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Guest Post: Fiat Money Kills Productivity

Tyler Durden's picture


From John Aziz of Azizonomics

Fiat Money Kills Productivity

I have long suspected that a money supply based on nothing other than faith in government is a productivity killer.

Last November I wrote:

During 1947-73 (for all but two of those years America had a gold standard where the unit of exchange was tied to gold at a fixed rate) average family income increased at a greater rate than that of the top 1%. From 1979-2007 (years without a gold standard) the top 1% did much, much better than the average family.


As we have seen with the quantitative easing program, the newly-printed money is directed to the rich. The Keynesian response to that might be that income growth inequality can be solved (or at least remedied) by making sure that helicopter drops of new money are done over the entire economy rather than directed solely to Wall Street megabanks.


But I think there is a deeper problem here. My hypothesis is that leaving the gold exchange standard was a free lunch: GDP growth could be achieved without any real gains in productivity, or efficiency, or in infrastructure, but instead by just pumping money into the system.

And now I have empirical evidence that my hypothesis has been true — total factor productivity.

In 2009 the Economist explained TFP as follows:

Productivity growth is perhaps the single most important gauge of an economy’s health. Nothing matters more for long-term living standards than improvements in the efficiency with which an economy combines capital and labour. Unfortunately, productivity growth is itself often inefficiently measured. Most analysts focus on labour productivity, which is usually calculated by dividing total output by the number of workers, or the number of hours worked.


A better gauge of an economy’s use of resources is “total factor productivity” (TFP), which tries to assess the efficiency with which both capital and labour are used.


Total factor productivity is calculated as the percentage increase in output that is not accounted for by changes in the volume of inputs of capital and labour. So if the capital stock and the workforce both rise by 2% and output rises by 3%, TFP goes up by 1%.

Here’s US total factor productivity:

Only a wilful and ideological Keynesian could ignore the salient detail: as soon as the USA left the gold exchange standard,  total factor productivity began to dramatically stagnate. 

Coincidence? I don’t think so — a fundamental change in the nature of the money supply coincided almost exactly with a fundamental change to the shape of the nation’s economy. Is the simultaneous outgrowth in income inequality a coincidence too?

Keynesians may respond that correlation does not necessarily imply causation, and though we do not know the exact causation, there are a couple of strong possibilities that may have strangled productivity:

  1. Leaving the gold exchange standard was a free lunch for policymakers: GDP growth could be achieved without any real gains in productivity, or efficiency, or in infrastructure, but instead by just pumping money into the system.
  2. Leaving the gold exchange standard was a free lunch for businesses: revenue growth could be achieved without any real gains in productivity, or efficiency.
And it’s not just total factor productivity that has been lower than in the years when America was on the gold exchange standard — as a Bank of England report recently found, GDP growth has averaged lower in the pure fiat money era (2.8% vs 1.8%), and financial crises have been more frequent in the non-gold-standard years.

The authors of the report noted:

Overall the gold standard appeared to perform reasonably well against its financial stability and allocative efficiency objectives.

Still think it’s a barbarous relic?

Seems more likely that the real barbarous relic is pure fiat money.


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Wed, 06/27/2012 - 11:11 | 2565060 Captain Kink
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Got PMs?

Wed, 06/27/2012 - 11:20 | 2565091 Born Patriot
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The biggest killer of productivity by far is multiculturalism. With such a diverse mix of cultures all crammed into a single economy, economic growth innevitably suffers. We have to get back to solid American principles, and traditional American values. End this madness! Vote Ron Paul 2012!

Wed, 06/27/2012 - 11:26 | 2565111 urbanelf
urbanelf's picture

So true.  Living near a Thai restaurant and working with Indians with masters degrees has truly hindered my ability to be productive.

Wed, 06/27/2012 - 11:35 | 2565139 economics9698
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One thing that occurs with fiat that cannot happen for extended periods with gold is trade deficits.  With gold when a country consumes more imports gold flows out creating a shortage of money, prices rise, imports become expensive.  In the country receiving the gold the cost of money falls, imports are cheaper, and consumers buy more.

Trade balances out assuming the countries are technologically more or less equivalent. 

Why is this important?

Because with fiat trade no longer has to balance, if countries (China) want to run a trade deficit with the USA they can simply finance it with debt.  Governments can run up huge deficits and trade deficits.

This is a crucial difference between fiat and gold and productivity because now producers in the USA can increase productivity by switching from US made components to overseas cheaper components.

The other factor is creation of money misallocates resources in favor of the counterfeiters and the organizations, government and Wall Street banks, receiving the counterfeit money.

Instead of resources being used for the most productive uses government uses those resources and squanders them, generally we lose 55 cents on the dollar, as opposed to manufacturing creating $1.40 for every $1 invested.

Wall Street is only interested in paper gains which may or may not be the best allocation of resources.  In the frenzy of the newly created cash from the Federal Reserve we have seen the Savings and Loan crisis, NASDAQ crises, housing crisis, and now government debt crisis.  All misallocation of resources involving those receiving the cash, Wall Street, TBTF banks, and what not.

Ludwig von Mises does a better job explaining the misallocation of resources from the printing of counterfeit cash.  


Wed, 06/27/2012 - 12:07 | 2565243 MachoMan
MachoMan's picture

I'll posit that under your scenario trade balances regardless of whether a fiat or gold standard is in place. You implied this anyway. When a country is on the gold standard, it pays for its prolifigacy through transfer of its gold to creditor nations. When a country is on the fiat standard, it transfers its jobs, knowledge, and other matters to creditor nations.

In short, there is no free lunch. Discrepancies between trade balances and monetary prolifigacy are eventually checked. It's just that one method is quicker acting conceptually. The result is always a decrease in the relative standard of living for the deadbeat... For a little while anyway.

Wed, 06/27/2012 - 16:26 | 2566243 JeffB
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The fiat masks the transfer of wealth, however. In our case China and Japan financed our deficits by financing our debt. That artificially propped up the value of the dollar and artificially suppressed the value of the Yen and Renminbi. That, of course, allowed the trade deficits and our fiscal deficits to continue relatively painlessly.

Just as people often don't recognize the seriousness of a disease that is painless and has few symptoms until far more damage is done, we continued on our merry way under the assumption that deficits don't matter.

We could also mask some of the symptoms, such as loss of our manufacturing and quality jobs, by transfer payments and assorted government programs funded by the money lent to it by foreign governments manipulating currency rates to keep their own manufacturing and employment high.

It's left us all in a mess. We're shouldering monstrous debts that we can't repay without conjuring the money up out of thin air, devaluing the "money" they lent us. They're holding debt that isn't as valuable as they had assumed, and not as valuable as the resources it represented when they loaned it to us.

Resources have been misallocated for decades and many of our jobs and skills and even work ethic have been exported, while many of our citizens have become dependent upon government for sustenance.

We've Become a Nation of Takers, Not Makers More Americans work for the government than in manufacturing, farming, fishing, forestry, mining and utilities combined.

I wonder what the numbers would be if you added in the "Government Sponsored Enterprises" like Fannie Mae, Freddie Mac, not to mention other government programs including welfare, medicaid, subsidized housing, food stamps, agricultural subsidies etc.


Wed, 06/27/2012 - 17:01 | 2566399 JR
JR's picture

Perhaps you meant to say this is a nation which has takers. And forgot to include “and producers.” If the American economy were a poker game and all the players around the table were out of chips except the banker-dealer with giant stacks of blue, red and white in front of him, it would be relatively easy to identify the taker.

Here’s the take from the late Joe Sobran:

“The state gives you two options. If you won’t be its dependent, you must pay taxes to support those who are. Living off others’ taxes is legitimate; refusing to pay those taxes is criminal.”

Thu, 06/28/2012 - 10:31 | 2568444 JeffB
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“The state gives you two options. If you won’t be its dependent, you must pay taxes to support those who are. Living off others’ taxes is legitimate; refusing to pay those taxes is criminal.”


What's in it for "the takers" in this scenario to have so many dependents? They're siphoning off far too much of the production for the producers to keep up. In the parlance of "the takers", they're "useless eaters".

I think his paradigm's a bit off. I think "the takers" are siphoning off far more than they can reasonably get away with without transitioning into a new far more obvious totalitarian paradigm, but the producers do have some of their own chips. The dependents also have a smaller pile of chips and "the takers" seem to be encouraging more and more of the producers to become dependents. I'm not sure what's in it for them to do so, unless they just want to crash the current system to make it easier to transition to the new one.



Wed, 06/27/2012 - 11:46 | 2565176 westerman
westerman's picture

Multiculturalism is divide and rule. Multiculturalism is all about reducing solidarity and atomising people. The capitalists want rootless and divided workers with no real loyalties and no solidarity within the population. Massimmigration means cheap unorganised labour.

