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The Second Social Disorder

The second social disorder produced by the infirmity of the world dollar standard:

2.  The world dollar standard breaks the social compact of equality of opportunity.

Economists call the disparity between the wealthy and the poor in a society the “Gini coefficient.”   The world dollar standard has let a ferocious “Gini” out of its bottle.  Under the world dollar standard, economic growth has become heavily concentrated among the top 1 percent of the American population, leading to widespread resentment.

 

Janet L. Yellen, then President of the Federal Reserve Bank of San Francisco, currently Vice Chair of the Board of Governors of the Federal Reserve System, in 2006 observed:


...from 1973 to 2005... real hourly wages of those in the 90th percentile—where most people have college or advanced degrees—rose by 30 percent or more... among this top 10 percent, the growth was heavily concentrated at the very tip of the top, that is, the top 1 percent. This includes the people who earn the very highest salaries in the U.S. economy, like sports and entertainment stars, investment bankers and venture capitalists, corporate attorneys, and CEOs. In contrast, at the 50th percentile and below—where many people have at most a high school diploma—real wages rose by only 5 to 10 percent.

John Maynard Keynes specifically anticipated this very effect of currency depreciation:  "By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth."

The growing wealth disparity is being caused by the decline in equality of opportunity brought about by the erosion in the value of the dollar.  This erosion is caused by the world dollar standard.

The "social infirmities" of the world dollar standard include:

1. It invisibly but powerfully erodes other social standards;  and
3. It creates a toxic sense of entitlement in the culture.

Next time, #3

 

Kathleen M. Packard, Publisher
Ralph J. Benko, Editor

In Memoriam
Professor Jacques Rueff
(1896-1978)

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