The US Dollar Is in the Toilet, but it benefits the rich.
I live in the Czech Republic, a country the world (annoyingly) insists on calling Chechia. But the dollar, like all world currencies, is traded on currency markets, and so its value is constant no matter if it’s converted to euros, or yen, or British pounds.
Twenty-five years ago, when I first got my social security, it amounted to $1800 a month. Because the Czech currency is still the Czech crown, that converted to 52,000 crowns a month, enough to comfortably live here. With gradual increases over that quarter century, it is now $1909 at the beginning of every month…a time that I have come to designate as “when the eagle shits.”
Converted to crowns, the eagle now craps 38,000 into my bank account. That’s a 5 ½% increase in dollars, and a 27% drop in the crowns those dollars buy.
Meanwhile, a package of Marlboro Lights (which I no longer smoke) cost 70 crowns a quarter century ago and now costs 120 crowns. That’s a 58% inflation rate over 25 years, which isn’t helpful, but doesn’t belong in the conversation, because the subject is the flushing sound of dollars and toilets.
Experts tell me it’s actually not in the toilet.
Over 25 years, they claim, the dollar has lost about half its domestic purchasing power, but held its ground internationally. You certainly couldn’t prove that by what my social security dollar buys here in Prague.
“Statistical confidence” in a currency, they tell me, isn’t captured by a single number the way inflation is. Instead, economists look at a cluster of indicators, and on those, the U.S. dollar still ranks as the most trusted currency in the world.
Hence, I trot out my long-term view that “if you torture them sufficiently, statistics will confess to anything.” Renowned British economist, Ronald Coase, is the author of that quote, although he substituted ‘data’ for ‘statistics.’
Quite often I am convinced that economists will confess as well, if one waterboards them sufficiently.
And so, inflation is the culprit, both here in Prague and there, in Seattle, Berlin, and Beijing.
Horsefeathers.
Over the past twenty-five years, inflation not only destroyed the American worker, it rapped him on the knuckles and sent him home without dinner.
Real wages barely moved, rising just enough for companies to claim progress, while leaving millions working longer hours and effectively running in place. Try living on $1909 a month and let me know how that works out for you. Here in Europe, the streets are full of middle-aged men pedaling delivery bicycles, working without contracts, healthcare, pensions or guaranteed hours.
But the real money is made elsewhere, because of the relentless inflation of assets, a gift to the top 10% (dare we call them billionaires?).
Stocks, real estate, and financial assets soared, piling up bucks for those who already owned them.
Meanwhile, those sent home without dinner were left to absorb rising costs in rent, healthcare, keeping the old family car running, and feeding their families. Many of their kids had moved back into their childhood bedrooms because they couldn’t find work, and that’s true here in Europe as well.
The result is not an accident of economics but a well planned and executed structural outcome.
Businesses, and the American government they now own (see Supreme Court Citizens United), built a system in which money creation and policy choices consistently lifted asset values while allowing purchasing power at the bottom to erode.
Why not? The money’s good and no one stands in the way.
The top 10% now owns nearly 70% of American assets, including private home ownership, businesses, banks and lending institutions, while the bottom third live on credit cards, home-equity loans, and additional jobs.
90% of all tax cuts in America, during both Democrat and Republican administrations, landed in the pockets of the 10%.
Inflation, once it’s stripped of all its technically confusing terminology, is not only a rise in prices, it’s an organized, politically supported and largely illegal transfer of power that rewards ownership, protects debt, and steadily tightens the constraints on those who have neither.
It’s lonely, being sent to bed without dinner.
And the billionaire classes have long ago escaped America to reach out with what can only be described as tentacles across the world.
If you think that’s not the case in China as well, you are mistaken.
I think you had the good fortune to qualify for social at a time when it was worth something, JIm. When I eventually get round to retiring a handful of years from now, my combined UK and Czech state pensions will still come to less per month than yours does now.
But my worst fear is that the index-linked state pension may end for citizens living in the EU (technically in the EEA) as it has already for UK expats in Canada and New Zealand, for example. Poor benighted fellows, their pensions' values were frozen at the very moment their boats departed the White Cliffs of Dover.