Wed, 06/27/2012 - 12:11 | 2565257 Lebensphilosoph
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OH, you have us there. Masters degrees and Thai restaurants. The mean IQ of Indians is 81. The average IQ of masters recipients is 125. The standard deviation of an IQ distribution is normally around 15. That means for every Indian even capable of obtaining a masters degree, you're getting nearly 30 halfwits, most of whom have only borderline intellectual functioning (70-84) and many who have mild mental retardation (50-69) . And that situation isn't helped by the IQ of emigrants being higher than the mean, because of the phenomenon of reversion to the mean within racial groups.


Now stop pretending that multiculturalism is about Indians with masters degrees, Thai food, and cute East Asian girls, and not sprawling ghettos, gang rapes, out-of-control violent crime, decreased material standards of living, the occupation of ones ancestral homeland, the throwing away of European ethnic identities and the genocide of white people. The ruins of Egypt, Greece and Rome stand as testaments to the end of every multiracial experiment.

Wed, 06/27/2012 - 12:22 | 2565291 Lebensphilosoph
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If you fill Europe with Indians, you turn Europe into India, not Indians into Europeans, regardless of how smart they are or are not.

Wed, 06/27/2012 - 13:53 | 2565626 DaveyJones
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Glad to see you reduce the issues down - way down

just what the backroom boys want

Wed, 06/27/2012 - 15:24 | 2566026 Random_Robert
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Oh boy... unpopular (and politically incorrect to boot) truths often fan the flames of impulsive reactionism..


Arm yourself,  Mr Messenger... otherwise the same fate that often befalls messengers, will be yours as well.



Wed, 06/27/2012 - 15:05 | 2565956 Citxmech
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So what is the mean IQ of immigrating Indians v. the mean IQ of existing US citizenry smart guy?

Wed, 06/27/2012 - 17:39 | 2566536 malek
malek's picture

Happy to see another person realizes the fallacy of LP's "argument"...

Wed, 06/27/2012 - 16:32 | 2566282 JeffB
JeffB's picture

I'm not in favor of unfettered immigration, but have to wonder what the original Indians in North America, aka Native Americans, would think about your phraseology "the occupation of ones ancestral homeland" when referring to your goal of keeping the immigrants out.

African Americans probably weren't too happy about the way they were treated by the European ethnic identities you're so worried about preserving, either.



Wed, 06/27/2012 - 16:43 | 2566318 Dr. Acula
Dr. Acula's picture

>I'm not in favor of unfettered immigration

Don't use double negatives. How would you fetter it?

Wed, 06/27/2012 - 19:59 | 2566859 tulip_permabull
tulip_permabull's picture


Wed, 06/27/2012 - 19:55 | 2566860 tulip_permabull
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Normally, Dr Acula, your libertarian freedom-fu is strong, but on this issue the Statists have pulled the wool over your eyes.

A major cause of anger over the current reality of immigration is that the state has a monopoly over it - and thus as in any monopoly situation we get poor policy at high cost.

In particular, through the twin evils of State "services" (which it is illegal to deny to anyone) and a variety of anti-discrimination laws, the State has taken away from individuals

- the complete use of their private property,

- their rights to freedom of association,  and

- their rights to free speech in relation to this issue.

So of course people are angry about current immigration policy. They feel that the State (its bureaucracies and cronies) are using immigration and the related debate to destroy cohesion and potential sources of opposition in the community. I think they are right.

Wed, 06/27/2012 - 21:07 | 2567033 shovelhead
shovelhead's picture

American Indians are really just Chinese early adapters.

Or really bad at directions.

Wed, 06/27/2012 - 17:09 | 2566302 Dr. Acula
Dr. Acula's picture

>the genocide of white people


>the throwing away of European ethnic identities

Can I sell mine instead? What's the going price?

>for every Indian even capable of obtaining a masters degree, you're getting nearly 30 halfwits, most of whom have only borderline intellectual functioning (70-84) and many who have mild mental retardation (50-69)

Which IQ cutoff value is the best choice for cleansing the human race? If you survive, you may end up cleaning my toilet.

But why save the highest-IQ individuals? Why not the strongest, the healthiest, or the most artistic? Why not preserve the ones whose labor commands the highest exchange value? Or maybe it's best to be the most UV-resistant individual?

Wed, 06/27/2012 - 17:27 | 2566490 JR
JR's picture

The IQ discussion seems to have gone disappointingly astray; the bankers aren’t that much concerned about IQ. When considering opening the borders to let the masses rush in, the banker tyrants make their selections in two categories: 1) low information Third World peoples who can tip the voting franchise away from the informed middle class, and 2) skilled technical immigrants who help the bankers’ corporate pals keep payroll costs at a minimum. La Raza, ACORN, et cetera, can help with the low information unpatriotic immigrant; Microsoft, Infosys Technologies, et cetera, can help with the skilled H-1Bs who will work  for less. The ideal immigrant in both categories should be as unpatriotic and as uninformed or misinformed about American traditions as possible.

Wed, 06/27/2012 - 11:36 | 2565147 Toolshed
Toolshed's picture

A very feeble effort my friend. Your screen name combined with a Confederate flag = obvious troll. Try, try again.

Wed, 06/27/2012 - 13:09 | 2565444 JR
JR's picture

Born Patriot – ignore their slings of arrows...

The concepts of multiculturalism and diversity as worthwhile goals for our society overlook the danger that some cultures pose to a prosperous and happy American system. For example, so-called Third World cultures have not been integrated into the American system and they bring complete ignorance of such critical issues as free markets, equality of races (racism), traditions such as the value of the family unit, how to participate intellectually in forming political action, the value of representative government and being used by tyrants to tear down such critical foundations of American society as its Christian heritage.

Unfortunately, many of the “new” cultures have no background or experience with the value of liberty and accept without resisting any force that happens to be in control of the government as not worth combating. IOW, they bring serfdom with them and have no concept of what great values they assist America in losing. The governing power of America, now in the hands of international bankers, is making widespread use of these low-information and often racist cultures in its breakdown of what would normally be its primary enemy – traditional middle class America.

Austen Phelps wrote in 1885 in the Introduction to Dr. Josiah Strong’s history of Our Country that almost all the thinking that thinking men have given to the subject of the welfare of the country has been “the idea of crisis in the destiny of this country and through it the destiny of the world.”

Wrote Dr. Phelps: “The common sense of men puts into homely phrase the great principles which underlie civilization of our land. It is ‘the nick of time.’ The present hour is, and always has been, ‘the nick of time’ in our history…

 “Fifty years ago (1835) our watchful fathers discerned it in their forecast of the future of the Republic. The wisest among them even then began to doubt how long the original stock of American society could bear the interfusion of elements alien to our history and to the faith of our ancestry. The conviction was then often expressed that the case was hopeless on any theory of our national growth which did not take into account the eternal decrees of God. Good men were hopeful, only because they had faith in the reserves of might which God held secret from human view.”

Wed, 06/27/2012 - 13:47 | 2565612 AnAnonymous
AnAnonymous's picture

US citizenism spreads uniformity and conformity.

So called multiculturalism, diversity is just smoke and mirror.

For example, the geographical space known now as the US of A was much more culturally diverse than current US of A under US citizenism.

The threat is not so much a large set of cultures, since it is just an illusion.

The threat is actually that more and more people adopt US citizenism and this creates tension.

For example, hopping borders and settling illegally is 'American' but as Mexicans for example adopt this 'American' feature, they get reviled for it.

The tension comes and will always come from the incredible number of zero sum games contained in US citizenism.

While on the paper, freedom can be adopted by everyone, when one runs an extortion and farming business like US citizens do, it is clear on the paper that not everyone can be an extorter, a farmer. For an extorter to be, for a farmer to be, there must be extorted and farmed.

Wed, 06/27/2012 - 17:02 | 2566409 Dr. Acula
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Thank you,

Your troll application was received. Unfortunately, we aren't accepting any more trolls at this time.


Wed, 06/27/2012 - 17:15 | 2566449 akak
akak's picture

Now THAT made me laugh!

Wed, 06/27/2012 - 15:36 | 2566061 Random_Robert
Random_Robert's picture

There is a commonly held wisdom that evil flourishes when good men (good people is more apropos) do nothing...


My personal ethic is that evil only flourishes UNTIL good people decide that the time for doing nothing has lapsed, and put on their ass-kicking boots.


Good people by their nature do not willfully choose to destroy evil- especially when it requires the willful and needful killing of other human beings.


Instead- the good allow their tolerance of evil to percolate until it boils, and then they let it boil until it rages, and the point is reached when they simply say "enough" and then the good identify each other, and then band together...


and after that, the fucking bullets start flying.


The only unfortunate consequence of this dynamic is that following every historical example of this cycle, the human race grows weary of mass death and destruction before the last evil asshole meets his due comeuppance (reference Stalin circa 1945)

You see, when GWB said "you are either with US, or you are with the terrorists", what he failed to realize is that good people understand that evil can not force the good to choose between varying degrees of evil.

