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Guest Post: Explaining Wage Stagnation

Tyler Durden's picture


Submitted by John Aziz of Azizonomics,



Well, my intuition says one thing — the change in trajectory correlates very precisely with the end of the Bretton Woods system. My intuition says that that event was a seismic shift for wages, for gold, for oil, for trade. The data seems to support that — the end of the Bretton Woods system correlates beautifully to a rise in income inequality, a downward shift in total factor productivity, a huge upward swing in credit creation, the beginning of financialisation, the beginning of a new stage in globalisation, and a myriad of other things.

Some, including Peter Thiel and James Hamilton, have suggested that there is data to suggest that an oil shock may have been the catalyst that put us into a new trajectory.

Oil prices:

And that this spike may be related to a fall in oil prices discoveries:

I certainly think that the drop-off in oil discoveries was a huge psychological factor in the huge oil price spike we saw in 1980. But the reality is that although production did fall, it has recovered:

The point becomes clearer when we take the dollar out of the equation and just look at oil priced in wages:

Oil prices in terms of US wages ended up lower than they had been before the oil shock.

What happened in the late 70s and early 80s was a blip caused by the (very real) drop-off in American reserves, and the (in my view, psychological — considering that global proven oil reserves continue to rise to the present day) drop-off in global production.

But while oil production recovered and prices fell, wages continued to stagnate. This suggests very strongly to me that the long-term issue was not an oil shock, but the fundamental change in the nature of the global trade system and the nature of money that took place in 1971 when Richard Nixon ended Bretton Woods.

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Thu, 07/19/2012 - 21:49 | 2634581 fonzannoon
fonzannoon's picture

Can you have hyperinflation with wage stagnation? Just curious.

Thu, 07/19/2012 - 21:55 | 2634590 radicall
radicall's picture

You can for a short while. It would be like a bubble. "Prices" go up, nobody buys there (because they can't afford it) or buys on credit and defaults (can't pay it back).

Producer can shove it in the Valley from Atlas Shrugged or lower prices or pay their employees more.

Same as what happened to housing

Thu, 07/19/2012 - 22:21 | 2634649 wang (not verified)
wang's picture

This explains it perfectly

Yahoo to Pay CEO Mayer $100 Million Over Five Years




and going back to an earlier topic

this is very disturbing WTF is going on down there with Bloomberg's Sara Eisen


Thu, 07/19/2012 - 22:22 | 2634660 Michael
Michael's picture

When are we going to talk about the real reason for wage stagnation?

Wage arbitrage and outsourcing jobs due to NAFTA, CAFTA, GATT/WTO, illegal alien invasion!

Bilateral trade agreements will solve many problems.

Thu, 07/19/2012 - 23:01 | 2634714 economics9698
economics9698's picture


I really like the first chart.  Good observation.  Three things dominated wage inequality, and maybe a fourth.

1.  Inflation, capital owners and governments are able to increase prices and taxes at a much faster pace than workers can demand wages increases. 

2.  Foreign born citizens was at a 40 year low at 4.7% in 1970 and is 12.3% today, generally driving down blue collar skilled and semi skilled labor,

3.  Hostile government taxation and distribution policies that have reduces wages as a percentage of the GDP from 55% to 44% since the early 1970s.

4.  Draconian social security and Medicare taxes, similar to #3, that have reduced a workers ability to earn a decent wage.  Currently 6% of the GDP is nothing but transfer payments by the feds from workers to old farts.

Good work John.


Thu, 07/19/2012 - 23:25 | 2634772 disabledvet
disabledvet's picture

most importantly and what is referenced above is "the introduction of women into the work force." this was the "game changer" in the Reagan years...which was the only true economic "recovery" this country has had post Vietnam. It was this "miracle" that produced the massive budget surpluses of the Clinton years...all of which was spent "wilding in speculations" of all forms (wars, hand outs, corruption) the bulk of which (it has turned out) does not have a "government guarantee." (the automobile industry is about the only area of the economy that has been truly "bailed out" in the sense that the government has backstopped--ironically enough--PRIVATE EQUITY...with the express purpose of building cars, trucks and commercial vehicles. We should have great cars for the next 50 years at least!) The downside now is that we really don't have anyone "new" to enter our labor force for the foreseeable future. Even illegal immigration is drying up the US labor market is so bad. Not only that but family formation has collapsed in the USA...never a good thing for a society as a whole and as clear a sign if any is needed that our days of being a dynamo of anything are clearly on the wane. This will...indeed obviously has given the massive size of our deficit...be as intractable as it in fact is. One solution is some type of "dramatic increase in prices"...which given the realities in DC (Chuck Schumer telling the Fed to "get to work"? No problem! "You'll have that price reduction shortly sir! Now you just do your job and get people taking home 500 bucks a week to pay for your trillion dollar hole...mmmmkay!)???? is simply...well..."not plausible even under the most optimistic of scenarios." that leaves "a dramatic increase in output" as basically you're only solution. Obviously labor must be worked to death under that scenario....and even then "unless you're North Dakota you're probably not going to make it." My money is on the animals doing just fine while the humans "die out."

