For discussion, a friend of mine posted a link on my Facebook wall wondering what my take would be on these topics. His comment and then my response below.
Robert, I'd be curious to know what you'd say about this. I think it is quite a lucid piece. It's interesting to see a right wing critique of wealth inequality. There are two things I wonder about: would staying on the gold standard really have helped ordinary people enjoy the fruits of their productivity? And is there a way we could do a jubilee that wouldn't wipe out the savings of people who really need them?
It strikes me that maybe he's creating a myth of a perfect America under the gold standard. But maybe the gold standard could have helped ordinary people enjoy the fruits of their labor. Can you see any way it would?
Here's my response.
Pretty interesting, but I think he is exaggerating the negative. It sells his book. I read most of the article (till into the book sales pitch) on my sleek tablet computer using WIFI at a laundromat. He was talking about how American workers have not benefited from America's wealth. I don't buy that idea in total as we are benefiting from so much new technology. The products we use today, such as tablet computers is one example. The internet brings great wealth. Even our public spaces, the parks, bike paths, schools, museums, public broadcasting is rich, in a way, than my childhood. I hear the average supermarket had around 4,000 items during my childhood. Now it's around 40,000 items (specific numbers may not be exact, but the idea holds). In many ways the world today, here in USA, is abundant and makes the world of my childhood look spartan.
The problem is that it seems like most of this wealth is not really accounted for very well. Much of the wealth we get from the internet is free. It's a benefit to the consumer, but how does one pay the worker when the product is free or at very low cost? More mundane things that have been thought of as necessities for years have gotten much more expensive. Important things like housing, healthcare and a college education. Part of that problem does relate to the practice of printing money. As the author of this article does point out the sloshing around of new money inflates the price of assets and hasn't done as much for wages.
Printed money is part of the reason why houses that went for $25,000 during my childhood now go for over 1 million dollars in Seattle at least. While assets like houses have inflated like crazy, the cost of a Xerox copy remains around the same as it was during my college years. This makes it hard to keep up with asset costs if one is working making things like Xerox copies or other products and services.
I'll have to admit I am not an economics expert, or like a friend of mine has says about himself, "I know enough about economics to make me dangerous." That being said, I think remaining on the gold standard would prevent the printing of money, but it would cause many other problems. It's kind of a pick your poison trade off. I think the gold standard is too confining for a growing economy and what we have now allows for more flexibility.
I may be suffering from biases created by NPR Radio. There is a lot of educational talk about the gold standard in the show called Planet Money. I heard one of the shows with my radio while biking around Lake Samish a few months back. Doing a Google search, I found several of those podcasts. Planet Money has done a whole series on the virtues (maybe) and drawback of the gold standard.
Going back to the gold standard would probably create as many problems as it solves, or maybe even more problems, I would guess. Instead, I think we just need to manage things better. Figure out how to better channel money to workers and less to assets. Taxes on the wealthy and more generous domestic spending can help; in the opinion of us liberals at least.
Part of the problem is when the Federal Reserve prints money, they try to aim at a balance of stimulating the economy without causing run away inflation. Problem is that they are looking at inflation across the whole economy and don't seem to be seeing that there are pockets of high inflation; like house values in many cities, while overall inflation remains low. People are hurting because certain things, like house values, go up while wages stagnate. When the things that are inflationary are necessities, it's a problem.
Better safety nets would help, but also the Fed may be pushing the gas peddle of creating money too much because they aren't looking at the things that are inflating. Maybe they should back off the accelerator to try and tame house value and other asset bubbles. The problem is that backing off the accelerator means lower economic activity and lower employment. That is why unfair distribution of wealth is a big part of the problem. We should have a better way to survive a slow economy. Better than tossing people out into the street.
In an ideal world, maybe they would back off the accelerator and let economy slow down. I am a fan of lower workweeks and striving for quality of life; rather than just material wealth. This could also help the environment. We, as a society, need to learn how to thrive with less consumption. Still have improving quality of life, however. It's how we organize society, wealth distribution and so forth that matters the most.
Today we have many things, like tablet computers, which have vastly improved quality of life, but they are not counted as wealth in the same way that a place to live is. Lots of quality of life things aren't even counted at all by economists. The time parents spend with kids, for instance. Too much of society takes money too seriously.
Speaking of taking money seriously, the concept of a debt jubilee is interesting. Things like this may have to happen and it would be hard to have a large jubilee without ruining people's savings on the other side of the equation.
In a way, there are small jubilees happening whenever there is a bankruptcy. By coincidence, last night during my custodial shift, I listened to a podcast about the post bankruptcy era for the city of Vallejo, California. 10 years ago, that city government declared bankruptcy which is kind of like pushing the reset button. It may have to happen in a lot of cases. Now Vallejo is getting back on its feet and thriving in many ways. Little bankruptcies can be absorbed in the financial system without too much disruption for most people's savings, but something big, like the US government going bankrupt, would cause the loss of a lot of savings. It can happen, I would guess.
I have some retirement savings in the YMCA plan. It would be sad to loose lots of that, but if everyone else was also loosing, we would all be in the same boat. Could mean cost of living drops also.
I don't know what the author recommends as I haven't bought the book, but my own idea is to cherish the life I live now and the life I have lived in the past. My bike trips across USA, for instance. I'm banking some on the future, but realize that the future is unpredictable. I've had a pretty good life anyway. I hope I have a good retirement, but part of my strategy is to enjoy the life I have today. Much of my good life has already been lived. Already in the bank of life experience, so to speak.
My friend comments again.
Thanks, Robert. Good reflections!
That helps me to understand how monetary policy can distort the economy in some ways.
I read an economist some years ago who said we should discourage home ownership. He said speculation in real estate is always behind all economic crashes, in some way at least. Real estate should be highly taxed.
But when I mentioned his theory to a lady at church, she said "somebody has to own the houses." Why not ordinary people?
I hear that in Germany there is much tighter controls on windfall profits from selling real estate at least. More controls if real estate has inflated significantly. Condominiums near central Berlin are a lot more affordable than in London, UK where those controls are not in effect.