If you have no faith in the good, then you deserve whatever evil that befalls you.

Wed, 06/27/2012 - 16:54 | 2566368 SmittyinLA
SmittyinLA's picture

No doubt, multi-culturalism and diversity kill productivity and innovation, successful companies whom actually produce more for less more often than not DO discriminate, that's one of the primary ways they produce more for less, by discriminating against slow, ineffective, inefficient or stupid employees. 

Wed, 06/27/2012 - 17:35 | 2566521 malek
malek's picture

Another pitiful attempt to smear Ron Paul's name...

Wed, 06/27/2012 - 12:28 | 2565305 Kayman
Kayman's picture

Show me unadulterated output.  It does not exist.  Governments have been fucking with the number for at least 30 years.

When a subjective measurement like "utility" is added to the mix, then you can count on nothing.  Pun not intended.

Wed, 06/27/2012 - 11:14 | 2565066 LawsofPhysics
LawsofPhysics's picture

What tripe, tell it like it is, the lack of any real consequences for bad behavior, kills everything.  Your monetary system and "money" must have consequences built-in to it's use, period.  Otherwise some paper-pusher can steal the value of your labor with the stroke of computer key.   Got physical?

Wed, 06/27/2012 - 11:40 | 2565164 Ghordius
Ghordius's picture

mmhhh... also an alternative explanation, but he has something right there: fiat money allows to draw resources from the future, i.e. "leaving less in the future". This raises immediate consumption now. Which is supposed to be produced later and not consumed then. This kind of deal generates a lot of attrition and losses (and banker bonuses). It's less effective than just using the resources you have at the moment.

As I repeatedly wrote, fiat money is good for war. It's something akin a weapon system. If the others have it and you don't, you are at disadvantage.

Nevertheless: here the article does not say why Nixon left the exchange based gold standard - that is something different from the gold standard.

1971 Nixon had the option of shipping some gold back to Europe, instead of leaving the exchange based gold standard. He preferred to do something that was not allowed to be called a default.

Wed, 06/27/2012 - 11:42 | 2565167 economics9698
economics9698's picture

I second that.

Wed, 06/27/2012 - 12:24 | 2565290 MachoMan
MachoMan's picture

There was a contemporaneous arms race. The winner of the arms race was able to dictate what happened to the collateral. Now, unless the arms are punitively utilized to the fullest extent of the competitive advantage provided thereby, then the trade imbalances eventually erode and rot the competitive advantage til it can no longer be utilized competitively. This decline always happens due to the fallacy of the free lunch, but how the arms advantage is implemented can prolong the stay at the top.

America probably isn't going to appreciate it if chinas manufacturing base stays intact. Although, waiting a few years might just allow it to collapse under its own weight. Time will tell.

Wed, 06/27/2012 - 11:56 | 2565204 AnAnonymous
AnAnonymous's picture

fiat money allows to draw resources from the future, i.e. "leaving less in the future". This raises immediate consumption now. Which is supposed to be produced later and not consumed then.


Rolling up a debt can be achieved without the use of any kind of money, through a barter system.

All it takes is a framework brought by US citizenism, the very idea of infinite growth, that the more you consume now, the more you'll get to consume in the future.

Fiat is a handy tool but the core is US citizenism.

Wed, 06/27/2012 - 12:19 | 2565226 akak
akak's picture

Made me laugh!

Oh, the monoextrememum of unicity of hypocrisy inherent in Chinese citizenism!  Your desperate antiselfindictmentalism, simplistic and bigoted wording of mind, and continualistic offuscationizing are overbursting with the humor so great!

You may discuss the demerits of the idea of infinite growth when your central planning Chinese Communist overlords stop engaging in it by blobbing-up the world's resources to build dozens of empty ghost cities, and when they cease to rip up and destroy hundreds of square miles of their own territory in the mad and unsustainable frenzy to stockpile rare earth minerals, and when they also stop the unprecedented pollution and environmental destruction of their own nation in their mad zeal to replicate all the very worst aspects of US consumerism, urban sprawl, and the automobile culture.

But keep on engaging in your insane self-denialism of the myths of Chinese Citizenism fabled past and now, as they are part and package of the whole stinking pile of roadside nightsoil that is Chinese Citizenism.  Make me retch!

Wed, 06/27/2012 - 13:39 | 2565572 AnAnonymous
AnAnonymous's picture

US citizenism is spreading in China, so yep, the claim to infinite growth, building of ghost cities etc are to for US citizenism to become actual in China.

Wed, 06/27/2012 - 13:54 | 2565621 akak
akak's picture

So in other words, your so-called "US Citizenism" is just your own self-defined, constantly shifting, all-inclusive, convenient label-of-the-moment for anything and everything that you find bad and wrong anywhere in the world, right?

Some might call that linguistic blobbing-up.  Others might call it psychosis.

Wed, 06/27/2012 - 13:57 | 2565643 AnAnonymous
AnAnonymous's picture

Not at all.

For once more, US citizenism stands for 'Americanism'

Building ghost cities is 'american'

Whishful thinking infinite growth is 'american'

Wed, 06/27/2012 - 14:16 | 2565697 akak
akak's picture


For once more, US citizenism stands for 'Americanism'

Which, again, is just your own uniquely bigoted and simplistic way of saying "everything I find wrong or evil in the world".

Admit it, you have been exposed in your lies, bigotry and idiocy countless times here already, as demonstrated by the fact that NOBODY here ever agrees with the bigoted, pro-Chicom trollery that you spew in this forum. 

Building ghost cities is 'american'

Except for the fact that it is the CHINESE, and ONLY the Chinese, who are blobbing-up the world's resources to build ghost cities --- a centrally-planned phenomenon which has NEVER been seen in the USA!  Care to try to explain your obvious hypocrisy now?

Give it up already, you chink piece of roadside shit.

Wed, 06/27/2012 - 16:01 | 2566163 AnAnonymous
AnAnonymous's picture

'Americanism' is not my production. 'Americanism' existed and was implemented before any one who visits this site was born.

Blobbing up resources?

As to central planned phenomenum, the US of A is the product of central planning. The existence of ghost cities in the US is also the result of central planning.

A remarkable comment because in the future, as US citizenism spreads, historical US citizen nations will look in minor differences in order to deny US citizenism spreading.

US citizens are obsessed with identity. Things are never enough uniform as long as identity is not reached.

The spread of US citizenism into China can not be identical to the rise of US citizenism in the rise. Just as US citizenism developed not identically in GB for example.

Wed, 06/27/2012 - 16:48 | 2566342 akak
akak's picture

Mindless gibberish, unworthy of response.

Wed, 06/27/2012 - 17:44 | 2566550 malek
malek's picture

Another way of saying "It's all Bush's fault", and the Chinese are all innocent victims with no responsibility whatsoever.

Wed, 06/27/2012 - 15:43 | 2566098 TheFourthStooge-ing
TheFourthStooge-ing's picture

akak said:

So in other words, your so-called "US Citizenism" is just your own self-defined, constantly shifting, all-inclusive, convenient label-of-the-moment for anything and everything that you find bad and wrong anywhere in the world, right?

Your hitting of nail being muchly square on the head with forcefulness of hammery. Situation is strongness unoffuscated for all looking with sight, except for the viewing through AnAnonymously self cloaked eyesightedness. Chinese citizenism citizen having in AnAnonymous head now the fetish for disagreetion over all, even to the littlest of thing to insignification.

The deliciousness being held of this fetish is too much goodness of superiornographic attitudation for Chinese citizenism citizen do relinquishing of it from AnAnonymousistic self. This makes continually endeavoriousness of construction upon fantasy world of US citizenism which is much disagreeability.

This projectingness onto the entire humanity world of self illusioned US citizenism is the mettle, the crustiest bit of AnAnonymousism. This crusty mettle of projection gives  shieldment the Chinese citizenism citizen AnAnonymously from self indiction in the truest form of self justificationness. Most fruitful gift he is to himselfs and his strawsmen bestowing.

Some might call that linguistic blobbing-up.  Others might call it psychosis.

This is truthness yes in astute observingry of self evidentiary. Some might even call it display of Chinese citizenism eternal nature judiciously.

But hey, AnAnonymousity confusionated very mixed up in head sickness leads to expedient citizenism conjugation, so bear with it.

Wed, 06/27/2012 - 17:42 | 2566543 malek
malek's picture

Oh, and going off the gold standard didn't remove real consequences for bad behavior, by putting relativism into the measure of accounting??

Wed, 06/27/2012 - 11:15 | 2565073 Sudden Debt
Sudden Debt's picture

we need more whips to get people back to work...


Wed, 06/27/2012 - 11:15 | 2565075 midgetrannyporn
midgetrannyporn's picture

Nothing matters more for long-term living standards than improvements in the efficiency with which an economy combines capital and labour...





