I can’t take the credit for today because today’s focus is on a website called wtfhappenedin1971.com. That is a good question and one we are going to try and answer with the help of some good data and some sense of history. I will do my best to describe the excellent visual representations of data known as graphs on an auditory medium. This could be disastrous, but the content is really good, and I believe the content is sponge-worthy.
The first graph on this site shows hourly compensation and productivity since 1948 being a baseline of zero. Both lines move from bottom left to top right until 1971 at which point compensation and productivity are roughly equal at a 90.84% increase since 1948. At that point the productivity gains go up much faster finishing at 246% in 2017 compared to compensation going flat and finishing at 115%. It’s like wages stopped going up, and they did at least in comparison to productivity. What is there to blame: technology, laziness, robots, software, computers, and Don Trump I imagine. I just know that it has happened, but not the cause. The next two charts show this same effect in some detail including how the lower earners actually fared worse than the higher earners. This makes their real wages to be much worse. In the last 5 decades we have seen the power of the worker decline, the power of the union decline, and both have been victims of the need for cheaper labor and that means outsourcing high paying jobs to countries that can provide cheaper labor. You want cheaper goods? I give you globalization.
The next chart really jumps out to me. It is a chart of income growth from 1917-2012 for two groups of people: the top 1% and the bottom 90%. Beginning in 1917 neither group fared very well until World War II as both groups showed negative income growth through the Great Depression. At the start of the war the bottom 90%’s income grew rapidly as men went from unemployed at worst and underemployed at best to all having jobs in the war and women took jobs supporting the war effort and the bottom 90% saw income growth. The top 1% showed negative income growth all the way until the 1960’s. By 1971, the bottom 90% was up 200% in income growth since 1917 while the top 1% was around 12%. The bottom 90% saw a decline since 1971, an outright decline while the top 1% started to grow quickly starting in the mid 1980’s as interest rates dropped and the Greenspan put provided support for their investments. The divergence is huge as asset holders have gotten even richer in the last 4 decades while the working man has gotten poorer in the last 5. This has correlated with the fiat dollar declining 96% since we went off the gold standard which is the common theme amongst all of these graphs. The money isn’t flowing to the workers but to capital and politicians and the rich.
If you look at another graph it shows a perfect correlation between Real GDP per capita and median female income while another graph shows Real GDP per capita and median male income are completely divergent. The male has shown no income gains since the 1970s but the females have shown gains of almost 100%. The male that used to be able to support his family on one good job has lost that job as that has gone to Asia, but women are making more than they were to help compensate. This leads us to the next graph showing average families. In 1971, 47% of families had both the mother and father working while today it is 66%. The husband-only working trend has dropped from 38% to 21% and the wife only working rate has increased from 2% to 7%. It is very difficult for families to get by without the woman working as well. The men’s jobs have declined in purchasing power and it has taken a supplemental income to maintain a lifestyle that keeps slipping further and further behind trend. This trend ends with revolution, chaos, and death by the way.
One of my favorite hockey stick graphs that are posted is the graph of a unit price of Campbell’s tomato soup. This chart goes back to 1895 and is basically flat until 1971 and then it hockey sticks up and to the right from $.10 to a dollar. This is consistent with the devaluation of the currency. Nothing has really changed about this can in 125 years so the can of soup is the same, but the dollars are going down. Remember when things are priced, they are priced a $.10 per can or $1 per can that means the numerator is $1 and the denominator is the soup can and the denominator isn’t changing. Just the dollar value.
Let’s imagine this differently using the next graph. Cumulative inflation from 1910 to 2015 shows inflation rising from 0 to 306% in 1971 that is 60 years but then in the last 44 it has went from 306% to 2,326%. That is almost an 8x increase. Dollar down not prices up, again. This is reinforced by the next graph stretching back to 1775. It shows the Revolutionary war spike in inflation and then a deflationary period until the War of 1812 and then a deflationary period then a big spike during the Civil War and then a deflationary period and then WWI and then a deflationary period and then World War II and a slight increase after than until 1971 and then a spike in CPI inflation that goes nearly off the chart. What happened? We de-pegged the dollar from gold and our promise to pay became the backing for our currency.