Fri, 07/20/2012 - 01:38 | 2634941 Binko
Binko's picture

Nice comment. But a person making minimum wage is only taking home around $250 a week. Not $500.

The most significant story of our time is ongoing widespread wage destruction. We now have a massive surplus of labor at a time when business has a lock on all the reins of power.

My stepson got a job where he travels for 1 to 3 hours, takes inventory in stores and enters it in portable computers. Moderately skilled work but it pays minimum wage. My nephew applied for a job humping packages at UPS. Used to pay decently but not it starts at $9/hr. Business is jumping on the bandwagan and driving wages down relentlessly. It's amazing to get out and see the high skill jobs that now pay a wage far below subsistence level.

Drive wages down across the board and three things happen; low family formation, low levels of consumption and very low tax revenue. If a livable wage is not paid for average, moderately skilled jobs this nation will slowly disintegrate from the inside.

Fri, 07/20/2012 - 02:45 | 2634989 economics9698
economics9698's picture

Living standards are related to productivity not wages.  If we have more capital formation to buy more machines that produce things we want living standards will increase. 

Wages are a number that varies with time in our fiat society.  What we consume is what needs to change over time.

Fri, 07/20/2012 - 03:44 | 2635018 AldousHuxley
AldousHuxley's picture

living standards are NOT related to productivity. It is determined by the social contract between capital versus labor. Right now taxes are less for capital gains than wage income, so think about that.

American labor opted for higher material living standards while Europeans opted for higher non-material living standards like education, safety, healthcare, community unity.


IMO, middle class is defined by the latter not how much cheap junk from china you can accumulate.


Reagonomics is what did middle class in. It wasn't just US either. Thatcher also came into power and pursued same policies:

outsourcing of production to ex-communist countries, growth of financial sector, weakened unions, tax breaks for capital. There are larger factors at play globally behind Reagon and Thatcher. Man behind the curtain said it was time for labor to have lower standard of living. They thought they couuld push dirty manufacturing abroad to Asia, exploit middle east and africa for commodities, and get wealthier via wall st gambling. When things didn't work out, they forced it. Now you have shit hitting the fan.

Fri, 07/20/2012 - 07:28 | 2635187 Aziz
Aziz's picture

Reagan — at least as President — was a big decifit spender who raised taxes multiple times:


Fri, 07/20/2012 - 08:40 | 2635379 GeezerGeek
GeezerGeek's picture

It must be pointed out that Congress, not the President, determines the spending level. Reagan asked for increases in defense spending to reverse the direction imposed by the Carter administration. The US was still engaged in a cold war with the USSR at the time, and rebuilding the navy, etc., seemed like a good idea. Once the Soviet Union fell everyone was proclaiming the advent of a "peace dividend" that would allow balancing the Federal budget. It wasn't until the Gingrich revolution - Republicans took control of Congress for the first time in, well, forever - in 1995 that the budget finally became, more or less, balanced. That was despite Clinton's repeated assertions that the budget could not be balanced until some time into the next century and after he'd left office.

Reagan agreed to tax increases to extend the life of Social Security, but his tax cuts were phased in over several years at the insistence of Tip O'Neill and the Democrats in the House. This delayed the economic revival because economic activity was pushed into the future to take advantage of lower tax rates. Any assessment of Reagan's economic policies should look at the deficits from 1982 through 1989. The deficit was in the process of decreasing significantly when "Read My Lips, No New Taxes" Bush 1 took power.

Blame and credit for economic conditions should not be solely assigned to a president without taking into account the Congressional side of the spending equation. Anyone who was of working age during both the Reagan years and the Obama years would have to admit that the economy was much better under the former president.