Wed, 06/27/2012 - 11:34 | 2565141 sessinpo
sessinpo's picture

And while some say fiat money is backed by nothing. Some others say it is backed by the goods and service (productive process from raw to finished) of the economy. Anyway, always an interesting topic.

Wed, 06/27/2012 - 11:17 | 2565079 Debugas
Debugas's picture

there is a saying among workers towards employers - "you pretend to be paying us and we pretend to be working"

Wed, 06/27/2012 - 11:25 | 2565107 LawsofPhysics
LawsofPhysics's picture

Funny, there is also a saying among financial fuckers too "We wil pretend to make you loans and you pretend to pay us back, when the whole thing blows up, the taxpayer will cover the cost and we will retire to our private islands.

Wed, 06/27/2012 - 12:14 | 2565272 IcarusOnFire
IcarusOnFire's picture

The saying:

there is a saying among workers towards employers - "you pretend to be paying us and we pretend to be working"

Was actually a standard joke amongst workers in the old Soviet Union.  Nothing has changed,  it's still true under every communist central planned economy including ours.



Wed, 06/27/2012 - 11:17 | 2565081 Jason T
Jason T's picture

this is kind of topic that should be openly debated.  

very similar chart of wage growth relative to productivity growth.  Wages have not kept up like they did prior to 1971.


Wed, 06/27/2012 - 11:25 | 2565106 Thisson
Thisson's picture

Ok, but why would you expect wages to keep up when the size of the workforce hasn't remained constant?  How do we know that on an "undiluted" basis, so-to-speak, wages haven't actually improved?

In other words, has labor's aggregate income increased (due to earning a share of increased productivity) before dividing it by an increased number of laborers?

Wed, 06/27/2012 - 11:30 | 2565124 sessinpo
sessinpo's picture

They simplified that through things like the Big Mac Index. Can I buy as much Big Mac in whatever year compared to how much Big Mac I can buy with current wages. But you point is taken. Good thoughts and debate.

Wed, 06/27/2012 - 11:56 | 2565200 Buckaroo Banzai
Buckaroo Banzai's picture

Your argument makes no sense. Look at the kink in the curve at 1971, there was a very distinct, very precise trend change at that point in time. The labor force did not change all of a sudden in 1971, and then stop changing.

Wed, 06/27/2012 - 11:24 | 2565102 ATG
ATG's picture

When fiat money fails, there may be another giant sucking sound as what is left of the economy goes into the toilet.

Puts can be a bears best friend today at the tipping point as people figure out the EZ is queasy and the Twist is dead: 2:38

RichCash@RichCash8 Twitter 

Wed, 06/27/2012 - 11:29 | 2565118 icanhasbailout
icanhasbailout's picture

The free lunch was a smorgasboard of Japanese and Gulf Coast seafood, washed down with Jonestown Kool-Aid

Wed, 06/27/2012 - 11:29 | 2565120 mark7
mark7's picture

Typical "Eating ice-cream in the summer causes more drownings"-correlation. How about the fast development after 1973 in China, India, Japan, Thailand, South Korea, Baltic countries, Poland etc etc etc. They all have non-gold standard currencies...

Wed, 06/27/2012 - 11:53 | 2565191 machineh
machineh's picture

That's a serious criticism.

But it's easier to follow a blazed path to economic development using available technology, than to advance the state-of-the-art in an already-developed economy.

For leading-edge global economies, there is no obvious road map for raising living standards higher. But funny money, windmill-tilt wars and serial bubbles can surely lower them.

Wed, 06/27/2012 - 11:59 | 2565214 icanhasbailout
icanhasbailout's picture

You mean, as soon as we left the gold standard and embarked on the path that allowed the financialization of the economy to replace real growth?


Maybe their growth was due to our sound money - previously business chose to do business here instead of there due in part to sound money and a reasonable facsimile of the rule of law in capital markets?


Aren't the dates on this particular bank's demise interesting in the context of this discussion?


"Between 1974 and 1982 [when it imploded Continental Illinois - ed.], the bank's assets increased more than 15 times to $525 million and its deposits swelled from $29 million to more than $450 million"


Things that make you go "hmmmm..."

Wed, 06/27/2012 - 11:31 | 2565126 dcb
dcb's picture

it makes absolute sense on an intellectual basis. those who can get ahead will now perform the easier task of rent seeking than improving things. so as one would expect lobby money becomes more impt than innovation

Wed, 06/27/2012 - 11:33 | 2565137 slewie the pi-rat
slewie the pi-rat's picture

counterfeiting is not productive activity EXCEPT FOR THE COUNTERFEITERS and those on da payroll

get down from the pulpit and getReal

Wed, 06/27/2012 - 11:36 | 2565150 Balmyone
Balmyone's picture

Love this article. For all of us trying to understand what the long term impact of leaving the gold standard is, this article shows how fiat currency created a dream world of GDP gains not based on real productivity gains. 

I read a while ago, probably on zerohedge, that according to a prominent Austrian economist, monetary easing, like we see today, predominantly benefits the moneyed-class, and has a very limited impact on the masses. This article lays this out nicely by pointing out that post 1973, income inequality has been rising. 

Thank you Greenspan, Thank you Bernanke, Thank you Keynesians, for putting the U.S. and the world on a path of mediocrity.

I'm buying gold and silver. Are you?

My favorite dealer:

Wed, 06/27/2012 - 11:52 | 2565190 Vince Clortho
Vince Clortho's picture

Don't forget that whiny wimp Woodrow Wilson when you are passing out credits for how this mess originated in the US.  Woody is the one that opened the door and let the plague in.

Wed, 06/27/2012 - 11:37 | 2565153 Benjamin Glutton
Benjamin Glutton's picture

incomplete. but the good news is it has become increasingly difficult for the rabble to accumulate wealth or avoid the draft.

Wed, 06/27/2012 - 12:00 | 2565155 Shizzmoney
Shizzmoney's picture

A) Fiat money can be manipulated.  It can manipulate the cost of labor, savings, the idea of wealth, and the cost of goods.  Think of it this way: one's labor is defined by what he makes; not by what he creates.

B) Fiat money can be created with no capital behind it.

C) Fiat money is used by corporations and banks to control and subdue the populace.

I mean, we have SO many problems over little pieces of green paper, and numbers on spreadsheets.  People get yelled at, acosted, abused, used, solicited, and even sold......all for green pieces of fuckin' paper. 

This was the kind of shit Jesus railed against when the Pharisees and the Money Changers were in the Temple.

You won't hear that from the fascist right wing, or the neo-liberal left. 

It's part of the reason I play poker so well; does losing money suck?  Sure, but it ain't the end of the world; and those who when they lose pots go on mega-tilt don't understand the big picture that really, there's enough money in the world to go around.

Do you think St.Peter and God at the Pearly Gates when we die is going to say, "Well, you've done alot of charity work and went to Church every Sunday.....but you're not getting into heaven because you defaulted on your mortgage."

Think about it: say if Jesus came back (kind of rooting for it, now...just for the hilarity) - do you think he'd give two shits that Jaime Dimon makes $270 milly a year?

“Citizens United has opened the tap on an ocean of money,” Silvers said. “The fear of that money is a trap. It stops politicians from talking about the issues voters are talking about: jobs, outsourcing, inequality, an unfair tax system. The only way to engage in the conversation the public cares about in this time of economic crisis and popular anger is to stand up to the power of money in politics.”

“The class of candidates has changed over the years,” said the operative. “When you can’t run competitive elections even in the House without raising 3, 4, 5 million bucks it means you’re looking at people who have the kind of contacts who can help them raise money. So the teacher, the plumber, the firefighter isn’t running for Congress.”

Read more:

Wed, 06/27/2012 - 13:19 | 2565489 JR
JR's picture

Celebrated Nobela Bubblelist Paul Krugman, a Keynesian brainless poop, solved the world’s hunger problem using phonus balonus ZIRP in his book – The Return of DEPRESSION ECONOMICS: “Depression economics…is the study of situations where there is a free lunch, if we can only figure out how to get our hands on it…” 

There is a free Keynesian lunch, of course; it just doesn’t include everybody. Their free lunch turned out to be my lunch.

Wed, 06/27/2012 - 11:55 | 2565197 DanDaley
DanDaley's picture

I haven't felt like working much since '73, and now I know the reason.

Wed, 06/27/2012 - 11:56 | 2565203 Vince Clortho
Vince Clortho's picture

For the Central Planners, there is little need for any kind of real economy anymore.  No need for middle class; consumption of goods; No need to offer services or products. Now that the people of the US have accepted the fact that the parasites can print themselves as much money as they need for their personal use.

Never thought I would see this in my lifetime.

Wed, 06/27/2012 - 12:10 | 2565235 Shizzmoney
Shizzmoney's picture

Really? This was kind of the plan all along since 1913 (although maybe you are commenting on the timing; it has acclerated at a fast pace).

