicated in an interview with Gwin Follis, former chairman of Standard Oil of California, filmed in what appears to be a palace.
"We made an agreement with Ibn Saud that we would give him gold. For every ton of oil we took out of his country we would give him gold. And we did at first. Then we got to be producing more and more and more, and we would try to find more gold shillings to meet the requirements so we could ship another ton. And we had to tell him we couldn't find any more gold. There wasn't that much gold. We had now such an enormous business that we cleaned the world of gold shillings."
This illustrates a number of elements: the enormous scale of the oil business, the challenges of a gold-backed monetary system, and the challenges of an exceptionally one-sided trade.
Going off the gold standard and dollarising oil sales solved several problems:
- The US had an unlimited supply of dollars.
- Saudi Arabia (and other oil exporters) wouldn't see their own currencies appreciating due to an unbalanced inflow of payments.
- Global demand for dollars in trade meant that dollarised petroleum sales wouldn't lead to either appreciation or depreciation of that currency.
- Basing international trade on a managed rather than specie / gold-backed currency meant that monetary policy could be used to adjust money supply to economic conditions.
On TFA, the precipitous decline of US gold reserves beginning in 1950, the year in which the US became a net importer of oil, is illuminating.
Usually it is just a blanket pejorative, but if you mean decoupling of debt from reality, then you are correct.
The 1980s of Reagan & Thatcher saw important strides in handing back the economy to market forces, but at the same time, derisking (undervaluing) credit to fund the investment necessary to backfill for government negligence.
(Re)enabling market forces was good, unrestricted credit was bad.
Nice page, but it doesn't seem to try very hard to create a framework to answer the question it asks. It ends with a Hayak quote which is interesting, even though it's taken out of context. You could argue taking the dollar off the gold standard is the reason metrics go wonky starting in '71. But some of the metrics go wonky slightly later after the NYC credit crisis. The suez canal was more or less blocked from '67 through '75, at a time when oil might have been more important economically than gold. And the US had to start paying it's VietNam debt during a period of high inflation.
I guess what I'm saying is there's probably no one factor that made '71 special, but a collection of factors; a "perfect storm" of economic sadness.
> Nice page, but it doesn't seem to try very hard to create a framework to answer the question it asks. It ends with a Hayak quote which is interesting, even though it's taken out of context.
My assumption has been this page is part of a two-part propaganda trick: the first part is to use all these charts to raise a question, the second part is to provide a oversimple but satisfying propaganda-answer (either a return to the gold standard or cryptocurrency).
The second part may be meant to be an exercise for the reader (e.g. raise the question, and then prime them to search for the answer in a way that will lead them to material advocating the oversimple but satisfying propaganda-answer).
The stereotypical form of propaganda (yelling an answer forcefully at your face) isn't very effective because it's obvious and elicits resistance, so actually-effective propaganda has to have a trick to disarm that response.
'71 was the end of the gold standard in the US. Given the Hayek quote and the crypto promotions that link to this site, the page is trying to heavily imply a goldbug argument.
I've noticed that most of the time, economists will only say the positive thing about the change they want to make. I really appreciate the lectures by Mark Blyth because he explicitly talks about tradeoffs.
If you want to see something fun, watch game shows from the 70's and 80's and note the prices of things like toasters and cars. Adjust for inflation to today, and especially for cars, compare the features. It's pretty amazing.
Anyway if someone is trying to tell you that one thing or one decision changed everything, they're at best telling you a partial truth, and more likely just lying.
> If you want to see something fun, watch game shows from the 70's and 80's and note the prices of things like toasters and cars. Adjust for inflation to today, and especially for cars, compare the features. It's pretty amazing.
I'm going to assume toasters and cars are far cheaper today than in the 70's and 80's considering all the features.
I don't get it. Has the wages not been stagnating, and has house prices not been creeping up, has US national debt not been going exponential, has energy consumption not been relatively more flat?
For example, the comment mentions that the the "Median Sale prices for new houses sold" is in dollars. Yes, he is correct. But looking up an inflation adjusted median price gives the same result, that house are more expensive than before. So yes, he is right that the graph can be technically misleading, but the point of "WTF Happened in 1971" still stands.
I think there are many midcurve takes, where one would argue how 1971 is wrong, but isn't it the case, in reality - that housing, college, wage, etc. have all been doing worse for a few decades now.