As an aside, and off topic for this specific comment from Aziz: not only did the divergence shown in the first graph generally coincide with Nixon's departing from Bretton Woods, but it also coincided with the advent of the baby boomers into the work force in significant numbers. Leading edge boomers, born in 1946, were 25 in 1971 and just beginning to swell the available work force. Within a few years, moreover, many (the lucky ones) were separating from the military into which they'd been drafted. While I've not seen any statistics, I suspect that the available labor pool expanded noticeably around this time; increased supply of labor with less of an increase in demand.

Fri, 07/20/2012 - 10:29 | 2635989 ceilidh_trail
ceilidh_trail's picture

Excellent point.

Fri, 07/20/2012 - 09:57 | 2635803 DanDaley
DanDaley's picture

living standards are NOT related to productivity. It is determined by the social contract between capital versus labor.


This is just an insane comment.  If you don't produce anything (non-productivity) then you have the living standard of a chimp on the savannah.  Production is paramount and the prime mover in all living standards whether it is the making of pottery of a hunter gatherer or the production of a new Lexis for you.  

Furthermore, there is no social contract between capital vs labor.  That's all marxist crap verbiage to make people think that something -society- exists, that doesn't, so as to better control you!

Fri, 07/20/2012 - 09:39 | 2635719 Umh
Umh's picture

The government backstopped the auto workers; the bond & stockholders of GM were wiped out. That's not what I would call backstopping private equity.

Fri, 07/20/2012 - 10:32 | 2636008 ceilidh_trail
ceilidh_trail's picture

Yup. The .gov backed the unions and banks at the expense of all of us.

Fri, 07/20/2012 - 00:09 | 2634777 TruthInSunshine
TruthInSunshine's picture

*Ahem* [wtf]

Thu, 07/05/2012 - 23:53 | 2590888 TruthInSunshine   

Repeat this process of Harvest by first inflating the money supply, getting people deeply indebted (many of whom weren't indebted before), and soon enough, with enough cycles of harvest, what belonged to many will be concentrated in the hands of a few, all via the sham that is fractional reserve banking.

It's the biggest scam in the history of mankind.

Once a person grasps this basic concept, they'll understand why events have taken place as they have (Bretton Woods*; Plaza Accord; Federal Reserve Act of 1913; closing of the gold standard in 1971*, etc.), and they'll finally grasp how a select few have rigged the game to be able to harvest assets continually, and concentrate wealth and power, by doing nothing other than maintaining Deep Capture of a nation's legislative and judiciary branches (and executive, in the case of the U.S.) of government.

*On August 15, 1971, the United States unilaterally terminated convertibility of the dollar to gold. As a result, "[t]he Bretton Woods system officially ended and the dollar became fully fiat currency, backed by nothing but the promise of the federal government." This action, referred to as the Nixon shock, created the situation in which the United States dollar became the sole backing of currencies and a reserve currency for the member states. At the same time, many fixed currencies also became free floating.



Thu, 07/05/2012 - 23:53 | 2590888 TruthInSunshine
Fri, 07/20/2012 - 00:14 | 2634862 economics9698
economics9698's picture

I second that.

Thu, 07/19/2012 - 23:09 | 2634752 economics9698
economics9698's picture

If the Yids were paid in gold or silver their earning power would drop like a rock.  No one likes paying bull shit wages to bull shit people when real money is used.

Then again if the Yids did not have their central bank they would be just like the rest of us goyims. 

Thu, 07/19/2012 - 22:47 | 2634721 El Oregonian
El Oregonian's picture

Or, Drew Brees $100 Million 5 Years.

One tosses footballs aroud- One tosses flunky's around


Thu, 07/19/2012 - 23:04 | 2634745 economics9698
economics9698's picture

$100 million would not even buy a decent Vegas trip for the GAO.  Fuck the hookers would be a few million anyway.

Fri, 07/20/2012 - 00:05 | 2634852 ZackLo
ZackLo's picture

It's a gun someone call michael bloomberg.

Fri, 07/20/2012 - 14:21 | 2637082 Raymond K Hessel
Raymond K Hessel's picture

It's most likely a medical device, like a pump, that drips medicine intravenously over the course of a day.  My brother wore some like that for his anemia, but he wore it at night while sleeping.

Thu, 07/19/2012 - 21:56 | 2634596 Caviar Emptor
Caviar Emptor's picture

It's classic Biflation

Thu, 07/19/2012 - 21:59 | 2634600 Jumbotron
Jumbotron's picture

You most certainly can.  Hyperinflation is a fiscal policy crisis and debasement of the currency.  Think about what we have now....inflation but wage stagnation at the same time.

