Monday, August 15, 2011
Monday, August 15, 2011 5 comments
We often talk about the 30 years of Reaganomics that destroyed the middleclass but today is a 40 year anniversary that is of great significance as it denotes the real beginning of the end. On this day in 1971 Richard Nixon stopped redeeming USD in gold for foreign governments. He claimed he feared a run on gold, supposedly the Brits had asked for $2 billion in gold at $35/ounce the day before. This effectively ended the Bretton Woods Agreement on Currency and Trade named for a small town in New Hampshire where all the allied governments met in 1944 to layout the post World War II economy.
Nixon tapes reveal that he hoped that massive currency printing by the Federal Reserve (once free of needing to pay in gold) would stimulate job growth with unemployment having spiked from 4% to 6% (ahh, the good old days). To keep the stock market from panicking he also announced a 90 day wage/price freeze and the tapes reveal that the Nixon’s people spent most of their time not in debate over the consequences of this action but rather if it was wise to pre-empt Bonanza on Sunday night to announce it.
This 90 day wage/price freeze was really a PR campaign to blame Labor Unions and farmers for inflation and not the Wall Street banks who were really to blame. This turned into 1000 days of hodge podge government regulation that favored the big banks and corporations and tanked the economy for everybody else. It produced double digit inflation that persisted for ten years and this is where the term Stagflation comes from, defined as high inflation and no growth. The bad economy of course opened the door for Reaganomics which was more of the same bad policies on steroids.
It’s popular to blame LBJ and Nixon for trying to hide the real cost of the Vietnam War by spending lots of USD overseas and then inflating the currency to keep from paying for it in real dollars or gold. It’s more widespread than that as the big Wall Street banks and the large corporations were simply manipulating the system to enrich themselves, the War was just one profit center.
The early seventies was when the Financial Services Sector really started to grab hold as inflation required everybody to start borrowing money to stay in business. Credit cards became common place as mom and pop businesses could not continue to provide credit and this opened the door for the corporations to start pushing them out.
The whole thing was systematic and thorough because it was official “policy” that the billionaire (they really were only multi-millionaires in those days) funded think tanks pushed hard for this agenda with government. Political funding flowed from the rich and corporate America to the Republican Party and any Democrats that would look the other way.
Nixon actually masqueraded as a liberal and even called himself a Keynesian on economics (the right called him a Marxist). He was neither, he let the Democratic Congress have liberal programs like the EPA and even offered a healthcare system identical to “Obamacare”. In return Congress looked the other way while he set in motion an economic policy that FDR and Keynes referred to as “Economic Royalism“.
Here we are today with the top ¾ of one percent holding 45 trillion in wealth (more than the bottom 90%) with another 6 trillion hidden overseas. This is expected to more than double by the end of the decade to 100 trillion. The very top ½ of one percent are the really wealthy that can borrow money at zero interest, evade almost all taxes and totally intimidate the government.
You wonder why Obama doesn’t save us from this? The country was long gone before Obama came to office. Only the retaking of Congress by the people could save us, but the majority of the country think that they are in the same class with the top 1%, or could be if they just pull on their bootstraps the right way. They don’t realize that their bootstraps are owned by somebody else and that no amount of pulling will help. www.prairie2.com