Historians, economists, and statisticians can hardly be more satisfied than looking back on a past year or era. By comparing yesterday’s data and research with today’s, experts can determine how significant and influential previous events were in history.
Regarding the United States, a quick internet search reveals a handful of slightly interesting facts from 1971. Aside from little tidbits like the opening of Disney World and the Apollo 14 lunar mission, several other events had bigger long-term effects on the country than today Audience may have thought.
Intel introduced the first microprocessor chip, a fundamental advancement that has helped contribute to the huge wave of technology that still rides our society. The 26th Amendment lowered the voting age to 18, empowering millions of young Americans. The publication of the 1971 Pentagon Papers was and still is fuel for libertarians and others who were skeptical and suspicious of the government. Eventually the NASDAQ index debuted, 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 scrolling through the internet’s interpretation of the relevant events of 1971, I didn’t see a website or article addressing the seemingly mundane circumstance which I believe ended up having a greater impact than any before mentioned event. Fifty years ago that month, President Nixon announced the end of the gold standard to the US monetary system. After a few years of still trading the dollar at a fixed exchange rate to gold, the results of the severance of the last pegs in 1973 are worrying.
With the country’s debt no longer backed by gold, there has been rampant spending that has propelled annual deficit numbers to unprecedented heights – and it seems they will never recover. The immediate consequence shows that from 1973 to 1980 the nation went through what was arguably the worst inflation period in US history, with the consumer price index climbing from 42.7 to 78.
Public deficits and inflation rates are not uncommon topics for discussion. However, the specific economic effects resulting from this are rarely discussed. The most revealing data from the end of the gold standard era is the change in income growth for the top 1% versus the bottom 99%. In a period of 35 years before the gold-backed dollar ended, the bottom 99% of Americans slowly increased their slice of the wealth cake, with pre-tax income growth roughly double that of the 1% in 1973, the decades that followed led to a breakout among top earners, and in 1997 their income growth surpassed 99% and has never looked back.
Significant trend reversals like these can sometimes remain silent and hidden for a very long time. Income inequality in the US hasn’t been as popular in a debate until the last decade, and it worsened sharply with the hurricane of 2020. In a time of shutdowns and layoffs, inexplicable phenomena regarding wealth distribution are afoot. Despite $ 3.7 trillion in global labor lost in 2020, billionaires’ wealth rose by $ 3.9 trillion. It’s not the first time the market panic has somehow led to 1% growth. Within a few years of the 2008 recession, their income rose 31.4%, compared to just 0.4% for the 99%.
The need for bitcoin
How exactly does Bitcoin fit into all of this? The root cause of income inequality starts with printing money. Nine trillion dollars were watermarked in 2020, which is an estimated 22% of all USD in circulation. This money is being distributed to banks and corporations with the supposed idea that it will refresh the economy and stimulate growth by seeping through on multiple levels. What happens instead is the wealthy have the luxury of hoarding and investing that money, resulting in artificially bloated stocks that are driven up in part on 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 resulted in increased credit and credit, allowing the rich to amass more interest. Recessions are further accelerating the growing housing and real estate monopoly, as scarce money prevents millions from making the payments they need to own a home.
It is difficult to speculate on what could possibly end the cycle in which money is slowly seeping into the pockets of American companies and the top 1%. Ideas regularly proposed include higher taxes for billionaires, raising the minimum wage, and making higher education more affordable. Most may agree that unless things change soon, statistics like the fact that the lower half of America has negative net worth will only get more frightening. Unfortunately, if the Federal Reserve continued to treat the dollar as it has for the past 50 years, none of these solutions would have any significant long-term implications.
Bitcoin offers a unique scenario in which money stops flowing from the Federal Reserve to banks and corporations and then into the middle and lower classes of America just as inflation finally sets in and its value declines. With a Bitcoin standard, it is entirely possible that reasonable wages would re-develop without government involvement based on previous decades with the gold-backed dollar. The lack of new money thrown into the economy eventually makes up for wealth as the rich can no longer hoard and control the majority of assets and property.
As a form of digital gold, Bitcoin also offers ordinary people easier access to wealth compared to other more expensive and arguably riskier investments in stocks and real estate. This is important when you consider the enormous influx of printed money in recent years; inflation has not come close to the rate it should in theory. That means either it will in the years to come, or there is more evidence that that money is being locked away from the 1% in the form of bloated stocks and investments.
Bitcoin’s 12-year track record shows that it is not a fad that can die anytime, and the narrative continues to grow in the necessary directions. Bitcoin is a long game and it will continue to function as such. Money systems and social structures do not change overnight.
Something as ambitious as Bitcoin will surely have to wear off over generations to ever stand a chance of achieving its primary goal of making money powerless. But when everyone is in control of Bitcoin, unlike the former gold standard of the dollar, nobody controls it.
This is a guest post by Andreas. The opinions expressed are solely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.