Bernie Sanders Stumbles Upon the Monetary Question

Is it possible the Democrats could find their way to honest money? Feature the Twitter posting the other day with Senator Bernie Sanders talking about the plight of — to use his Marxist lingo — the working class. “Growing income and wealth inequality and the decline of the working class in our country is not a new phenomenon attributable to the pandemic,” he says. The number of years he traces back the phenomenon is 47.Remember that number. “Despite an explosion in technology and a huge increase in worker productivity,” Mr. Sanders says, “the average American worker today is making $30 a week less than he or she did 47 years ago after adjusting for inflation.” In other words, the Senator adds, “while the cost of housing and child care and health care and prescription drugs are going up, wages have stagnated.”So what in Sam Hill happened 47 years ago? That, it turns out, was 1973. That March, a State Department history records, the Group of 10 inked an arrangement wherein six European countries “tied their currencies together and jointly floated against the U.S. dollar.” That “signaled the abandonment” of Bretton Woods, with its system of a fixed exchange rate at which America would redeem dollars in gold.Before that, our economy was working well for the working stiffs whom Mr. Sanders seeks to serve. The Bretton Woods Agreement had been launched in the closing days of World War II. America agreed to redeem dollars held overseas at a 35th of an ounce of gold. The economy boomed. Jobs, too. Between 1946 and 1971, unemployment averaged but 4.6%. The personal bankruptcy rate was low, too, as was the inequality index.Those two indicia are favorites of Senator Elizabeth Warren and economist Thomas Piketty. After 1973, though, bankruptcies started soaring. So did Mr. Piketty’s inequality index. And so did unemployment. Mr. Sanders reckons that just since 1990, “the top one percent have seen their wealth increase by $22 trillion, the bottom 50% have seen their wealth go down by $776 billion.” Mr. Sanders calls it “incredible.”The senator also says that if income inequality had remained the same as it was in 1975, the average worker in America would be making $42,000 more today. We’re not here either to vouch for or to deny Mr. Sanders’ numbers. The Vermont socialist wants the government to respond with enormous spending on top of what the pandemic has cost. We’re here to suggest that maybe Congress ought to address what happened 47 years ago.That was America’s plunge into the age of fiat money, a currency that the government can conjure from computers — and then lend to the government to fund its deficits. Since 1973, the value of a one-dollar Federal Reserve Note has plunged 98% to an1,838th of an ounce of gold. Meantime, there are apartments in New York cresting $200 million in buildings outside of which people sleep in the street.We understand that non-monetary forces have also cut into the bargaining power of American labor. We’re thinking of, say, the integration of China, India, and Easten Europe into the world’s trading system. Or the rise of digital technology. Or the way the shrinking world expands what a recent book, “The Great Demographic Reversal,” reckons is the “effective labor supply” of the world’s advanced economy.We are, though, three years away from the 50th anniversary of our experiment in fiat money. If the GOP loses the Senate, it will be deep in the political wilderness. What an ideal time to establish a monetary commission — a private one — to take a serious look at the role fiat money, along with such 21st century side-effects as artificial interest rates and towering debts, have played in our troubles. And to engage with Mr. Sanders and other socialists and Democrats wrestling with the disparities of the fiat era.It’s not our purpose to suggest that Bretton Woods was perfect. No less a figure than Henry Hazlitt warned at the outset that it was an inflation trap. No less a figure than Paul Krugman, though, has written that he yearns for the economy of the 1950s. It is our purpose to suggest that now is an ideal time to confront the record of the era of fiat money. It’s the biggest unredeemed campaign promise of the Trump years.

Bernie Sanders Stumbles Upon the Monetary Question

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