As Chaz Palmenteri's character said to "C" at a dice game in "A Bronx Tale":

"You know who the biggest sucker is, kid?  The workin' man.  He's the biggest sucker in all of the house."

Wed, 06/27/2012 - 12:04 | 2565236 AnAnonymous
AnAnonymous's picture

It is somehow funny when US citizens get engulfed by their own fake notions they brought up and wove as a covert.

Another reading is that 1970s was peak oil in the US, followed by Nixon's move to counter act it.
But this would paint a grim picture when it comes to US citizenism and its achievements relative to growth.

Wed, 06/27/2012 - 12:32 | 2565321 akak
akak's picture

Another reading is that the dictatorial ruling elite of Communist China has learned absolutely nothing from the socially corrosive and unsustainable post-WWII American economic experience, as they seem utterly determined to replicate all the worst aspects of US consumerism, urban sprawl and the automobile culture in their own overpolluted, enviromentally degraded, overpopulated homeland.

Make me retch!

Wed, 06/27/2012 - 16:26 | 2566269 AnAnonymous
AnAnonymous's picture

China has learned absolutely nothing from the socially corrosive and unsustainable post-WWII American economic experience


China would have learned US citizenism.

Besides, and more importantly, US citizenism was an unsustainable course before WW2.

If US citizenism was sustainable, the GD would not have happened.

But hey, when the Indian land transfer ponzi matured, well, it popped up.

Wed, 06/27/2012 - 17:47 | 2566560 malek
malek's picture

Careful sidestepping the main point...

Wed, 06/27/2012 - 15:05 | 2565959 Aziz
Aziz's picture

Hey AnAnonymous

Do British citizens like me also suffer from US Citizenism?

Wed, 06/27/2012 - 15:44 | 2566099 akak
akak's picture

Of course you do, by definition!

That definition being infinitely flexible, to fit all of AnusAnonymous' prejudices and schizophrenic whims of the moment.

Wed, 06/27/2012 - 15:53 | 2566137 AnAnonymous
AnAnonymous's picture

By definition? A strange way to put it.

This author fits the bill of 'Americanism'

He recants day in day out the mantras of 'Americanism'

His own choice, his own acts.

Wed, 06/27/2012 - 16:07 | 2566191 TheFourthStooge-ing
TheFourthStooge-ing's picture

"US citizens are US citizens: dont let facts get in the way." - AnAnonymous

Wed, 06/27/2012 - 16:24 | 2566259 AnAnonymous
AnAnonymous's picture

Making up quotes? Selective quotation?

US citizen nature is eternal.

Wed, 06/27/2012 - 16:57 | 2566381 akak
akak's picture

Making up facts and bigoted theories? 
Selective insanitation?

AnAnonymousitizenism nature is eternal.

Wed, 06/27/2012 - 23:13 | 2567251 TheFourthStooge-ing
TheFourthStooge-ing's picture

AnAnonymous, actively hallucinating, said:

Making up quotes? Selective quotation?

US citizen nature is eternal.

US citizens are US citizens: dont let facts get in the way.

More denial?  More impossibility of self indiction? More offuscation?

Chinese citizenism citizen nature is eternal.

In Chinese citizenism, admission of facts has to be weighted against denial of facts.

The denial of facts required by Chinese citizenism citizens as a sign of submission is now way beyond the scope of ignorance. Very can kicking.

Self indiction in Chinese citizenism is a context to avoid with all costs. Better to offuscate by blaming strawsman of US citizenism. The impossibility to self indict in Chinese citizenism leads to the weirdest result.

The slope taken by Chinese citizenism citizens is going to be fruitful.

But hey, keep denying, even though you know.

Wed, 06/27/2012 - 15:51 | 2566123 AnAnonymous
AnAnonymous's picture

Hey AnAnonymous

Do British citizens like me also suffer from US Citizenism?

Suffer? I dont know. Not the word I'd use.

But they are proponents of 'Americanism'just like most of the other european nationals.

All your articles sweat the 'American' spirit, with the same mantras over and over again.

Once again, US citizenism is not a matter of nationality, of citizenship. It is first and above all a state of mind.

Do not worry, you display that state of mind. You are one of them 'Americans'

Wed, 06/27/2012 - 16:01 | 2566162 Aziz
Aziz's picture

What's the alternative to my US-citizenism, then?

Wed, 06/27/2012 - 16:07 | 2566175 akak
akak's picture

Apparently, the only alternative to his all-encompassing (yet nonexistent) "US Citizenism" is the insanitation of AnusAnonymous, Chinese Citizenism-style.

Wed, 06/27/2012 - 16:12 | 2566211 AnAnonymous
AnAnonymous's picture

How could it be? Austistic behaviour much?

I repeated times and times over that US citizenism will prevail in China.

Maybe I will be wrong. But still not possible save through strawsman to claim that I see something coming from China as an alternative to US citizenism as I tell that China is turning to US citizenism.

Wed, 06/27/2012 - 16:16 | 2566223 TheFourthStooge-ing
TheFourthStooge-ing's picture

AnAnonymous ranted:

Maybe I will be wrong. But still not possible

Made me laugh.

Wed, 06/27/2012 - 21:34 | 2567083 shovelhead
shovelhead's picture

But that's a good thing.

Chinese citizenism start to pet dog instead of eat dog.

Roadside shitter might bring poop scooper. Much double happiness for Chinese citizenism.

Wed, 06/27/2012 - 16:06 | 2566189 AnAnonymous
AnAnonymous's picture

Ah, the US citizen scam of constructive speech.

You know, nobody needs to provide an alternative to wrong ideas when underlining they are wrong ideas.

When somebody claims that 2 and 3 are four, nobody needs to provide the proper answer to underline 2 and 3 are not four. 2 and 3 are not four. Period.

There is no use of alternative to underline US citizenism as it is.

Besides, there are also other issues related to power.

Nope, the US citizen trick of calling for constructive speech does not work.

Wed, 06/27/2012 - 16:11 | 2566209 akak
akak's picture

Ah, the Chinese Citizenism comedy stylings of AnusAnonymous!

Why ask him a direct question, when no direct answer is ever forthcoming?

(Nor is any semblance of logic, for that matter.)

Nope, the Chinese Citizenism trick of offuscation, monolizing the speeching means and semantic blobbing-up is always at hand.

Wed, 06/27/2012 - 16:15 | 2566219 AnAnonymous
AnAnonymous's picture

If the question is poorly formulated, it is sound to make it known.

The question is irrelevant. I Answered to it many times with other causes.

But US citizens, who play attrition games, keep coming with the same overused trick.

Lets see your talent for answering to questions directly: do you wish that China adopts 'Americanism'? Do you wish for the Chinese to be ruled by an 'American' system?

Wed, 06/27/2012 - 16:19 | 2566238 TheFourthStooge-ing
TheFourthStooge-ing's picture

AnAnonymous said:

But US citizens, who play attrition games, keep coming with the same overused trick.

Ah, ah, sounds like the wok calling the cooking marmit black.

Well, well, well, Saxton and the Countess.

My, my, my...

Wed, 06/27/2012 - 16:22 | 2566249 AnAnonymous
AnAnonymous's picture

Are you implying that a lone person could work a attrition game on a website populated by hundred of US citizens?

US citizen fantasy at its best.

Wed, 06/27/2012 - 16:29 | 2566278 akak
akak's picture


Are you implying that a lone person could work a attrition game on a website populated by hundred of US citizens?

No, I am not implying it, I am outright stating it.  Because that is what trolls such as you excel at doing --- disrupting the conversation and the exchange of ideas, all for their own nefarious and pernicious ends.  It can only take one dedicated troll (which you are) to bring down an entire online forum --- I have seen it happen more than once.

Your insanity is only exceeded by your evil.

Wed, 06/27/2012 - 16:41 | 2566315 AnAnonymous
AnAnonymous's picture

Conversations? Ideas?

US citizens live in a world of propaganda and fantasy.

You claim that on this site, a discussion is disturbed?

Which one? The only thing that could be disturbed is the constant masturbation over tales. But it is very hard to do so.

How could it be performed? US citizens love their propaganda and fantasy. They do not care for facts.

US citizens can not even bear their own past. They need to manipulate it to fulfill their fantasy tastes.

And somebody could interrupt the flow of it?

Interrupting US citizen propaganda, fantasy, that is a claim. A wild one. I cant claim I am able to perform such a trick, even if I wanted to. Which I do not want.

Wed, 06/27/2012 - 16:14 | 2566218 TheFourthStooge-ing
TheFourthStooge-ing's picture

Aziz asked:

What's the alternative to my US-citizenism, then?

AnAnonymous will tell you no alternative exists. You could agree with his every utterance and he will disagree with you. Disagreement is his Chinese citizenism fetish, and all of humanity exists only as a canvas for him to tar with his broad brush of US citizenism.

