Bitcoin, memorial to the 50-year gold standard

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Nothing can be more satisfying for historians, economists and statisticians than to delve into a past year or era. When the data and research of yesteryear is compared to that of the world today, experts can begin to determine how significant and influential earlier events in history have become.

As for the United States, a quick internet search reveals a handful of slightly interesting facts from the year 1971. Aside from small tidbits, such as the opening of Disney World and the Apollo 14 lunar mission, d he other events ended up having more long-term effects on the country than the contemporary public might have thought.

Intel introduced the world’s first microprocessor chip, a fundamental advancement that helped contribute to the massive technological wave that our society still rides. The 26th Amendment lowered the voting age to 18, empowering millions of young Americans. The 1971 publication of the “Pentagon Papers” was, and still is, a source of fuel for libertarians and other government skeptics and mistrust. Finally, the NASDAQ index made its debut, joining the S & P500 and the Dow Jones to create today’s three-headed monster.

Fifty years since the end of the US dollar gold standard

But, after half an hour of browsing the Internet’s interpretation of the relevant events of 1971, I saw no website or article responding to the seemingly mundane circumstance which I felt ultimately had a bigger impact than any of the above events. Fifty years ago this month, President Nixon announced the end of the gold standard to the American monetary system. After a few years where the dollar still operated at a fixed exchange rate against gold, the results of the final severance of ties in 1973 are worrying.

With the country’s debts no longer obligated by gold, soaring spending has occurred that has pushed the annual deficit numbers into unprecedented territory – and it looks like they will never recover. The immediate consequence reveals that from 1973 to 1980, the country experienced arguably the worst period of inflation in US history, with the consumer price index dropping from 42.7 to 78.

Public deficits and inflation rates are not uncommon topics of discussion. Yet the conversation seldom turns to the specific economic impacts that result. The most telling data from the end of the era of the gold standard is the change in income growth for the richest 1% versus the poorest 99%. During a 35-year period leading up to the end of the gold-backed dollars, the poorest 99% of Americans were slowly increasing their share of the wealth pie, culminating in pre-tax income growth roughly twice that of 1% in 1973. The following decades saw an explosion of top incomes, and in 1997 their income growth exceeded 99% and never looked back.

Significant trend reversals like this can sometimes remain silent and hidden from the public eye for a very long time. Income inequality in the United States was not such a popular debate until the last decade or so, and it has intensified dramatically with the whirlwind of 2020. In a time full of closures and layoffs , inexplicable phenomena are underway concerning the distribution of wealth. Despite $ 3.7 trillion in lost labor worldwide in 2020, the wealth of billionaires increased by $ 3.9 trillion. This is not the first time that the market panic has led in one way or another to the growth of 1%. A few years after the recession of 2008, their incomes jumped by 31.4%, against only 0.4% for the 99%.

The need for Bitcoin

How exactly does Bitcoin fit into all of this? The root cause of income inequality begins with the printing of money. Nine trillion dollars were watermarked in 2020, or roughly 22% of all US dollars in circulation. This money is distributed to banks and businesses with the supposed idea that it will refresh the economy and stimulate growth, going through several levels. What ends up happening is that the rich have the luxury of hoarding and investing that money, which leads to artificially inflated stocks that are partly driven by fear of a collapsing dollar.

In the cases of the 2008 financial crisis and the 2020 pandemic, the struggles of the lower and middle classes also led to an increase in loans and lending, allowing the rich to accumulate more interest. Recessions further accelerate the growing monopoly on housing and real estate, with tight money preventing millions of people from making the payments necessary to own a home.

It’s hard to speculate on what could end the cycle of money slowly seeping into the pockets of U.S. companies and the richest 1%. Ideas regularly suggested include higher taxes for billionaires, raising the minimum wage, and increasing the costs of higher education. Most can agree that if something doesn’t change soon, statistics like the bottom half of America having negative net worth will only get scarier. Unfortunately, none of these solutions would have a significant long-term impact if the Federal Reserve continued to treat the dollar as it has over the past 50 years.

Bitcoin offers a unique scenario in which money stops flowing from the Federal Reserve to banks and businesses and then to America’s middle and lower classes as inflation finally kicks in and its value drops. With a Bitcoin standard, it is entirely possible that adequate wages will redevelop without government involvement on the basis of previous decades with the dollar backed by gold. The lack of new money injected into the economy ends up balancing wealth, as the rich can no longer accumulate and control the majority of assets and goods.

Acting as a form of digital gold, bitcoin also gives the common person easier access to store wealth compared to other more expensive, and arguably riskier, investments in stocks and real estate. This is important if one still bears in mind the vast influx of money printed in recent years; inflation has not reached the rate it should theoretically reach. Which means that it will be in the years to come, or that there is more evidence that this money is blocked by the 1% in the form of stocks and inflated investments.

Bitcoin’s 12 years of experience demonstrates that it is not a dying all-time fad, and the narrative continues to grow in the necessary directions. Bitcoin is a long game, and will continue to operate as such. Monetary systems and societal structures do not change overnight.

Something as ambitious as Bitcoin will surely have to cross several generations to have any chance of achieving its primary goal of making money without power. But when everyone controls Bitcoin, it ends up being controlled by no one, unlike the old gold standard of the dollar.

Sources

This is a guest post from Andrew. The opinions expressed are entirely theirs and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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