It is truly stunning as graph after graph shows the price of fruit, houses, and events rents all spiking after 1971. These were stable for decades or even centuries before that. That is the work of our founding father giving us a system that worked and our fearless leaders the baby boomers screwing it up. But you don’t have to take my word for it, how about billionaire money manager Ray Dalio.
Louis Goss writes for Marketwatch, “Bridgewater Associates founder Ray Dalio has said decades of “chronically horrendous leadership” under the postwar baby-boom generation has now reached an apex in the form of presidential candidates Joe Biden and Donald Trump…I was fortunate enough to have parents who were of the greatest generation, who overcame the depression, fought in the war, and gave me a strong upbringing … that allowed me to take advantage of the equal opportunities to live the American Dream,” Dalio said in a post on LinkedIn.
“I also saw the generation that came after the greatest generation (i.e., my generation) run up government debt, let the country’s infrastructure break down, allow huge polarities in opportunities and living conditions to develop which led to pervasive economic and social inequalities, homelessness, mental illness and drug problems,” he added. It is surrealistically shocking to me to see the condition the United States is in, such chronically horrendous leadership that has reached an apex in terribleness that is reflected in our two presidential candidates, our representatives in Congress. … They are so unimaginably worse than I ever could have thought possible,” the hedge-fund founder said.”
This is coming from a baby boomer himself as Dalio was born in 1949. What I find ironic is that the adulthood of these boomers coincided with what date?1971. When they got done spitting on returning soldiers, burning their bras, and protesting any number of causes they set out as adults to ruin the American economy. By demanding the government spend beyond their means these boomers have wrecked the currency, the dollar privilege, and the respect of America on the global stage.
Other very fundamental things changed as well in 1971. There are charts showing the price of oil started spiking in the early 1970s as the oil embargo would lead oil independence to be a very weighty issue. It is also when the US trade imbalance began to shift America from a creditor nation to a debtor nation. Is it coincidental that when our money went from backed by gold to backed by hot air that our nation began to slow production and began to increase consumption. There is a chart showing how many hours it took the average American to buy 1 share of the S&P 500 stock index. The average was 30.9 over 100 years until 1971 and now it is over 100.
US physics PhDs conferred to US graduates peaked in 1971 while foreign born physics PhDs conferred has risen steadily since. This is a very top heavy and worthy profession that offers a very unique signal that something has changed, but if we look at the other end of the spectrum the signal is the same even if the source is still missing. The incarceration rate of inmates troughed in 1971 and soared almost 5x in the three decades after. Is this coincidental with more and more average males being unable to provide for their families, earn a fair wage, or not see their job eliminated and moved overseas? Perhaps.
The number of children a woman had was 5 in 1971 and that has declined across the world until now it is barely 2.5 just above the replacement rate and below the replacement rate in many developed countries. Is this due to the introduction of the pill or the legalization of abortion or something else perhaps? It is a very significant statistic. The growth of doctors has been rising slowly but hospital administrators have grown at roughly a 15x faster pace. The doctor is the important one in the health equation yet the bloated American healthcare experience continues toward the worst value in the world.
Food trends also changed in the 1970s as the beef cow herd peaked in size and has never returned to the same level while the consumption of chicken has skyrocketed, and the global use of vegetable oils has skyrocketed. Americans are also waiting far longer to get married with the trough in the late 50s through the 70s before moving rapidly higher in the 70s through today. Is there a link between the use of vegetable oil and women having kids? I don’t know, but I do think our civilization changed rapidly in the last 50 years.
Is it because women are having to work more that we have changed to quicker and easier meal preparations? Cooking a pot roast takes time, but microwaving a chicken tender meal is far easier for a woman after a long day’s work. Is it because there are smaller families that families can afford to eat out and eat prepared meals versus imagine ordering pizza for a half dozen kids 60 years ago. That was called there are plenty of taters to fill up on.
This is a great set of data put together and is probably worth your time to check out and develop your own conclusions about. I think it tells us a lot about how the value of our money changed and how America changed with it. Ray Dalio and I both agree that it wasn’t for the better.
Sincerely Yours,
C Thomas Printer
On this date in history… 33 years ago to be exact, Russian politician Boris Yeltsin was elected president.
Also born on this date … inventor, engineer, futurist, profligate Nikola Tesla.
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.