Now add the collapse and the only way to pay off the margin calls and the derivatives and everything else is to print money.

You haven;t got paid a dime more....but the money you have left is now worthless.

Fri, 07/20/2012 - 01:09 | 2634917 Waffen
Waffen's picture

soliders and police and federal government workers will get their pay increases when they cant eat.. this is who will get the pay raises, even if it is by the billions .

in the end the government will print and it will pay for goods and services to keep going even if just a short while.

If you have a chance to get a federal government job I suggest you get it, as you will be the first people getting the freshly printed money or 1s and 0s.  Those clossest to the printing press win.

Thu, 07/19/2012 - 21:59 | 2634601 JackT
JackT's picture

Hyperinflation - I would think no. But slow frog boiling inflation..yes, in fact we have been living it.

Thu, 07/19/2012 - 22:04 | 2634618 Poor Grogman
Poor Grogman's picture

Usually before people starve they ask for a pay rise.
Google starving millionaire Zimbabwe.

Thu, 07/19/2012 - 22:23 | 2634666 Aziz
Aziz's picture

Everyone is a trillionaire in Zimbabwe.

Thu, 07/19/2012 - 22:51 | 2634726 El Oregonian
El Oregonian's picture

Now when you get to being a Quadzillionaire, NOW, where talk'in scratch, baby...

Fri, 07/20/2012 - 01:50 | 2634952 Muppet of the U...
Muppet of the Universe's picture

You made 1 mistake that everyone always does.  Productivity is due to the digital and technological revolutions of the 20th century.  People in ye olden days worked very hard.  The efficiency of their work was simply improved by tech and resulted in across the board higher productivity.

The chart that holds the most importance is the price of locally produced, oganically grown, food over the same period as the wage stagflation.  Granted, this measure is somewhat above Real inflation b/c the corporate gmo farms cause increased prices in organic food and small farms... but nevertheless, nothing else matters compared to fresh food and clean water. Everything else, like productivity, seems like noise.

Thu, 07/19/2012 - 23:09 | 2634756 FreedomGuy
FreedomGuy's picture

I think true hyperinflation with wage stagnation is not possible. Hyperinflation is the abandonment of currency, the final "No confidence" vote. However, I think we could see sector inflation before any wage increases. There are too many idle and under employed ready to reenter the work force to drive up wages.

I am actually economically fascinated with the times in which we live. I have always been an inflation predictor. I did not anticipate that a government can wreck an economy at the same time it monetizes it's debt through central banks and the Fed. It is two incredible forces, inflation and deflation meeting head on. The result is a bonanza for the government. We get zero or negative real interest rates to keep the borrowing going while wages and most prices stay stable. The energy is realized in the ballooning deficits. It is a sort of conservation of energy thing.

You cannot get your wages up and you are lucky to even be employed (outside of government) so money holds its value...at least for now. With all the international stratospheric borrowing and defaulting going on the price of money should be sky high but it is at record lows. That alone tells you there are financial shenanigans going on, even if you don't understand them all.

The problem for Bernanke and virtually all governments who want inflation is how to get money moving and in the hands of people. They have given it to banks and favored financial institutions but it stays there and perhaps fills the black holes in their reserves and balance sheets. It does not circulate. Unemployed, underemployed and nervously employed cannot take out loans and do the ten to one money creation that banks usually do.

Frankly, I am mystified as to how it will play out but I am leaning towards a collapse scenario because Obama is a complete moron on economics and will wreck the economy before Bernanke can inflate. Inflation has to bake a little in the oven. One piece of legislation or a new tax can wreck an economy overnight. I might have to sit on the PM's for awhile.

Good luck to us all.

Fri, 07/20/2012 - 10:39 | 2636018 MachoMan
MachoMan's picture

Demand pull inflation is impossible with wage stagnation...  however, I don't believe cost push is...  this is effectively what happens when governments pay for their prolifigacy with freshly printed currency.  With wage increases proper, why would there be a need to drop rates to the floor and fund the government's budget (the one it doesn't pass) through printed currency?  The central bank would simply raise rates and the crisis would be averted...  which type of inflation does hyperinflation more closely resemble?

However, with wage stagnation...  the CB has no answer...  but that won't stop it from trying to fit the square peg into the round hole.

I completely disagree with the premise that it's somehow difficult to "get money in the hands of people."  Really?  If you can give it to banks, how is it you can't give it to people?  That patently makes no sense...  they can throw the money wherever they want it (e.g. everyone gets an extra $10k with their tax refund)...  When you figure out why they haven't done this, you can see what they are trying to play out...  (who knows whether it will succeed).

