Three policies have arguably been the main drivers in pouring trillions of dollars into the pockets of wealthy banks and transnational corporations while hollowing out the American heartland.
Massive printing of fiat money to support Wall Street. The huge expansion the supply of money has also funded decades of trade deficits and fueled inflation. The US ended silver coinage in 1964, and Nixon “temporarily” ended the gold standard in 1971. These changes mean that there the Fed is free to print money without worrying about running out of gold or silver.
The metal value of a 1964 quarter is currently $5.81. A silver quarter would still buy a meal at McDonald’s or a gallon of gasoline like it did in 1960.
Free trade combined with enormous trade deficits paid with fiat money have decimated the US industrial base and manufacturing jobs. It is no coincidence that US manufacturing employment peaked in the 1970s and has declined since then in spite of adding 100 million to the population.
Huge flow of low-skill, mainly illegal immigrants have further depressed the labor market for the American working class while providing cheap labor for the wealthy. It is no accident that the fraction of the gdp going into wages has been declining since 1971.
In fact Gold and the S&P have been tracking each other for almost a year.
(Yet gold did not invent AI or anything like that.)
It’s almost as if gold and houses and stocks have not really gone up instead the dollar has gone down.
Free trade combined with the dollar’s status as the world’s reserve currency have destroyed the US industrial base.
The dollar’s reserve status means that the dollar’s has been overvalued for decades compared to other currencies. The end of the gold standard in 1971 means that the US can always fund trade deficits by printing more dollars without worrying about running out of gold.
The US once had the world’s largest industrial base. It was the arsenal of democracy during WW2, but since the 1970s the US has declined while the industrial capacity of China and other nations have exploded compared to the US.
China passed the US in steel production in 1993. Now it produces ten times as much as the US.
We are the world’s reserve currency because
of all major currencies
US interest rates -minus- US inflation rate is consistently the highest.
IOW the US has the highest “real” (inflation-adjusted) interest rate.
What are you gonna save your money in
→ something that pays higher interest, or
→ something that pays lower interest?
The US dollar replaced the British pound as the world’s reserve currency when the US bailed out the British government after WW2:
In 1946 Britain took a loan for $586 million (about £145 million at 1945 exchange rates), and in addition a further $3.7 billion line of credit (about £930m at 1945 exchange rates). To the total loan of $US3.75bn, Canada contributed another US$1.19 bn, both at the rate of 2% annual interest.The debt was to be paid off in 50 annual repayments commencing in 1950. History of the British national debt - Wikipedia
Since then, the US has used its position as the center of finance and the West’s dominate economy to maintain the position of the dollar.
The last thing that the US wants is a free market when it comes to reserve currency. NATO and the US allies in the Pacific are effectively US protectorates, so they are not free to abandon the US dollar, but BRICS is viewed as an existential threat to dollar dominance. That explains a lot about the talk of war with Russia, China, and Iran.
Another thing that contributed but is hard to quantify.
When WW2 ended we were basically the only country left that even HAD an industrial complex intact.
Nations would have started rebuilding once the war was over, but their production capacity wouldn’t have recovered instantly. The rest of the world would have slowly ramped up which over time would have looked like the dollar declining but it would have in fact been other countries just rebuilding. Partially.
Yes, the US was the clear winner when it came to WW2. North America was the home of the largest industrial economy not to suffer from enemy bombing.
Most of Europe, Japan, China, Korea, etc. had enormous war damage.
The US appears to be following a path similar to that of Spanish Empire after it established its empire in the New World. Vast expansion of silver production in New World allowed Spain to buy manufactured goods from northern Europe, while Spanish industry suffered. The influx of silver allowed Spain to become the dominant power in Europe, but the silver production eventually declined. Spain ended up exhausting its wealth and power on decades of wars that ended with the Peace of Westphania in 1648.
Well, if the US achieved industrial output = x
only because the other economies were destroyed by war,
then logically output = x is temporary and will go down regardless of good or bad gov’t policy.
US gold reserves were dangerously low in 1971 as a result of a tiny trade deficit by today’s standard. In a real world, the value of the US dollar should fall, which would allow US industry to become more competitive to balance things out. But the status of the dollar as the world’s reserve currency means that the US just keeps exporting newly created dollars to fund the enormous trade deficit.
Transnational corporations have made trillions of dollars by outsourcing manufacturing jobs overseas. Investment bankers have made trillions with new derivatives markets and financial manipulations. Financial centers in coastal cities have seen huge influxes of cash, while the heartland has been strangled.
The best and the brightest in the US end up running hedge funds. Actually producing anything tangible has become irrelevant since we can just print more money to bring in more container ships from China.
Of course, the whole system is basically a gigantic Ponzi scheme.
Well, above you are describing a lot of symptoms, and your descriptions are all basically accurate, but you have yet to show how free trade is the culprit.
Let’s try this thought:
If a US government make wages (artificially) high, but governments in China and Mexico and India, intervene to keep wages low, in which direction would the flow of jobs be?
Likewise, what if the US government makes energy artificially more expensive but China, India and Mexico intervened in the opposite direction causing energy or energy-intensive products to become cheaper?
My point ---->
Every symptom you have said above is a symptom, but it is not likely caused by love of the free market. In actuality it is caused by the misguided efforts of people who oppose the free market, bash corporations and seek big government solutions to protect them form imaginary boogey men.
.
.
.
. Energy-intensive products:
Iron ore
Steel
Aluminum
Cement
Glass
Paper and pulp
Chemicals (e.g., fertilizers, plastics)
Petrochemicals
Automobiles
Textiles (automated)
Free trade is not really “free” when you look at the bigger picture.
For example, it may be cheaper to outsource weapons production to Russia and China, but how would that work if we plan on getting into conflicts with those countries?
Countries like China do not have to meet the same environmental laws. It may be cheaper to make steel in China and import it to the US than to pay for pollution controls to make it here. But can the US survive as a major power if it has to import basic commodities from China?
The financial system is anything but free. It is rigged to allow unlimited printing of dollars while at the same time artificially overvaluing the dollar compared to other currencies. This situation favors finance and transnational corporations, but it means that US manufacturing and agriculture are noncompetitive.
China intervenes:
Uses heavy-handed (Communist) methods to make labor cheap and support industry.
USA intervenes:
Uses lighter (lefty capitalist) methods to do the opposite.
There are different degrees of intervention on both sides both with the same effect(s):
reducing US industrial output, increasing Chinese industrial output.
How anyone can look at that and say “the LACK of intervention is causing this” is truly mystifying.
Yeah most of the destroyed countries recovered much faster than anyone then or now really expected them to. Germany was approaching its pre war output just ten years after the war. And Japan was in even better shape. France was doing shockingly good despite the Nazi occupation and their government blowing its efforts in Vietnam and Algeria.
