PARIS – It’s back to Europe. Back to school. Back to work.
Let’s begin by bringing new readers into the discussion… and by reminding old readers (and ourselves) where we stand.
Small and Lonely Group
As a Diary reader, you join a small and lonely group.
But we know something others don’t.
We – and apparently only we – understand the real cause of our economic malaise.
What malaise, you ask?
Well… how could the richest, most technologically advanced, and most scientifically sophisticated economy stop dead in its tracks?
The rate of economic growth has gone steadily downhill for the last 30 years. By some measures, after accounting for the effects of inflation, we’re back to levels not seen since before the Industrial Revolution.
And how could such a modern, 21st-century economy make the average person poorer?
As we saw yesterday, when you measure actual inflation, rather than the government’s crooked numbers, the median U.S. household income is 20% lower today than when the century began.
And why would our modern economy concentrate wealth in the hands of so few, so that only the richest 1% make any real progress?
You may also ask a question with an obvious answer: Why are the richest and most powerful people in the country overwhelmingly supporting Ms. Clinton in the presidential race?
You find the answer to all these questions the same way: Follow the money.
Ms. Clinton is raising record amounts of money – $80 million in a single month.
Big corporations, banks, military contractors, rich people – all are pitching in to make sure Hillary is our next president.
Because she promises to protect the status quo.
That, of course, is what government always does. A free economy is a precarious place for wealth. It is despised by nearly everyone – especially the rich.
In a truly free market, the process of “creative destruction” can’t be controlled. New wealth is born. Old wealth dies.
Naturally, people with wealth and power try to use government to get more wealth and power… and to stop the creative-destructive process. They want to protect what they’ve got already. That’s why the real role of government is to look into the future and keep it from happening.
Hillary stands like King Canute, promising to stop the tides of economic history.
What’s this got to do with money?
Let’s ask another question instead: What is the source of Ms. Clinton’s campaign pile? Whence cometh all this lucre?
“It comes from rich people,” you will say.
But where did the rich get so much money?
Ah… that’s where it gets interesting.
We remind you of the context: So far this century, only the rich have gotten wealthier. Naturally, they are keen to see the system that gave them – and them alone – such great wealth continue.
Old Money, New Money
The key to understanding it all is the money system itself.
The money you spend today is the money that President Nixon inaugurated on August 15, 1971.
That’s when he reneged on America’s promise to convert foreign creditors’ dollars to gold at a fixed price of $35 an ounce… and broke the last link between the dollar and gold.
Nixon’s new money looked, for all the world, like the old money. It seemed to work just like the dollar always did. And the most distinguished economist of the era – Milton Friedman – advised Nixon to put it in place.
Subtle… slippery – the difference between the old dollar and the new one went unnoticed for 40 years.
Old dollar? New dollar? Who cared?
Even now, most of the world has no idea what happened. But we, dear reader, are beginning to connect the dots.
Here’s the basic difference: The old gold-backed dollar represented wealth that had already been created. You got more dollars as you created more wealth.
Money was real wealth.
But this old money was hard for the authorities to control. They said it was uncooperative. Intransient. And stubborn. They wanted a new kind of money… and a dollar they could manipulate (to make a better economy, of course).
So, the new dollar was created. And this new dollar was not based on wealth, but on debt.
It was not backed by gold. And it was not connected to the real wealth of the economy.
Instead, it was brought into being by the banking system – as a credit. It increased as people borrowed and went further into debt, not as they grew wealthier.
The more they borrowed, the more they could buy. This gave the economy the appearance of growth and prosperity. It allowed millions of Americans to increase their standard of living, even as their salaries stalled.