Your claim about the US having abandoned the gold standard around the great depression didn’t sound quite right to me, as I remembered we were on the Bretton Woods system until 1971. It turns out there was indeed a gap in the 30s though.

Your memory is correct - though I did mean to communicate that it was the lessons learned during the great depression that lead to the end of the gold standard, not that those lessons were immediately absorbed. Constraining the money supply is so good for the rich, naturally they’d argue that the societal collapse it correlated with was just a fluke, and use their considerable political power to bring it back. But when black people organized militias and poli-sci students demonstrated considerable organic chemistry knowledge, visions of a return to the revolutionary chaos of the last cycle weighed heavier on the scales than even the economic demands of the war.

McCarthy, Nixon, and the Vietnam War

In looking at the chart on the Bretton Woods article, I remembered that the decoupling of real wages from productivity (article) also started in the 70s. I wonder if there’s any connection. I know that Reaganomics was a thing, but that would have started in the 80s. (I promise I’m not doing a conspiracy theorist “ah ha!” thing here, the correlation may be entirely coincidental, but may also be worth further investigation.)

That’s an interesting hypothesis. You could test it by finding the data during the period the dollar was first allowed to float after the great depression, and see if a similar decoupling happened. My suspicion is that it has more to do with McCarthy’s witch trials of labor radicals during the JFK era and Nixon’s subsequent war on unions and unionization.

The Bretton Woods break and the decoupling of wages to productivity are possibly related in the form of the Vietnam war though. It’s difficult to fund an ever escalating war when your monetary supply is constrained (1971); and once a war ends (1973), there’s a shock to wage negotiating power as tens of thousands of former soldiers return to the labor market. The already hollowed-out union movement explains the inability of workers to recover from the shock and the rest of the graph.

Ranum’s Law

Wage stagnation is a social problem which requires a social solution: organizing labor. Any technical solution that is not directly supportive of the social project is unlikely to be effective at resolving this specific problem. For example, some governments have done away with political minimum wage struggles by legislating regular recalculations based on inflation data. But this encourages labor complacency and wages in these countries have also not scaled with the vast increases in productivity. As I’ve claimed earlier, the benefit of constraining the money supply for the rich outweighs any benefit it could have for the poor and middle class.

Hyperinflation Quibble Quibble

I’ve used arguments based on very simple models, because its easier to use them to illustrate points that remain true when more complex models are applied. Economics as a science is deeply criticized for its lack of predictive power, and part of this is due to the tendency to treat it as the mathematical discipline of the analysis of rational actors. It is germane that the greatest recent advancements in economic theory come from outside the discipline, like Daniel Kahneman in psychology or David Graeber in anthropology.

Hyperinflation is usually associated with government mismanagement of their currency, but its important to remember the real reason is people’s lack of faith in the government management of their currency. Since currency functions on irrational human trust, any hyperinflation event is a product of both psychology and mathematics. Hyperinflation in the Weimar Republic was caused by taking enormous debt meant to be paid by winning a war, and then dramatically losing that war. Overprinting money acerbated the situation, but I believe it was a primitive attempt by government to actively manage the situation using the economic tools as they understood them, rather than self-interested corruption as is often the case. Nothing they could have done in the treasury could change the fact that the war department had very publicly gone all-in on a losing bet. Calling this economic mismanagement ignores that Germany had earlier followed this sequence of events in the previous conflict in which it ended the victor, with predictably positive results for German ledgers. The subprime mortgage crisis, on the other hand, was clearly a result of private self-interest and corruption. It could have lead to much worse results, but I contend that preserving confidence in the government’s willingness and ability to maintain the stability of the market, more than any actual solution the government provided, prevented a larger financial catastrophe. Bitcoin is subject to this vulerability also, for example the price collapse I mentioned earlier that occurred over rumors that Nakamoto was finally going to pull the rug.

WanderingDuck(x) = y

Having confidence that the market will never act to stabilize itself is not the same as market confidence. My example using growing population and fixed currency proves a point, but things are obviously more complicated than that, and in ways that make the problem even more intractable than the simple example implies. Looking at stock price history and forex graphs, it is obvious that market trends have so many inputs that the resulting output is impossible to model mathematically. Wars, natural disasters, crop failures, disease outbreaks, economic bubbles, and other large sources of economic uncertainty will not suddenly cease once the last Bitcoin is minted. A worldwide currency of exchange that can’t adapt to market changes will only acerbate the problems caused by the unpredictable.

Retiring on “My friends owe me money”

A soldier stationed in Hong Kong during the British mandate learned a fascinating truth about money from Cantonese merchants. Used to writing checks on his account in England, he was shocked to see another patron paying for supplies using a check he had written six months prior to pay a bar tab. It had been covered in Chinese writing indicating dozens of other merchants had endorsed the check, each using it as a medium of exchange in turn. He had accidentally minted his own hard currency.

It it useful to frame money as a commodity, but it is also possible to frame it as tokens of debt. An IOU from cacheson may be a less attractive source of exchange than a proper US dollar amount, but fortunes change, and an IOU from a trusted friend is more useful than a Dogecoin or a Biafran Pound. According to the credit theory of money, people can just use credit exclusively, because that’s what most people are already doing when they use fiat currency.

There’s an aspirational and infrapolitical argument against traditional cryptocurrency here: retirement savings are a relatively recent invention. In pre-banking societies, people relied on their community to look after them in their old age. The social debt wasn’t precisely quantified, but the implied communal economy relied just as much on trust. The capitalist system thrives by atomizing individuals and consolidating corporations. Trust between banks is subsidized, and trust between people is undermined. Bitcoin in its idealized form is a tool for a market based on competition rather than collaboration. Its zero-trust architecture mirrors a zero-trust vision of society. I feel the same as you in that I wouldn’t retire with the expectation that gratitude from the people I have helped would meet my needs either, but if society evolved to the point where that was a realistic option, that would be an anarchist achievement.