AnAnonymousity stands for trained monkey malarkeyism, blobbing up by crapping on the roadside and flinging it at others.

Wed, 06/27/2012 - 16:18 | 2566234 AnAnonymous
AnAnonymous's picture

Woooo, US citizens are fond of putting words into mouth.

You know, it is a classical strawsman. When you cant answer to or manipulate a version, substitute another version, easier to manipulate.

Never stated that there were no alternative to US citizenism.

I stated that US citizens exert power. Therefore they are in charge of bringing up solutions or have to step down.

This is the way power works.

Wed, 06/27/2012 - 17:48 | 2566565 malek
malek's picture

We're still waiting for concise alternatives to be presented by you.

Wed, 06/27/2012 - 16:01 | 2566169 akak
akak's picture


US citizenism is not a matter of nationality, of citizenship. It is first and above all a state of mind.

Autistic schizophrenia is also a state of mind, which you display in spades.

Tell us again your fairy tale of how your mythical and bigoted "US Citizenism" destroyed the society on Easter Island long before the USA was even founded as a nation.  Pretty please!

Just fucking come out and admit it: you loathe and despise Americans.  You are a Chinese bigot who hates "round eyed foreign devils".

Wed, 06/27/2012 - 16:09 | 2566205 AnAnonymous
AnAnonymous's picture

I never wrote that Easter Island sank before the rise of US citizenism. That is the strawsman you keep building.

I wrote that the contact to US citizenism is what destroyed the Eastern Island population.

It is funny that you speak about autistic behaviour because after countless pointing to that point, you keep coming up with the scam that Easter Island sank before 1776. Which is blatantly wrong.
In spite of this countless repeatition, you have been unable to integrate the fact and keep coming up with the same scam, no matter how many times it is debunked.

Wed, 06/27/2012 - 16:19 | 2566229 akak
akak's picture


I never wrote that Easter Island sank before the rise of US citizenism. That is the strawsman you keep building.

Actually, it is YOU who is building the strawman here --- nobody ever talked about the SINKING of Easter Island, merely the collapse of its society, shithead.

I wrote that the contact to US citizenism is what destroyed the Eastern Island population.

Behold the insanitation of our Chinese Citizenism troll on display!

He readily adn freely admits that he is INSANE!  It is well known by anyone with any knowledge of Easter Island that its societal collapse happened LONG before any contact with outsiders, and certainly even longer before the USA was even founded as a nation --- yet his autistic Chinese troll tries to squarely lay the blame for a collapse brought upon the population of Easter Island by the environmentally destructive actions of its OWN inhabitants on the American people!

Truly, no better example of the insanity and mindless anti-American bigotry of this acursed Chinese troll could possibly be provided.


Wed, 06/27/2012 - 16:19 | 2566241 AnAnonymous
AnAnonymous's picture

The societal collapse did not happen before 1776.

No, no, no.

Eastern Island had lows before that, but they were picking up. It would be major crisis after 1776 that destroyed the population.

Wed, 06/27/2012 - 16:25 | 2566261 akak
akak's picture

You are just gibbering mindlessly again, as usual.

Most archeologists and historians place the collapse of Easter Island society, and their descent into cannibalism, somewhere in the early 17th century, with the first (brief) contact with outsiders not happening for over a century later.

But don't let that stop you from blaming the extinction of the dinosaurs on your self-defined (and self-created) "US Citizenism" as well.

Wed, 06/27/2012 - 16:31 | 2566286 AnAnonymous
AnAnonymous's picture

The collapse? Descent in cannibalism?

Cannibalism did not sink the Eastern Island population. Due to US citizen nature, you are somehow led to draw moralistic conclusions but cannibalism is not a sign of collapse.

Cannibal societies exist. They do not collapse save fo contact with US citizenism. Of course.

Wed, 06/27/2012 - 16:46 | 2566338 akak
akak's picture

Your Chinese Citizenism offuscating insanitation has literalwise blossomed into a blobbing-uppitness that is much awe-making to beholding!

However, your idiocy and blind anti-American bigotry remain undiminished.

Cannibalism was an integral part of the collapse of Easter island society, about which you obviously know NOTHING except to try to childishly and disingenuously blame on some phantasmagorical contact by that population with Americans, which did NOT happen despite all your wild opium-induced fantasies to the contrary.  You are utterly closed to all logic or factual arguments, and only continue to prove yourself to be a retarded and bigoted anti-American troll with not one logical or original idea in your hopelessly addled head.

Wed, 06/27/2012 - 23:50 | 2567327 TheFourthStooge-ing
TheFourthStooge-ing's picture

akak said:

Cannibalism was an integral part of the collapse of Easter island society, about which you obviously know NOTHING except to try to childishly and disingenuously blame on some phantasmagorical contact by that population with Americans, which did NOT happen despite all your wild opium-induced fantasies to the contrary.

Ah, but you being now are forgetful of proto-US citizen inventionary trickery of Ben Franklinism, which constructioned for George Washington the time traveling flying rickshaw.

Employed then this method for Washington to retrieve King Henry VIII onto Eastern Island. Lightning key powered time traveling flight of rickshaw facilitationed Henry VIII conquest of Easter Island.

This being first most glorious conquest for US citizenism. Regrettable now that flying time travel Ben Franklinism rickshaw tethered to Eastern Island drain plug. On George Washington return trip to Washington DC, forgettability of state of tethering resultation with drain plug the pulling out, making for Easter Island sinkery.

Chinese citizenism history of world very muchlike in congruence with LSD trip through hall of mirrors funhouse with Albert Schweitzer and J. Frank Parnell.

Thu, 06/28/2012 - 00:33 | 2567379 akak
akak's picture

My dog (mercifully far distant from any and all Chinese woks) just gave me the weirdest look, as I was laughing so hard while reading this that I literally almost soiled myself!  Which would have been a shame, as I am equally distant from any and all Chinese roadsides upon which to gift the People's Republic of Nose-Picking with my beneficent nightsoil.

Wed, 06/27/2012 - 12:08 | 2565241 mark7
mark7's picture

In the 1950's and 1960's there were no competitors against USA and USA was not bombed to ground during the war. Nazi engineers provided a huge boost to USA, Apollo program would have not been possible without them.

Europe was divided and still recovering (west side). Eastern Europe started recovering only after 1989, after decades of Russians fucking up the place. In the 1970's Europe started to become more serious competitor and later BRICs and others came into picture too. 

Wed, 06/27/2012 - 12:14 | 2565266 overmedicatedun...
overmedicatedundersexed's picture

in this same time period the US gov rapidly grew free trade and reduced tariffs, but that has nothing to do with it I am told. LOL eyes wide shut indeed.

Wed, 06/27/2012 - 12:21 | 2565286 PulpCutter
PulpCutter's picture

No lie.  Until the income tax was made legal in 1913, the federal govt's primary source of funds was import tarrifs.  Sail into any of the east coast's older harbors, and you can usually still immediately see the old customs house - which in the past was often one of the most prominent buildings on the waterfront.  America's manufacturing might was built behind a significant tariff structure (and we've remained the world's largest manufacturer for over a century, though sinking fast at the moment).  Meanwhile, we allow a number of our largest trading partners to openly manipulate their currency; including specifically China, Japan and Canada.  The Euro's troubles (death throes?) have killed our exports as well.  The dollar's value tripled, in trade-weighted terms, between the 1950s and year 2000.  This (and robotics) is why manufacturing jobs have dried up.

Wed, 06/27/2012 - 12:37 | 2565268 PulpCutter
PulpCutter's picture

The move away from the gold standard is a symptom, not a cause.

Until the 1970s, most states had so-called "unit banking" laws.  These laws meant most banks were local, and when the laws were tossed out, we began to grow the national/internationl banks that we have today. 

Local banks live and die with the local economy, which focuses the bankers' attention on how to grow that local economy.  The bankers had to do the best they could to prudently lend money to local businesses and startups; a difficult balancing act between entrepreneurship and wisdom.  Doing it well took a deep knowledge of the businesses that your community was good at, and of the local businessmen, and of the local regulatory agencies.  Banking was competitive, and those who mastered the balancing act well were very good at it, and a significant force for growth. 

In contrast, think a big national bank, like Bank of America or Well Fargo, gives a rat's ass whether a Detroit or a Youngstown continues to go to seed?  Instead, they bet against the recovery of those economies, using derivatives. 

 I don't buy the gold standard => productivity argument, though.  Correlation, not causation.  See Ben Franklin, Bryant's "Cross of Gold" speech, and many others for the down side of tight money policy.  Sure, monetary authorities can be irresponsible.  But there can also be too little liquidity in an economy.  There's a "right" amount of liquidity, and it's not neccessarily equivalent to the amount of gold that happens to be around.  No easy answer like "let's go back to the gold standard".  Even back then when we were physically-backed, there were huge fights about adding/subtracting to the money supply.  E.g., the huge addition of the Comstock silver lode to the national money supply can be seen in the economic growth, increased wages, and yes inflation that occurred after it's addition. 