Up until 2017, the price of a house had been creeping up, but so had the size of the median house. One you adjust for inflation and square foot, it was pretty steady.[0]
This has absolutely no relevance to housing prices. I can't go to a store, see that 2k square feet is too much, and ask for 500 square feet. Housing is all or nothing. You either rent or buy an entire unit, or none of it.
There is no option to rent 500 square feet because it's illegal in most cities to have units smaller than 600-750 square feet.
Like most of the housing crisises: racists mostly. Because for a glorious-to-them moment in time they could keep minorities and other undesirables priced out.
This is a good point people often miss. It's not that houses are more expensive today in (hrs worked / square foot) people just work more for a larger house.
I think the takeaway isn't that material living standard in the U.S.A. have declined but that they've only increased a little.
Yes and no. A larger share of wages have been diverted to non-wage income, like health insurance especially in the US. There's also increased inequality and issues with trying to measure wages over several decades as the typical household changes -- see "where has all the income gone" [1]
> has house prices not been creeping up
Sure, but this is a separate topic. The dates line up by coincidence. There's a long history of urbanism (zoning, suburbanization, etc.) and migration (immingration and rural -> urban migration) as well as atomizing households (fewer nuclear families meaning need more housing units) that led to this.
The point is 1971 is nonsense even if a lot of the trends over 3-5 decades make sense, but for disparate explanations. And any topic has 2-5 separate subtopics that matter (eg. income is tied to healthcare costs, inequality of capital gains vs labor income gains, etc.)
Can you be more specific? That's a long, nuanced reply that suggests several legit explanations that account for some of the trends, none of which look like dismissing the whole thing as bad statistics, like you're claiming.[1]
If anything, it agrees that "something happened" around 1971, and suggests multiple such things.
[1] Edit: to me, "freshman bad statistics" means something like "the supposed trend is an artifact of how it was measured or transformed", but the link doesn't say anything like that -- this label is misleading at best.
The main thing is that this is entirely because they choose CPI instead of PCE to measure inflation. Also it compares a median (wages) to a mean (productivity).
Yes, that's used to dismiss the significance of some of the asserted trends. But it also agrees that inflation really did go up:
>>The change in the trade deficit (graphs 15 & 16) may be linked to the end of Bretton Woods indirectly. The end of the system created floating exchange rates. That allowed every nation to determine it's own monetary policy fully. When that happened many Central Banks behaved badly causing high inflation. The US stopped it's high inflation in the 1980s.
And other real phenomena account for other trends c. 1971:
>>Graph 3 is tricky. It shows how Real GDP per capita has moved away from real GDP per employee. The main reason for that is the introduction of women to the workplace.
And it also agrees that some of the trends did happen, meriting investigation, but 1971 wasn't the inflection point:
>>Take a look at graphs on inequality. Here I'm looking mostly at graphs 1, 6, 8, 9, 10. Notice that the inflection point isn't actually 1971. It's usually some time in the early 80s. Greater inequality between high income earners and everyone else started around then. It's a matter of debate why. A lot of economists believe it's because the modern developed economies rewards high skills more than they did in the past. Notice that the very first graph is misleading because it doesn't use total compensation.
I have a hard time characterizing any of that as a "freshman statistics error".
Yup, that website has been around for a while and many critiques have been done calling out the selective use of statistics and making conclusions not supported by them (by ignoring the limitations or confounding factors).
Nice collection of graphs. But looking closely, you can see that all those graphs conflate multiple trends and not everything happened exactly in 1971 but sometime in the 70's, or even 80's.
1. Ditching gold standard - this obviously happened in 1971 and had a big impact. But there were other equally important changes.
2. Women entering workforce - this started in late 60's and continued throughout 70's and 80's. You can see "Dual-income working couples" graph, which plateaued in the late 80's
3. Reagan revolution - Reagan changed the discourse both culturally and from a policy perspective. He enacted tax cuts, deregulation, deficit funded growth etc . See the "income growth, from 1917-2012" chart. Income for top 1% earners starts ticking up from mid 80's. Or the "income share of top 1% relative to bottom 90%" starts picking up around 1980. Same with the uptick in "Income inequality in the United states" - starts in 1980.