Thu, 07/19/2012 - 23:18 | 2634764 Stormdancer
Stormdancer's picture


Fri, 07/20/2012 - 07:19 | 2635179 Red Heeler
Red Heeler's picture

"Can you have hyperinflation with wage stagnation? Just curious."

Yes. We've been having inflation with wage stagnation, and in some cases wage deflation, for years now.

Fri, 07/20/2012 - 10:27 | 2635971 Carl Spackler
Carl Spackler's picture

Yes, you can have hyperinflation with wage stagnation.

Remember, what "hyperinflation" really is...a loss in the confidence of a currency or a collapse of the currency's purchasing power.

Wage stagnation is deviating from the course of productivity is more than just Bretton Woods (although that plays a part).  It also has to do with the advancement and employment of new technologies, which have CONTINUALLY REPLACED LABOR WITH CAPITAL GOODS.

Mass scale deployment of advances in the personal computer and telephony are the real drivers behind the sustainability of diverging productivity and wages.

Techonology marches forward, while the society is left with a lot of sheeple who cannot keep adapting, honig their skills, and providing additional value (i.e., productivity).

I would also argue that the diversion is as much cultural as anything else.  The more you shift away from personal responsibility to statism, the lower the productivity of people you will have. 

Why...  It's somebody else's fault.  If you don't like it, then sue me.  The man is keeping me down. What time does American Idol come on tonight?  Buy whatever Goldman Sachs says you should buy.

When that culture changes, people will pursue a "I must continually improve myself" mentality, and wages will again track with productivity.

However, it will take a revolution in this country for that paradigm to shift, in my opinion.


Thu, 07/19/2012 - 21:50 | 2634582 SteveGennisonBa...
SteveGennisonBallWasher's picture

Work is for suckers!

Thu, 07/19/2012 - 23:43 | 2634806 johnnynaps
johnnynaps's picture

In this day and age it most certainly is! Here's your job that will destroy your health, pay you just enough for food, shelter, transportation and a lil extra for the latest icrap gadget. All while donating vast sums of money via taxes to keep uncle scam afloat so he can ass rape you in the end!

Thu, 07/19/2012 - 21:51 | 2634585 radicall
radicall's picture

Such a random post! It also correlates with the time my parents had sex, and the time I was born.


It must be my fault :(


Correlation is NOT causation... get a better argument

Thu, 07/19/2012 - 22:07 | 2634625 Aziz
Aziz's picture

I've identified a whole swathe of other variables that change at the exact same time:

The end of the Bretton Woods system correlates beautifully to a rise in income inequalitya downward shift in total factor productivitya huge upward swing in credit creation,the beginning of modern financialisation, a sharp uptick in globalisation, the beginning of the end for US manufacturing and the beginning of the beginning for cheap Chinese imports.

We can go on pretending that ending the pre-71 system (with more limits of credit creation) has nothing to do with all these developments. Or we can accept the data.

Thu, 07/19/2012 - 22:14 | 2634643 Dr. Engali
Dr. Engali's picture

Yep. Everything revolves around Nixon cutting the gold standard and his visit to China. That was the beginning of the end.

Fri, 07/20/2012 - 11:26 | 2636128 earleflorida
earleflorida's picture

nixon was out of the visible limelight for a few years after his resignation, but he still was called [he actually never left,... the guy was a political anomaly] upon for advise from ford, and was a big-time quasi-clandestine emissary for reagan and bush #41, regarding china and russia. in fact it was the russian's that implicitly had said to nixon... anything other than another four-years of carter?

Ps. reagan believed, and practiced the old adage -- 'keep your friends close and your enemies closer'?  he [reagan] didn't much care for nixon,... going as far back into his early california primary endeavors... developing and fine-tuning his estute political career rhetoric that would eventually non-polarized the electorate.

Ps2. stagflation = hyperinflation and stagnant wages [this country has been lowering the bar for decades regarding real  wages] is simply decreasing the jobs [illegal aliens by the millions?]available by outsourcing the service and all industrial base offshore where fewer jobs are available for exponentially more applicants and ya get 'Subordinate-Stagflation'! 

great read Aziz  :-)) 

Thu, 07/19/2012 - 22:28 | 2634678 radicall
radicall's picture

Commodity prices were very stable (or falling) from 1980s-late 1990s.


You have had flat wage growth in the last 12-13 years and sharp rise in commodity prices. How do you explain the difference between the 71-81 era,82-99 and '99-2012? How do you explain the impact of technology?