Wed, 06/27/2012 - 15:45 | 2566104 Iwanttoknow
Iwanttoknow's picture

Pulpcutter,good post.

Wed, 06/27/2012 - 21:45 | 2567094 OneTinSoldier66
OneTinSoldier66's picture

"Sure, monetary authorities can be irresponsible.  But there can also be too little liquidity in an economy.  There's a "right" amount of liquidity, and it's not neccessarily equivalent to the amount of gold that happens to be around.  No easy answer like "let's go back to the gold standard"."


I believe there's enough Gold. It would just need to be revalued. For instance, if there is a 'collapse' I believe then we would find out what it's value really is. I do not believe that the Government should have any say in what it's value is, such as... it's worth $20/oz. That should be determined in the marketplace. Then I believe, you'd find there is plenty enough Gold, especially is the value of other precious metals are determined in the market and used for money as well.


I gave you a +1 for effort if nothing else. But I think you should ask yourself if you really believe in hard money that is an real, actual, tangible, 'unit of account', thereby limiting Government and Bankers to real, actual, reality. It's not how much of a commodity is available for use as money, except in cases of extreme rarity of availability. It is the value of the unit of account being used for money as determined by 'the demand for money' in the market, as interest rates should be determined by 'the demand for credit' in the marketplace, rather than artificially by some Government bureaucracy.


I would like to recommend Detlev S. Schlichter's book, "Paper Money Collapse".

Wed, 06/27/2012 - 12:15 | 2565275 yogibear
yogibear's picture

LOL. Bernanke and the Fed are thorwing money at us. Why be productive and do a real job? Just skim the money and off-shore it. Too bad when Benanke and the Fed destroy the rest with their fiscal Ponzi.

Wed, 06/27/2012 - 12:16 | 2565276 EmileLargo
EmileLargo's picture

What kills productivity is misallocation of capital.

Wed, 06/27/2012 - 14:36 | 2565835 Balmyone
Balmyone's picture

It can be easily argued that artificially low interest rates, or easy money policies made possible by the Federal Reserve causes "malinvestment."

Malinvestment means sub-optimal allocations of capital and labor.

Keynesians, including our Federal Reserve, believe there is no such thing as a misallocation of capital and labor.

They believe that U.S. GDP in 2007 was normal, and not caused by ridiculous monetary policy and securitization gone MAD.

Wed, 06/27/2012 - 17:49 | 2566567 malek
malek's picture

And how, if at all, is this in contradiction to this blog article's argument?

Wed, 06/27/2012 - 12:23 | 2565296 neutrinoman
neutrinoman's picture

Yes, I started to suspect the same thing a couple years ago. If you can get the illusion of growth without the productivity increases to sustain it, sounds like a politician's wet dream.

This history is a little more complex than just a simple pre-1971 and post-1971 bifurcation. Productivity growth stagnated in the 70s and early 80s, in a very clear, well-documented, and fairly well-understood way (understood by more conventional economists). The basic cause was accelerating price inflation, which diverted scarce capital into non-productive activities like real estate and precious metals. And this Great Inflation, as some have called it, was enabled by leaving the gold standard. Inflation was already picking up in the late 60s, while the gold standard was still in place, albeit cracking apart and no longer credible.

Productivity growth picked up again in the mid-80s and continued on a stronger course until the end of the 90s. I suspect that is closely related to the Great Moderation, higher real interest rates, and a "money rule" monetary policy that is the closest thing you'll get to the gold standard in our present system.

Undoubtedly, since the end of the 90s, increasingly reckless central bank policies have taken their toll on our standard of living, the value of our savings, and productivity. Much of the disease seen in the 70s reappeared after the 2001 recession: falling dollar, rising commodity prices, once again slower productivity growth, scarce capital being diverted to non-productive uses (like real estate).

What's gotten me is the relationship to rising inequality. I'm not sure *income* inequality can be explained this way -- that's been rising in the US since the end of the 60s and is fundamentally driven by the division between the college-educated and everyone else. This same bifurcation shows up again and again in unemployment data, real incomes, etc. It is reinforced by other trends, of course: automation of unskilled and semi-skilled work, globalized competition for mass-produced products, dramatic changes in family structure (lawyers marrying lawyers, doctors marrying doctors, etc., as well as the rise of single-parent families). But the educational distinction is the basic factor.

What's not disputable is how the end of the gold standard has promoted the rise of *wealth* inequality, albeit in a very uneven, boom-and-bust way. Just look at the asset bubbles of the 90s and 2000s, as well as the mini-bubble of LBOs and junk debt in the late 80s. That represented the flashy "one percenters." But there's a pervasive, albeit less obvious effect that affects far more people, the heavy skewing of wealth by *age* in our society. There's always some skew, of course. But the skew has gotten dramatic in the last 20 years, the effect of inflated real estate and stock prices on the one side, and growing student debt on the other.

The political implications are explosive. The rationale for fiat credit/money is to "stimulate" growth and "help" the poor and "little guy." What if it doesn't work that way *at all*?  What if chronic inflation means that middle- and working-class people (not to speak of the poor) find themselves falling further and further behind, while a smaller class of people, plugged in to making money in riskier ways, end up on top? All because our dear Fed wants us to take more risk ... which is not appropriate for widows and orphans. After all, what most people need are bonds, CDs, and so on, not speculative investments. In our world of financial repression and "stimulus," only speculators win -- and even then, not always. Everyone else suffers in silence as their savings shrink in real terms.

Wed, 06/27/2012 - 12:41 | 2565354 Seer
Seer's picture

That's some good clarity there!

The only thing missing, which I think is extremely relevant, is the peak in oil extraction in the US in 1971.  From that point on the export cash cow started to die.

The income thing was all about having "trained" workers for redirecting the wealth.  NOTE: "wealth" is really all about mining/exploiting physical resources.

The big Canary is that for the first time in the US "educated" workers make up a greater percentage of the unemployed.  The old paradigm is collapsing.


Wed, 06/27/2012 - 15:15 | 2565773 OneTinSoldier66
OneTinSoldier66's picture

" But there's a pervasive, albeit less obvious effect that affects far more people, the heavy skewing of wealth by *age* in our society."


I think this is due to older folks haven gotten in on the Ponzi scheme earlier in than the younger generation. My latest issue of Reason Magazine shows a granny in a wheelchair holding up a young fellow for her Socialist Security payment that she is entitled to because a lying politician told her she was entitled to it years and years ago. Large promises(lies) were made by politicians in the past that cannot be kept, so that they could get elected. Of course, everyone on Socialist Security expects those promises to be kept even though they cannot be. This is just part of the Ponzi. Anyway, it's one of the reasons that it now takes two or three income households just to maintain a household, whereas it used to take only one income.


Politicians made promises that they expected future generations to pay for. They weren't responsible or accountable for these promises because they weren't using a money system that used a real, actual, tangible, 'unit of account' as money. Also, the Government has never found a lockbox it couldn't break into. I'm referring to Socialist Security which used to be kept in a lockbox, until they raided it. IIRC it was raided back in the Clinton years, along with other accounting tricks and hedonics, to make the budget appear balanced.

Wed, 06/27/2012 - 12:25 | 2565301 TrainWreck1
TrainWreck1's picture

Why do real work for money when some can just sit around and print it at their leisure?


Wed, 06/27/2012 - 14:06 | 2565688 OneTinSoldier66
OneTinSoldier66's picture

Because it motivates us slaves to work so much harder for them so that they don't have to do any work?



Wed, 06/27/2012 - 12:28 | 2565307 tony bonn
tony bonn's picture

many pundits overlook the key problem with fiat currency - ours is not fiat in the pure sense of the word. what banksters and politicians did in 1971 was to exchange an asset based currency for a debt based currency. that is the cancer on the economy. it is in the cost of money as money. interest is the killer.

Wed, 06/27/2012 - 12:52 | 2565388 Seer
Seer's picture

It was all an attempt to extend a failing growth paradigm.  NOTHING based on growth-as-the-goal can escape the inevitable run-in with the brick wall.

Like two magnets presenting their opposing sides to one another, look at "growth" as a "positive" and the "brick wall" (force to stop growth- physical world of limits) as the "negative," with the brick wall being much larger than the "growth" vehicle.  "Growth" WILL ALWAYS SLAM INTO THE "brick wall!"

Wed, 06/27/2012 - 12:33 | 2565323 dbTX
dbTX's picture

Paper is NOT money; however ass wipe is.

