For those old enough to recall the 1970’s, the present economic turmoil looks a lot like the stagflation from fifty years ago. Just like a half century ago, we have a mix of inflation, economic stagnation and incompetent leadership in Washington. Joe Biden is not exactly Jimmy Carter, as Carter was an honest man, but like Carter, the public sees him as a man out of his depth. Like Carter, he wound up in the job due to a crisis within the political class over a previous president.
It is a comforting parallel for many people, because if the pattern holds, it means there is a Ronald Reagan coming after Biden. The saner elements in the ruling elite will rally to a sober minded governor who can withstand the progressive crazies. Many people are looking at Ron DeSantis as the man who can save the system. Trump running in 2024 could throw a wrench in the story, but maybe the ruling elite has a plan to get that element out of the script so the story can continue.
This problem with the script is a reminder that historical parallels are like all generalizations in that they are a starting point. They help frame the times to better understand the details. We know the general plot of one side of the comparison, so it allows us to infer things about the other side. From there we have a basis from which to analyze the present. In this comparison, however, the observable similarities have different direct and root causes.
For example, the current energy crisis is different from the crisis in the 1970’s, which was mostly driven by the currency war and an oil embargo. The collapse of the post-war currency arrangements not only gave us inflation, but it also created havoc in commodities, which are sensitive to currency fluctuations. The big driver was the Arab oil embargo over US support for Israel. The embargo was always a short term strategy to get a better deal from the West.
The present energy crisis is primarily systemic. Generations of mismanagement are finally showing up in the price. The United States was the largest exporter a few years ago, but then the government reversed course and exports have collapsed, making America a net importer again. Europe is smashing its energy system in an effort to make the Russians look bad on Twitter. There is more than enough energy to go around, but the system to distribute it is collapsing.
In the 1970’s, the solution to the energy crisis was to make a deal with the Arabs so they would end the embargo. There were lots of new energy schemes launched to take advantage of the crisis, but the final solution was a deal with the Saudis. This current energy crisis does not have a simple solution. In the West, energy policy has been corrupted by the same cranks who have corrupted the culture. It will take a revolution to fix that problem in order to fix the policy problems.
Systemic problems are also at the heart of the inflation crisis. In the 1970’s, the issue was the old fashioned Econ 101 problem. There was too much money chasing too few goods, resulting in inflation. This time, the issue is more about systemic problems in the global monetary system and in the global supply chain. This is where dumb people like to say, “it is as simple as…” and then finish with their favorite bromides from the Mises Institute, but the current inflation crisis is not a simple one.
For starters, the monetary system that was put in place in the 1980’s assumed a few things that are no longer true. One was that the excess dollars created by Washington would be absorbed and laundered by low cost counties. This worked while Asia had an infinite supply of cheap efficient labor. Extra dollars could flow into these countries as economic investment. The extra from developing countries would then return in the form of assets like treasuries and equities.
That system is breaking down for two main reasons. One is China is becoming a mature industrial nation, which means labor is no longer cheap. The Chinese understand this and they are shifting policy to encourage domestic consumption rather than focus on exports. All of a sudden, those extra dollars are no longer as welcome in China as in the past. Instead of returning as assets to America, they hang around the system chasing too few retail goods.
Another cause is the breakdown of the dollar system. The dollar itself is doing great, but the rest of the global currencies are not doing so well. Their strength has been pegged to the health of the system based on the dollar being the global currency. As this system shows signs of crisis, the weaker currencies are in free fall. The Euro, the secondary global currency, is falling sharply. Of course, the ruble is booming, due to the crackpot policy response to the war in Ukraine.
The point is the solution to the current inflation is different from what happened fifty years ago because the causes are different. In the 1970’s, the Fed could tighten the money supply, wring out inflation and force a corresponding correction in the system with a deep, but short recession. This time, simply raising rates will not be enough to address the inflation problems. It could also trigger a crisis in the financial system, which is built on the assumption of free money from the Fed.
There are more comparisons like this, but the bottom line is that the crisis of the 1970’s is similar to this crisis, but the causes are different. Back then, America was a healthy business in need of new management. The demographics were good, the social capital was still strong and the working population was young. More important, the ruling class wanted a strong America and saw it as their duty to deliver it. A few tweaks to the system would unleash the economic power of the country.