4. Inflation - oil shock of 1973, with rest of the decade spent fighting it. Interest rates were jacked up to 18% or beyond at some point. Only in the early 80's did things stabilize (Reagan's "morning in America" campaigning). This is also reflected in many graphs with notable changes around mid-80's.
The first graph shows productivity and real _disbursed_ income. Health insurance is a very large proportion of compensation now.
There has been a large decoupling of compensation from productivity. What happened was unions were neutered (Taft-Hartley), and businesses took advantage by stomping them out whenever they could. Businesses also merged and acquired their way to become the enormous behemoths that they are today. There is a large amount of inequality in productivity between the Fortune 500 and other US firms. The Fortune 500 is responsible for 60-70% of US GDP despite employing only 16-20% of American workers. All the bargaining power in the world isn't going to help the 80% of us working for non-F500 firms.
What we need is a combination of greater union power (wildcat strikes, closed shops, sectoral bargaining, heavy restrictions on employer interference in unionization efforts), and a greater antitrust effort to break up the monopoly firms.
I guess a better question would be if we consider employment the only valid source of income. There are plenty of examples of tax-and-spend welfare states that simply redistribute income from rich earners/gainers to fund public services.
Very frustratingly vague page. I think it's supposed to be implying that this happened: https://en.wikipedia.org/wiki/Nixon_shock, and that bitcoin would somehow fix all these issues.
Anytime someone just lists a bunch of graphs without telling you which graphs they left out and what their analysis is, you can probably ignore them. Even in many of these cherry-picked graphs, 1971 appears to be in the middle of some ongoing trend and is not an inflection point.
Seems more than just a crypto ad; it's an ad for a philosophical libertarian utopia where we ignore actual market behaviour that doesn't support a post-consensus monetary view of the world.
Not only is someone trying to get rich off of hashes, they're trying to convince you any theory which suggests burning fossil fuels to calculate hashes might not lead to increased productivity is heretical.
Are there any reasonable conclusions and/or insights that we can draw from these graphs and their correlation? (Excluding anything cryptocurrency-related)
It takes a lot of chutzpah to claim that all economic badness arose from the Nixon Shock (US going off the gold standard in 1971) when several of your graphs show clear inflection points happening at very different times (e.g., 1981).
Going off the gold standard isn't EXCLUSIVELY crypto-currency related, but yeah, that community seems to harp on it a lot. My guess at a reasonable conclusion is "dang, there was a lot going on in the 70s, economically speaking."
Amateur opinion, but President Nixon was president in 1971, and I wonder if a lot of it is increased greed primarily due to two things. This increased greed also manifests as more short-term thinking. To paraphrase Fast and Furious, "I live my life one quarter at a time".
First, decreased consumer and investor confidence in the future after the combination of Watergate, removal from the gold standard, and the Nixon Shock policies [1].
Second, the Wharton MBA program's rise, and the Wharton view, as explained to me, that employees should be treated as renewable resources, not to some extent as family.
This page is supposed to be a conversation starter, I think. You present the page to someone, then get them interested in the mystery so you can tell them what happened.
I don't think there's any doubt the conclusion you're supposed to reach is that it supports an Austrian economics view about the negative effects of our current monetary regime, and de-linking the USD from gold.
I always thought it was Nixon taking the wind out of the metaphorical sails. He was so bad, even Republicans of the day were grossed out. Cancelling the space program, domestic surveillance abuse, the extremely cynical Southern Strategy, the Viet Nam war, tons of things done to destroy idealism and trust in institutions.
> Nixon was so bad that he won 1972 re-election with 520 out of 528 electoral votes.
What happened after that, including both politically for Nixon and in terms of further information about the use of the national security apparatus for domestic political purposes during the Administration (including during the 1972 re-election campaign) that occurred after what happened personally politically for Nixon?
(While the question asks what happened in 1971, most of the graphs that show anything show something very minor separation for the first few years after 1971. I think “Nixon icky” is an…incomplete…hypothesis, to the extent that any of the graphs show something real, but I don’t think “but he was re-elected by a wide margin in 1972” is a sufficient dismissal, either.)
He was a crook and resigned because he's got caught. But not because of the laundry list of sins that GP has presented. Seeing "the Viet Nam war" on that list is also funny. Nixon ordered troops withdrawal 30 days after his inauguration. And kept withdrawing more and more through his presidency.
