How inflation destroys a civilisation

City in ruins

This article is from Bill Bonner’s Diary?and applies to all Western countries. See what you think. Quote:

It all started ?in late 2012, when over 100 New York City fast-food workers walked off their jobs, demanding higher wages.

Many made minimum wage. They were struggling to make ends meet as rent, utilities, medical care, and the overall cost of living continued to rise much faster than their wages.

The ?fight for $15? movement quickly spread across the country.

But the ?fight for $15? is only one symptom of a much larger epidemic. end quote.

Sound familiar? We are talking about the U.S. here, but we could be talking about New Zealand. quote:

Polls suggest that a majority of millennials (people born between 1982 and 2004) now favor socialism. And a growing number favor outright communism ? if it?s implemented ?correctly.?? end quote.

We should all know by now that there is no ‘correct’ way to implement communism. In over a hundred years, there have been many attempts to make it work, and all have failed. Why do people still think there is a way to make it work that won’t end with the slaughter of millions of people? Quote:

[Bernie] Sanders and his fellow socialists are offering a dangerous gimmick. It?s something called a ?universal basic income? ? or UBI, for short.

It?s where the government gives you money, just because. There?s no requirement to work or even display a willingness to work. You could sit at home all day, watch TV, and still get a check from the government. end quote.

Gareth Morgan seems to be an advocate of this crazy idea too. He advocated making little old ladies pay tax on the house they have already paid for and give it to people who do nothing all day. Obviously, he was ahead of his time. Quote:

Remember: Even people living under communist regimes have to work. But with a universal basic income, the government simply hands out ?free? money to everyone for doing absolutely nothing. end quote.

That will make our flagging productivity go gangbusters, won’t it? quote:

Inflation is the primary factor driving this trend. Americans feel squeezed because the cost of rent, medical insurance, and tuition ? as well as other basic living expenses ? is rising much faster than their wages.

This creates very real problems for ordinary people. In response, more and more turn to Santa Claus politicians that promise supposed freebies, like a $15 minimum wage or universal basic income. end quote.

Yes. But working hard at school, training for a skill and getting a good paying job is still the way to go. There are still people getting ahead. They just work hard and have a few clues. quote:?

By every measure ? including stagnating wages and rising costs ? things have been going downhill for the American middle class since the early 1970s.

August 15, 1971, to be exact. This is the date President Nixon killed the last remnants of the gold standard.

Since then, the dollar has been a pure fiat currency. This allows the Fed to print as many dollars as it pleases. And ? without the discipline imposed by some form of a gold standard ? it does precisely that. The U.S. money supply has exploded 2,106% higher since 1971. end quote.

Wasn’t this what Russel Norman, Finance Minister in waiting in 2014, proposed? Even though we didn’t need to print money? Quote:

The rejection of sound money is the primary reason why inflation has eaten up wage growth since the early 1970s ? and the primary reason why the cost of living has exploded.

Measured in gold, wages in the U.S. have fallen over 84% since 1971. That?s an astounding drop.

Note that the federal minimum hourly wage was $1.60 in 1968. It?s $7.25 today, or 353% higher in dollar terms.

But that $7.25 buys 87% less than $1.60 did back in 1968. That?s the story you won?t hear from the mainstream press. end quote.

We have had periods of high inflation in that time, but for the most part, governments have had inflation under control for some time. The cumulative effect since the 1970s is still astounding though. quote:

This is why millennials ? and millions of others ? are gravitating toward socialism.

They feel the economic pain of inflation every day. They know it?s becoming harder and harder to maintain a middle-class lifestyle. They just don?t understand why. So they succumb to the siren?s call of freebies. end quote.

But Venezuela is a socialist country. They have inflation of 1,000,000%. I don’t think anyone actually thinks this is good, particularly not Venezuelans. Quote:

Inflation has a way of perpetuating itself. The more inflation reduces living standards, the more people push for programs that create even more inflation. These include things like a universal basic income and a higher minimum wage? which, in turn, create a cycle of inflation.

It?s only a matter of time before ?fight for $15? ? the rallying cry for a $15 minimum wage ? becomes ?fight for $20.? Then, it?ll be ?fight for $50,? ?fight for $100,? and so forth. end quote.

We know this. As minimum wage workers earn more, the message goes up the chain that everyone should earn more. That gives them more buying power. Which increases demand. Which pushes up prices. quote:

Inflation follows a clear a pattern of corruption:

  1. In a fiat currency system, the government will invariably print an ever-increasing amount of currency.
  1. This makes prices and the cost of living rise faster than wages.
  1. The average person feels the pain, but doesn?t understand what?s happening.
  1. More people support politicians who promise freebies.
  1. In order to pay for the ?freebies,? the government prints more money.
  1. This creates even more inflation, and the cycle repeats.end quote.

A never-ending spiral. Downwards. quote.

At this point, we have to ask ourselves whether the political situation in the U.S. will improve. Unfortunately, the data points to a troubling, but inevitable, answer: No.

The reason is simple: A growing majority of U.S. voters is addicted to the heroin of government welfare.

An estimated 47% or so of Americans already receive some form of government benefit. But I don?t think that accurately reflects the situation ? at least, not when you consider all the government employees, along with those in the nominally private sector who feed off the warfare state. This includes defense and other government contractors who win huge, no-bid contracts.

People involved in the military-industrial complex live off government slops as much as, or even more than, those who collect food stamps and other traditional forms of welfare. Yet, they?re not counted in the statistics. An honest account of who depends on the government needs to include them.

When you count?everyone?who lives off of political dollars, we?re already well north of 50% of the U.S. population.

In other words, the U.S. has already crossed the Rubicon. There?s no going back. end quote.

And we have very similar numbers in New Zealand. We have unemployment benefits, Working for Families, state pensions and sickness and disability benefits. Then we have government workers. Many government workers do great jobs, don’t get me wrong but they are not contributing to productivity in our society. They are still a drain on the taxpayer.

The answer to these problems is already here – automation and outsourcing. In fact, these are the very reasons that Gareth Morgan gave for favouring the universal basic income. Paying people to do nothing is not the answer. Every able-bodied person of working age needs to make a contribution to society for that society to thrive.

Millennials may find it hard to make a middle-class living, but the universal basic income is a mad idea. Really, it is just a form of the dole. The dole is subsistence living. How many millennials want to live like that, really?

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