The current crisis is driven by different forces. This is an end of cycle crisis as the American empire reaches its terminus. Critically, the demographics are much worse, the productive population is old and the social capital has been spent trying to prove Mother Nature wrong for fifty years. More important, the ruling class is now populated by feckless grifters and ridiculous people. They see their duty as throwing fuel on the fire in order to prove how little they care about the country.
What this comparison between this crisis and that of fifty years ago reveals is that this crisis is different in nature. There are general parallels, but the underlying causes are vastly different and that means the results will be different. New management may walk through the door in the next election, but unlike 1980 they will be taking control of an enterprise that needs bankruptcy protection. It may even require a fire sale to clear out the unproductive segments at the top.
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OT: Today, Denmark votes on whether to abolish our exception a common EU defense policy so we may send our bois out to police former French colonies and such.
Upvote to send some 1783-energy Denmark’s way.
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Like the Finns, the Danes appear to be succumbing to this madness sweeping the West. It is sad to see.
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We’ll see. The last three EU referenda returned a fuck you to the globalists. Though this time, they allowed mail in ballots, ominously, and a lot of the anti-EU Boomerwaffen is dead.
The government campaign has been to essentially ignore the whole thing, hoping that people forget about it and stay home on the sofa. They’ll tell you that you’re paranoid for suggesting that Brussels would even want an army they could dispose of without asking anyone democratically elected: it will never happen.
When asked, their argument is: “it makes no difference one way or the other, so you might as well vote yes.” That’s exactly the same sales pitch they offered at the last three EU-referenda, so I’m cautiously optimistic.
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The only reason you had stagflation in the 70’s was because we had defaulted on our debt. What do you think the arabs selling the oil would rather receive, Gold or pieces of paper with dead presidents on them? The only reason you had the 80’s was because the debt ceiling (private and public) had been breached and could be expanded enormously which it did. The world went along because the soviets were on their last leg and what else were you going to do? This ain’t the 70’s, now you have to major countries who seem to have been planning for this and are creating an alternative.
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Clearly the answer was dollars. They wanted dollars and that is why they agreed to the petrodollar scheme. That guaranteed them lots of dollars.
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The embargo was due to no more gold being sent for oil, the solution via kissinger was protection and dollars. Protection being the most important part, the dollars were just a bit of sweetner.
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Protection meaning 30 year gold futures contracts, paid for in dollars, now well past their expiry date.
Not sure about the 30 year gold futures contracts, but i also believe US oil production peaked in the early to mid 70’s, but correct me if i’m wrong.
A tecnical detail that stuck with me, I doubt it’s relevant to the better informed arguments made here.
Plus, those futures are bound to be rolled over, I don’t know enough about banking, metals, and currency forex to intuit the power shifts.
Let’s not forget the military aid and bases that went along with those dollars.
1945 led to 1971: The plebs fought the war and were given a good deal by the men who led them. A good job, a good pension, a good deal.
1971 led to where we are now: The unions were busted by Volicker (but not .gov unions, curiously enough) and good wages were substituted with cheapish credit. The jobs went to China and Mexico which kept the prices down and the illusion of prosperity alive.
Now is either going to lead to the greatest tyranny ever known to man or thunderdome.
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“Now this leads to thunderdome” may be the coolest meme ever
…because it’s true
Wouldn’t hurt to have a 1000 CEO’s like E. Musk writing memo’s saying “Pretend to work somewhere else” while ending the “work from home” ridiculousness.
Instead we have companies who obsess over their ESG rating (Environment, Social (LGBTQ+), Governance (political fad causes/diversity in high positions).
Even though it clearly guts the core mission of the business.
CEO’s grift as much as anyone now; mature businesses take their cues from political leaders who couldn’t run a lemonade stand.
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Sometimes, at this point in the decline of empires, you get a strong man dictator.
Whatever happens, it will be interesting to watch. And at my age I have no dog in the fight.
Break out the popcorn and sit back for the spectacle.
His name was Lincoln. Now we get Honorius.
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We are in that phase. It is just a feminine version of it. Instead of a man with a mustache it is light-in-the-loafers types and single women dictating policy from behind committees and bureaucracy. There is nothing democratic about America. That is just a show to hide reality.
