Because many people can’t save at all, they can’t even set aside money for their old age. This is especially true for young professionals. In the United States, people under the age of 39 have less than $50,000 saved for retirement on average . For people under the age of 29, the situation is even more tragic – less than $10,000 on average.
The most frugal are individuals between the ages of 55 and 59, who set aside about $223,000. The bad news for them is that, given today’s retirement age, they need about $1 million to see them to a decent old age.
But the destruction of the gold standard hits retirees in another way. Since inflation has been devastating for the past 50 years, the money they put aside guarantees them little purchasing power anyway. Therefore, they have to save huge sums to ensure a decent old age – which, as it has already become clear, is practically impossible.
Without Gold The World Sinks Into Inequality And Poverty
However, undermining purchasing power, increasing the tax burden and destroying savings are not the only bad news for individuals.
When currencies are below the gold (or silver) standard, productivity growth is linked to wage growth. Therefore, the 19th century is the era in which the most drastic increase in the real standard is observed. Today we live incomparably better than 5 decades ago, let alone a century earlier. But if the world had kept the gold standard, this increase would have been even more drastic than it was then.
Thanks to relatively free markets compared to the mid-20th century and the opportunity to invest globally, entrepreneurs continue to innovate today. Accordingly, labor productivity increases. But after 1971 wages, although rising in real terms, began to lag far behind. By 2019, scissors were dissolving by more than 100% compared to 5 decades ago, although previously the two indicators went hand in hand.
Two Types Of Wealth: Honest And Private State-Backed
12 years ago, the world was torn apart by the Occupy Wall Street protests against the richest 1% of the population. According to the protesters at the time, their wealth should be taken through taxes and redistributed among all. That is how we would achieve justice.
Occupy Wall Street scored the wrong goal. It is true that over the past 5 decades, some people have accumulated wealth much faster than others. But this is not accidental. Some entrepreneurs create products and services that are used around the world. In their case, enrichment is not only a natural phenomenon, but also a desirable phenomenon. Just as the Olympics reward the best athletes, so the market rewards those who best satisfy the needs of others.
The Cantion And Chronism Effect
Others amass wealth not because of the free market, but because of their ties to the state. The link between private companies and public institutions or individuals is called cronyism.
The mechanics of croninismwere described as early as the 17th and 18th centuries by Richard Cantion and today are known as the Cantion Effect. Within it, increasing the money supply does not increase prices equally. On the contrary, the first beneficiaries of the newly created funds can buy goods and services in the market at their old (lower) prices. The reason is that the economy “doesn’t know yet” about the new money. However, their next recipients are already facing rising prices. Those after them – an even higher price, because more and more money wants to buy less and less goods. This is an application of the law of supply and demand .
The recipients of the newly printed money are usually people from the sectors most closely associated with the state, i.e. chroniclers. The crisis generated by the pandemic is one of the rare episodes where farmers, for example, received money directly. Regardless of who receives the newly printed money, currency inflation is a disastrous economic policy, as the people of Hungary, Venezuela, and Zimbabwe well know.
When their recipients are chroniclers, they take advantage of the fact that they can buy more assets at their old prices. In this way, those close to governments benefit from the multiplier effect, and inflation gives them a completely unfair advantage over everyone else.
This is the phenomenon that Occupy Wall Street should have been protesting against. It is not too late for this, considering that today money printing has unprecedented values, and those who do business with the state earn more than ever.