Originally posted on Tuesday, July 24th, 2012
Recent posts here have addressed the apparent strong correlation between the final departure from the gold standard and the beginning of economic stagnation for the middle class.
Recently, in BullionVault, analyst Nathan Lewis directly and persuasively addressed the same issue:
How Fiat Money Has Depressed Living Standards – 9 July 2012
Breaking the link between the Dollar and Gold Bullion has had a marked effect on American standards of living…
The chart below shows the US government’s own statistics on the median male full-time income in the US:
The interesting thing here is how there is such a definite inflection point, right where we go from a gold standard system to a floating currency system. A lot of other things have happened over that time, but we don’t see any other major inflection points. You might think that the 1990s were really good for people, and the 2000-present era has been not so good, but oddly enough, there’s no particular difference you can see on this graph (although maybe the government is monkeying the statistics more aggressively in 2000-present to make it look that way).
This is one reason why I think that the transition to funny money in 1971 is probably the most important long-term event for middle-class prosperity in the United States.
Many officials, and and members of the elite “nomeklatura” intellectual class, passionately argue that allowing the Federal Reserve to manage the value of the dollar will generate job growth better than the gold standard did. The empirical evidence argues, eloquently, that the gold standard has a dramatically better track record at creating solid middle class affluence.
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