Financial system and its defects

The global economic and financial system has been operating on the basis of a fiat version of the old Bretton Woods system for 50 years. This system was designed in 1944 and collapsed in 1971. Nevertheless, we still use a certain version.

System and income inequality

America has succumbed to Triffin’s dilemma by having huge trade deficits with manufacturing countries such as China and India, where many former American middle-class jobs now exist.

Nothing in this system makes sense, and those above benefit the most, those who are closest to creating a new currency.

Under the so-called “Cantillon effect”, people who find themselves in a position to benefit from the printing of money first will eventually accumulate almost all their wealth. By the time the newly printed money reaches the masses, the currency is devalued, so the average person is even poorer.

The Cantillon effect may be a key reason why income inequality has reached record levels in the United States and around the world. While bankers create trillions of new currency units from the air and distribute them to their friends, masses of people are finding that their wages are lagging significantly behind the rate of inflation.

Wage stagnation

How much has wages stagnated over the last 50 years? The answer can be found in terms of gold. Keith Weiner did an excellent job in 2013 his article for Forbes magazine. He pointed out that, in terms of gold, wages have fallen by at least 87% over the last 55 years.

In 1965, the minimum wage was about 71 ounces of gold a year. In 2011, an educated worker, such as an engineer, earned about 63 ounces of gold a year. According to this metric, it is clear that today’s highly skilled workers often earn less than workers with a minimum wage just two or three generations ago.

The price of gold in USD is higher at the time of writing than in 2011, many consumer costs have risen and real wages in USD are not keeping up. In other words, the situation has only worsened over the last ten years.

A hopeless scenario

In addition, citizens of many countries outside the United States are often forced to suffer disproportionately from the consequences of central bank printing. In recent years, we have witnessed historic currency collapses in many countries in South America, Africa and parts of Eastern Europe.

The current system also provides extraordinary influence to the American empire. The US dollar can be used as a weapon through sanctions and other methods to bring smaller nation-states to the will of the US government. After all, “men with guns” are behind the dollar, as Paul Krugman says. Most of the world probably considers this system to be unfair, and a large proportion of Americans who understand this system are inclined to believe that it is not right.

Conclusion

Fortunately, a solution has emerged over the last 12 years. There is now an opportunity to create a new monetary system based on open access, equality, peace and prosperity.