Jeeze, blaming Nixon for the Vietnam War is laughable. By the time he came into office the US was already on the way out (Lyndon Johnson was already pulling troops out).
I'm not blaming him for the war
that had been ongoing since the 40s, but rather what he did during his administration. He and Kissinger bombed Cambodia. There's some evidence to suggest that Nixon and Kissinger manipulated the 1968 peace talks to give Nixon an election advantage.
This page is a good education in how to misinform with data. Slap an arrow across as many different graphs, establish something resembling a pattern, and like a good magic trick, have the viewer do the research and (seemingly) come up with the "correct" explanation.
In this case you are supposed to find out that that 1971 was the end of the Bretton Woods system (and probably, more importantly to the Bitcoin promoters who run this website, the final end of the Gold Standard in the US).
However, now that you know the purpose of the magic trick, it's easier to peak in and see the misdirection. There are basically two things going on:
- The end of the Gold peg changed a lot about how things were valued, nearly overnight. So a lot of graphs relating to real values based in currencies had enormous changes, even if the fundamentals underlying them did not substantially change. This even impacts inequality metrics - since the money supply was no longer artificially limited, you see high-earners holding on and collecting more of it - rather than, say, fine art or T-Bills. And graphs that mark depreciation against gold are obviously going to be slanted.
- The gold peg failed in the first place because of rapidly changing demographic and consumer trends. You can see this where the arrow was lazily plopped in the middle of sweeping curves or trends. Like the rising cost of chicken starting in 1934. Or the numbers of divorces. Or the rise of dual income families. For most the graphs on this page, 1971 is not a significant date at all.
There is a graph showing the house prices in Amsterdam in the Netherlands, and an arrow pointing at 1971 - but unlike the US, the Netherlands left the gold standard already in 1936, and according to that graph the house prices went lower for several decades after 1936.
Unix epoch starts Jan 1st 1970 - could this have anything to do with it? As in, we started getting better at keeping records and more detailed data because of computers?
Peak extraction of conventionnal oil in the US. The eurocrisis correspond to peak conventionnal oil in the north sea (2005 for gas, 2008 for oil) and in north Africa (it's peak extraction: if we improve technique, we can probably get double than what we extracted)
>beginning of globalization, the decline of American manufacturing jobs, the decline of union jobs. The 70s were the beginning of the end for heavy industries in Pittsburgh.
It's fun to look back on these things with the context of system dynamics. We can grade the quality of models and predictions to help figure out where we're headed.
Sure. But a better treatment might be to say "here's a lot of metrics, some of which might be related and here's a list of reasons people have proposed for the causes behind these metrics."
This one reads off like BADGER-BADGER-BADGER-MUSHROOM, but it's GRAPH-GRAPH-GRAPH-HAYAK QUOTE.
What's frustrating for someone like me, who doesn't know much about economics, is that it's unclear exactly how we're meant to "look at it". It's just data without theory and context -- it's impossible to draw any meaningful conclusions.
This is a page for goldbugs/sound money advocates.
The presumed culprit is the fed/fractional reserve banking.
It's a pretty good assumption, especially considering that all the other major 70's things that occurred were things that rectified in spite of the trend continuing.
The fiscal-progressive nature of the New Deal earlier in the century was so successful it created the middle class in the post-war era (90% marginal tax rates!) and it was being followed up by a socially-progressive era of the civil rights movement in the 60s and the powers that be had to make a concerted effort to derail both.
The takeover of the political dialog by economism using the Freshwater/Chicago school of economics started in earnest around this time and was so remarkably successful that Democratic presidents were spouting the neo-liberal conservatism[0] hogwash by the time of Clinton.
I am a member of the Cory Doctorow school[1] of political thought.
Peter Schiff claims that the U.S. technically defaulted on is debt in 1971. Holders of Federal Reserve Notes were handed dollars instead of the promised gold.
As others mentioned this is a libertarian/crypto site so it's going to gloss over the loss of labor union influence that really sped up in the 70s (we can argue later about why this happened).
A correlation was graphed already, though it's comparing top 1% income share vs union membership:
1. The moving off the gold standard
2. A large number of women started entering the workforce essentially doubling the supply of labor.
3. The rise of MBAs and downsizing really became big.
4. Outsourcing and off shoring started to be introduced during this time
5. The 70's stagflation where we say inflation and high interest rates.
These all seem to be plausible factors to me.