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the Lizafication (with a “Z”) of America!
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On the demographic issues, Ramzpaul did a video within the last couple of weeks about how Japan really doesn’t need more children because their cities are already overcrowded and they don’t need that many people. He neglected to mention the population distribution by age graph of Japan almost looks like an inverted pyramid. They are headed for a sharp population decline and are under significant pressure to start taking in third worlders to reverse it like has happened in the rest of the world.
Not only are developed nations not producing enough of their own children to keep functioning at a high level, the ones they are producing tend to range from mediocre to a drag on society. There is little evidence anyone among world elites has thought seriously about these problems beyond assuming globalism will make everything work out alright.
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“and are under significant pressure to start taking in third worlders to reverse it”
What they need is deflation of both the debt and the population.
Reality is trying to tell them (us) something about limits and growth.
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Demographics is a tabu among the ruling class. Afghanistan population increased from 18.mill til 38.mill in the 20.years the west was there. 40% of is food was imported when the west left. Food shortage quickly become a problem and Taliban now get aid from the west. When the “Arab spring” broke out due to increases in wheat prices in 2011, Egypts population was 84.mill. Today it is 25.mill higher. They will not talk about it because they have not solution to it .
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“They will not talk about it because they have not solution to it.”
Well, actually, the nearly all-white Davos class does, I just wish they wouldn’t include their own people in that final solution.
We’re the Talented Tenth of the planet.
I mean, we’re 1/10th of world pop, why do the rest need our spaces so badly?
“under significant pressure to start taking in third worlders to reverse it”. because this has worked so well everywhere it has been tried. sorry to tell you thjs, but you are a normie.
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I am not advocating for that, but some people in Japan are and they are getting pressure from the “international community.” They are trying to do it in a controlled way, good luck to them in doing that without gutting their country. I would encourage them to promote a higher fertility rate for their own people.
https://foreignpolicy.com/2020/06/23/japan-immigration-policy-xenophobia-migration/
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So what is the probability that a messiah (DeSantis?) will be elected president, accompanied by a sufficient number of uncorrupted senators and congressmen, to enable a course correction and get the country back on its feet? If you are addicted to the Comfort First Imperative (and otherwise a fat slob with low motivation), you will chase this pipe dream regardless of the odds. If you are still worth your salt, chances are that the Stasi will have already disarmed you and placed you in a detention camp before the 2024 pretend election occurs.
Analyzing and prognosticating changes nothing. Getting fit, improving your aim, and disappearing into nobody status will keep you vertical through the collapse and serve you well as the natural world of evolutionary fitness selection resumes post-collapse.
Also remember that in the 1970s, you could buy a nice home for like $30,000. Near Chicago and not in the ghetto. And you could go to university for $3,000, the same price as a Datsun.
Fast-forward 45 years and you got all the same problems, but everything is expensive to boot. Vamos revolución!
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Also if you had saved money, you could simply park it in the bank and get a good rate of return. In this market, there is nowhere to hide from 8% inflation.
Residential real estate so far has been a refuge from the high consumer inflation
But you’re still stuck because of you can’t find anything to replace it where you come out ahead
Glorified prison asylum we live in, and Biden’s the warden. And we got Fauci performing experiments on us. And then we have all the screaming crazies roaming the halls, and men turning into women.
There has got to be a better way. Here I am in complete agreement with TomA. The collapse is the cure.
their favorite bromides from the Mises Institute
Uber monetarist Milton Friedman and many others also believed that enpixelating money, the modern equivalent of Septimus Severus’ diluting Roman gold coinage with base metals, is really the only cause of monetary inflation. The money creators have been helped along by cranks like Warren Mosler and Stephanie Kelton and their “Modern Monetary Theory”, which posits that the state can’t issue a bad check, and that all sovereign funds, those used to pay taxes, the nomenclatura and the military, are legitimate as well as legal.
It’s forgotten that in the earliest years of the country there was no national currency. American trade was carried on with Spanish, British, French and other precious metal coinage. People shied away from paper money. Ecuador, which adopted the US dollar as its own currency in 2000, could be in for a rude awakening.
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Two other differences.