Wed, 06/27/2012 - 12:47 | 2565368 mark7
mark7's picture

Gold standard is obsolete. For example electronics...any circuit board requires certain amount of gold in the various components. So under gold standard you are actually destroying money in the circulation, or at least making it unavailable in easily tradeable form, when you buy a computer or tablet or TV! More the economy grows, more electronics of all kinds are sold and thus, less gold available! Silver also has very many uses. Nice paradox there.

Gold bar fakes are also increasingly difficult to detect without breaking them or without fancy measurement equipment.

Wed, 06/27/2012 - 17:27 | 2566484 Dr. Acula
Dr. Acula's picture

>Gold standard is obsolete. For example electronics...  So under gold standard you are actually destroying money in the circulation

There is also this new-fangled invention called "jewelry", that is made with gold. You actually have to destroy gold to make it. I guess gold can't work in the modern era.

>Gold bar fakes are also increasingly difficult to detect

I heard there was this guy named Archimedes who just recently worked out ways to detect fakes. Again, everything has changed with the modern era.


Wed, 06/27/2012 - 17:57 | 2566581 malek
malek's picture

People like you always fail to point out the other side of the coin they're presenting:

"[The] Gold standard is obsolete" ...and therefore we have to accept and live with the fact that politicians can debase our money at will.

Most likely you are someone who likes decrying social Darwinism, but in effect you are supporting monetary Darwinism, where the one's most adaptable to change (of the monetary unit in REAL terms) come out on top.
Hint: It's not the poor people who do.

Wed, 06/27/2012 - 12:48 | 2565375 billsykes
billsykes's picture

Shuffle money around, use none of your own, take a piece every time, make it as obscure as possible, raise the bar so high for new employees, devalue the university degree, take stupidity to new heights and coerce government officials with lucrative consulting roles after they retire and you are in the best place to make money.


Hugh hendry said it better than me:



Wed, 06/27/2012 - 13:15 | 2565471 Never One Roach
Never One Roach's picture

But at least housing prices have bottomed out.

Wed, 06/27/2012 - 15:21 | 2566018 OneTinSoldier66
OneTinSoldier66's picture



And interest rates will never rise.


And the Government will always have 'conservatorship' of Fannie Mae and Freddie Mac.


And you will always have your Mortgage Interest Tax deduction.


Housing prices have bottomed out means that the price of houses will never go down!



Wed, 06/27/2012 - 13:37 | 2565559 DanDaley
DanDaley's picture

My theory is that the further any occupation moves a person away from physical labor and insulates them from it, the more they will tend to do that thing.  

Manipulating fiat, whether as a banker or a hacker (like the Russians who just drained 75 million from 60+ banks -, makes this process just so much easier than under a more accountable system, e.g. a gold standard...but maybe this is just stating the obvious.

Wed, 06/27/2012 - 13:58 | 2565650 OneTinSoldier66
OneTinSoldier66's picture

Pretty good. I do wish this would have included a graph and some discussion on the amount of National Debt from say, 1900 to present, with an emphasis on the degree in the amount of it's rise since 1971. I have seen such charts in numerous articles discussing this subject and was just thinking it had a role in this article.


I've been waiting all my life to see my Government live within it's means. How motivated am I in helping pay for a debt that I never ever condoned one little bit? I think that I and I alone should be in charge of how much debt I am responsible for. No one nor any Government, has a right to foist debt upon me or to undermine me through a 'money' instrument.

Wed, 06/27/2012 - 16:08 | 2566198 GMadScientist
GMadScientist's picture

You are welcome to protest from prison, Mr. Thoreau

(put your action where your mouth is)

Wed, 06/27/2012 - 22:23 | 2567153 OneTinSoldier66
OneTinSoldier66's picture

Excuse me. Have I taken some action, or am I advocating some action that is illegal or that you think I should be imprisoned for? Please elucidate.


As to what mysterious action this is that you are referring to, there is a chance that I am already taking that action. But it's pretty hard for me to know since this action that you speak of is, so far, a mystery to me!


I have to wonder if you are not only a MadScientist, but also a MadEconomist and a MadStatist.

Wed, 06/27/2012 - 14:19 | 2565743 Hohum
Hohum's picture

Coincidentally (but not really), US oil production peaked in the early 1970s.  That couldn't explain the drop in productivity, could it?

Wed, 06/27/2012 - 15:12 | 2565985 Citxmech
Citxmech's picture

Chris Martenson's hypothesis is that the rejection of the gold standard and the peak in US oil prodution are linked events.

Wed, 06/27/2012 - 16:15 | 2566220 GMadScientist
GMadScientist's picture

How do those dots get connected? (I see Vietnam and spending in general as more relevant to the world dumping the dollar)

Wed, 06/27/2012 - 18:02 | 2566594 Citxmech
Citxmech's picture

I believe it had to do with the resulting trade deficit.  Decreasing domestic energy prodcution lead to increasing foreign energy imports.  This created an exodus of real capital - hence rigging the game with fiat to compensate - which of course lead to job outsourcing and our doomed "consumption/service" economic model.

Wed, 06/27/2012 - 14:37 | 2565839 brown_hornet
brown_hornet's picture

How much was caused by demographics?  Boomers were just coming into the work force en masse in the 70's.  And as we know, most youth don't know their AFAHITG. Then, by the 90's, boomers were in their peak productive years, hence, surpluses and productivity increases. Now, 10,000 a day retiring. Look out below.

Wed, 06/27/2012 - 16:05 | 2566183 GMadScientist
GMadScientist's picture

I'm hoping all the coke they did in the 70s will lead to massive heart failures across the board before we have to pay out too much.

"Son it says here you're 27, but that's look like you could be...45" - J. Browne


Wed, 06/27/2012 - 16:00 | 2566164 GMadScientist
GMadScientist's picture

Mistaking correlation for causation is symptomatic of mental disease, Aziz.

Why ignore labor deregulation, financial deregulation, and the massive explosion of money in politics?

We don't need a new Constitution or amendment to ban "money as speech"; the SCOTUS balances rights against each other all the time and only the most inane, conservative, activist bullshit court in the history of the US believes that entities which aren't people, can use money (which is not speech), to influence the electoral process for their own gains without it fundamentally undermining the trust of the people in their democratic republic.


Wed, 06/27/2012 - 16:17 | 2566233 billsykes
billsykes's picture

Think of of the things that contribute to supposed "more" productivity and efficiency:

-unpaid overtime
-Six sigma, ISO, etc- standardization, continuous improvement, LEAN.
-more "educated" workforce with higher % of degrees.
-computerized costing, computer everything
-efficiency gains with robots
-better manufacturing processes and replaced goods with cheaper or lighter, easier to mold/make equaling greater output plastic from steel etc.
-faster more efficient motors/engines
-Advanced CAD and automated CNC, etc.
-better logistics, GPS, routing software, tracking software.
-Move away from making stuff to services-
-less unionization

SO all of these things, all working together are contributing nothing, no less then nothing? So we are less productive than the 70's with their disco, hair, big cars, and 40 hour work weeks than now with our 60 hour weeks being paid for 35, house music, tattoos, SUVs and 70's movie remakes?

I would think one of these factors would be the addition of military workers in the employment stats (shadow stats) and the possible rise of government workers may have something to do with this- but totally stagnant since the 70's? 

What the fuck? 

Or have we just been 100% efficient at being 0% productive?






Wed, 06/27/2012 - 17:34 | 2566503 Dr. Acula
Dr. Acula's picture

>but totally stagnant since the 70's? ... What the fuck? 

Pretty much. Of course there is no way to scientifically and objectively compare the economies of two different time periods involving different, heterogenous goods and different, heterogenous people. But it's quite arguable.

There is no reason I can see that we can't continue with bad policies and cause the complete unraveling of civilization and the deaths of billions.


Wed, 06/27/2012 - 19:30 | 2566816 JeffB
JeffB's picture

My father had a monstrous mechanical calculator in his office in the early 70s, I believe. It was 2 to 3 times larger than a typerwriter and made all kinds of noises as it mechanically twirled numbered dials around while making calculations. I was the first kid in my class to have a hand held calculator in ~ 1972. Heck, fax machines weren't common until the late 1980s. 

Computers and the internet have been a tremendous boon to productivity. Video conference calls have done away with a lot of travel, and people can send and receive documents, pictures and videos in an instant. Many people can now work from home. My brother-in-law now works from home and his company sold the large 4 story building and grounds.

Cell phones were also another major productivity tool, and were significantly improved when smartphones came out.

Yeah, you would think we'd be smoking the '70s productivity wise.


Wed, 06/27/2012 - 22:32 | 2567178 OneTinSoldier66
OneTinSoldier66's picture

Ahhh, Yes. But you have to keep in mind, we need more Government. Or at the very least, we cannot possibly reduce Government or Government Spending.


The gains from increased productivity must be taken(sucked) up by the growth in Government and growth in Government spending! We couldn't actually have an increase in wealth of the citizens that actually create the wealth now could we?



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