One HFT computer can do the job of a 100 traders. That is productivity. Foxconn will hire 3 million robots to replace factory workers. People used to break rocks with hammers to get gravel for making roads now we have machines). Amazon can serve a million customers with maybe 2 employees keeping an eye on systems at night.

Might be useful to tie some of that into the analysis.





Fri, 07/20/2012 - 05:42 | 2635089 Tirpitz
Tirpitz's picture

"One HFT computer can do the job of a 100 traders. That is productivity."

Radi, technically you are absolutely correct. But economically, those 100 traders each make some cut, which permits them to feed a family, to keep shops in their neighborhood open, plus a couple of craftsmen employed. The HFT computer is made beyond the seven seas, feeds mostly a single guy who already has it all, anyway, and thus serves mostly to fatten some tax-sheltered bank accounts in Cayman Islands. And that is exactly the root cause of the malaise we find ourselves in.

Thu, 07/19/2012 - 22:28 | 2634679 catch edge ghost
catch edge ghost's picture

One World, One Balance Sheet.

Thu, 07/19/2012 - 22:51 | 2634723 James_Cole
James_Cole's picture

Devaluing currency gives the illusion of better income as your hrly $xx.xx increases (stagnating in real terms), actual productivity can't fake as easy - like gold. 

It's a good argument I haven't heard much of, you could probably dig into it quite a bit more though.

Thu, 07/19/2012 - 22:22 | 2634664 NMC_EXP
NMC_EXP's picture

"Correlation is NOT causation."

True, but in some situations inductive reasoning is the only option.  Unless perhaps one of the instigators of this situation writes a deathbed confession.

Here is another correlation:  From 1945 to 1965 US foreign trade as a percent of GNP/GDP was steady at around 7%.  In 1975 it was 15%.  In 1995 it was 22% (source Historical Statistics of the US).  What is it today...40%?

Per the US Dept of Commerce US Merchandise Imports from 1950 to 1970 increased slowly from about $10B to $30B.  In 1975 the curve went exponential reaching $700B in 1995.  Thanks Walmart.  

Between 1900 and 1975 the US Merchandise Trade Balance hovered at zero.  Around 1975 the bottom fell out and by 1996 it was (-)$200B.  Source- Historical Statistics of the US and Historical Abstracts of the US, 1996.

An economic tectonic shift occurred in the early 70's.  If you want more detail read:

"The Pooring of America" by Dr Ravi Batra and "The Great Betrayal" by Pat Buchanan.


Thu, 07/19/2012 - 22:54 | 2634729 El Oregonian
El Oregonian's picture

Oh, so your the peckerhead everyone's been talking about...

Thu, 07/19/2012 - 21:56 | 2634592 RobertJ
RobertJ's picture

I think the author is overlooking a MAJOR variable: international trade.  Our trade relations in China picked up massively in the early 70s and then exploded in the early 90s after the passage of different trade agreements.

International economics 101: capital intensive countries will export capital to labor intensive countries.  The capital intensive country, US, will see a rise in rent and a decrease in wages; whereas, the labor intensive country, China, will see a rise in wages and a decrease in rent.  The graph depicts exactly this scenario unfolding as trade with China, and other developing nations, ramped up. 

Here's a brief article on our trade relations changing in the early 70s with China: http://www.foreignaffairs.com/articles/24601/alexander-eckstein/chinas-t...

The most important snippet from the article: "In June 1971, a month before Henry Kissinger's secret trip to Peking, the United States lifted the trade and payments embargo that had been in effect on the Chinese People's Republic ever since 1949. The move followed a number of lesser measures of relaxation taken from 1969 onward, and of course set the stage for the Kissinger visit and President Nixon's trip in February 1972. In the Shanghai Communiqué, the two nations agreed "to facilitate the progressive development of trade between their two countries.""

Thu, 07/19/2012 - 22:09 | 2634631 Aziz
Aziz's picture

Yeah, and the end of the Bretton Woods system also correlates exactly with the uptick in globalisation and the beginning of the US addiction to cheap Chinese junk.

Much easier to run massive trade deficits when you can print as much as you like.

Thu, 07/19/2012 - 23:36 | 2634795 Flakmeister
Flakmeister's picture

Beg pardon, just what was China doing when the plug was pulled on BW? Did I miss the Mao IPO?

You seem to miss the shift of high tech / value manufacturing to Japan happened first followed years later by the Chinese...

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