1. In the 1970s, wage and price controls produced the gas lines still seen in news footage of the time. We don’t have that, just higher prices.
2. The Soviet menace focused everybody’s mind on getting America back on track. Today, even China is not seen as threatening in the same way.
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The other very important reality was back in the 70s the gas shortages were regional. They never affected us down in Florida.
And this brings to mind so much of the other stuff that supposedly is a feature of American history and life. Just a more personal example. But you always hear in the media how Italians were discriminated against blah blah blah. Maybe that was true. In say the northeast. But it was never true where I come from, and I never heard anything like it until I got older and nationalizing the northeast media became the norm.
Moral of the story: anything that comes out of the national media is often a load of garbage.
This brings to mind someone like victor davis Hanson. Seems much of his analytical shortcomings come from being so stuffed with historical knowledge like a cluttered attic that he can’t move anywhere without bumping into a piece of old furniture. And ultimately he can’t escape his own attic and seems fearful of what he might find outside.
Nice little analogy there Falcone.
I don’t know where people get the idea that the US was a net exporter of energy in the recent past. Every single year of the Trump and Obama presidencies, there was a large gap between the amount of oil we consumed and the amount we produced. The small amount of natural gas exports could in no way make up for that large deficit. The US has not been an exporter of oil on net since well before I was a born and I’m in my 50s.
US oil peaked in 1970 at about 10MB/D and dropped steadily until Obama came into office when we produced about 4MB/D. It shot up during the Obama years and Trump years and once again hit about 10MB/D. But our consumption never dropped to anywhere near 10MB/D. I don’t think it ever got below 15 in recent years.
I read in the press all the time about how we were net exporters. I don’t know where they get this idea. This data is easy to find. There are both international and American bodies that report this data. Sometimes they say we were net exporters of gasoline. But that’s a refined product and doesn’t really mean anything.
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The US also hasn’t had a positive trade balance since before i was born. Think of it as the “national credit card”.
The Reagan Administration also put the industrial economy in its coffin and began the orgy of the financialization of our economy and basically mortgaged the family farm for what we have now, a digital financialized economy.
The digital economy in its current form combined with the sexual revolution does not provide leverage for family formations and high birth rates.
It’s possible that bringing back some industrialization combined with technology and a digital economy could give us a well functioning nation.
Just not with the current demographics and leadership.
It’s time for a fire sale of our current system and new construction.
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Cue Steely Dan’s “Everything Must Go.”
I’m not ready to concede the point about bromides from the Mises Institute. I don’t think Murray Rothbard dealt in bromides, and Human Action, Mises’ masterpiece, seems accurately to describe the economics of human behavior.
A sharp restriction of supply, an equally sharp reduction in money supply unbridled by any sort of currency peg and zero elasticity of supply/demand, imposed by dictatorship sufficient to prevent all but a miniscle black market, could make Paul Volker look like Alan Greenspan. It would mean a severe but short lived depression with terrible hardship accompanied by massive social dislocation and political upheaval so the idea is a non-starter.
Still, the Misesians aren’t superficial or simplistic. True enough, Peter Schiff has been saying “some day…” for ages, but “some day” will come and, at that time, the broken clocck will be proven correct.
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The final line is key. The solutions of the 70’s can only take place in a country without a massive debt overhang that we currently have. A Federal bankruptcy (that’s called something else) is necessary. Several states and municipalities would naturally follow. This would allow for a regime of high rates to repair the misallocation of resources.
However, it’s more complex than just rolling over the debt into hundred year bonds. It would begin an era of limited budgets with poor financing options. It would also mean an asset bubble that not only pops but assets like real estate would be undervalued for awhile. When peering into the nothingness of our underlying economy, it would mean a depression beyond belief. Would the fat diabetic drug addicts called the American people be able to handle it? Would they put down their Jack and Cokes and brainstorm just how they will make ends meet in this new environment? What will become of the n-words, who won’t even have the brain capacity to survive? Will they mass chimp out?
The solutions are pretty simple when you boil it all down, it’s the reaction to the solutions that would be, in my opinion, historical. Politicians would likely hear loud and clear, from all sides, “give us out money! now!” The calls to flood the system with more money would be overwhelming.
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