Almost forty years ago, the United States had seemingly reached the zenith of economic power. Then on August 15, 1971, the federal government abandoned the gold standard, and the last tether between Federal Reserve policy and fiscal responsibility was severed. For America, it was when the future went away.
I instinctively sensed this loss, because I grew up in the 1960s and was keenly interested in "The Future." I was a precocious science fiction fan, when science fiction was about optimism and hope in the advances of science and technology. After going to the Moon, what couldn’t we do?
The decades up until the 1970s had shown tremendous progress. In twentieth century America, living standards skyrocketed. Automobiles, indoor plumbing, electric lighting, telephones — the list of marvels was endless. Average life expectancy increased by fifty percent. We did indeed sense a momentum that would carry us to the stars.
Popular culture envisioned this as straightforward economic extrapolation. The cartoon The Jetsons portrayed a "typical" twenty-first century family living in a spacious fully-automated home with a flying car, robot maid, and four-hour workday. The movie 2001: Space Odyssey had a hotel in orbit and city on the Moon.
But then something happened, and it happened around 1971. Being fifteen at the time, I had no idea it had to do with the abandonment of the gold standard. I merely noticed the optimism had suddenly vanished.
Suddenly my dad, who ran a successful construction business, started wondering aloud about how he was going to put food on the table. He and my mother got into arguments about where to buy hamburger for the cheapest and we kids were sharply scolded for leaving the lights on.
Inflation and unemployment reached double-digit levels in what was called "Stagflation." Some national commentators warned that even economic collapse was in the offing.
Then, after more than a decade in the wilderness, the economy finally stabilized. Government economists congratulated themselves for "fixing" the business cycle.
But — where was the future?
True, by the official econometric indices, the economy of the 1980s was booming as before. Unemployment and inflation were low, and Gross Domestic Product growth had returned to the levels of decades earlier. Officially, everything was getting better and better . . . except the middle class knew different.
I had graduated from college and was working as an engineer by then. Going by the historical trends of recent decades of American economic progress, I expected to live better than my parents, who had lived better than their parents. Instead, my salary was barely keeping up with inflation.
I had grown up among other middle-class families but now I looked at housing prices and realized that I could barely afford to buy a home in the community where I had been raised. Living better? No, despite paper-GDP growth, the economy was running backward for the middle class.
By the late 1990s, my generation had come to realize that the promises of the twenty-first century had been broken. We couldn’t afford flying cars. Instead of robot maids, mothers had to work overtime to keep roofs over their families.
The future we lost was about more than gadgetry. Less poverty, less drudgery, greater health, abundant energy — our progress has been slower than anticipated. And now, rising fuel prices and declining life expectancy threaten us with being dragged back to the barbarous past.
How did abandoning the gold standard lose the future?
In theory, a fiat currency can function indefinitely, so long as the monetary printing presses are restrained. In practice, once the discipline of the gold standard was abandoned, the banksters immediately became profligate. And the greatest damage wasn’t the boom-and-bust cycle, it was the effect on economic growth.
Even an annual monetary inflation rate of a few percent will erode the savings of successful businesses, which must then borrow to finance capital investments. Interest costs then eat profit. That curtails re-investment and R&D, stifling innovation and stunting economic growth.
But can businesses even acquire loans? In what amounts to a giant money-laundering operation, the government-enforced banking cartel prefers lending its printing-press dollars to select cronies in the financial industry. Interest rates on those loans are kept artificially low by inflating away the savings of productive enterprises. Our manufacturing base is bankrupted so that financial speculation can be lavishly subsidized.
Today, burgeoning Federal-Reserve-induced debt causes America to falter from lack of value-added investment. Once-impoverished China fills cities with skyscrapers, while we can’t afford to fill potholes. Now even the computer industry staggers under the ravages of Keynesianism Unleashed.
To bring the future back, first find where it went. To do that, follow the money.
Joe Schembrie [send him mail] is a writer who lives in Bellevue, Washington.