The Biggest Event In World History – WTF Happened in 1971?

by birtanpublished on August 23, 2020

About three months ago a friend of mine albert rodriguez sent me a link to a website that explains a whole lot about the reason life is the way it is today it explains this economic rollercoaster that we've been on with bubbles and busts it explains the income inequality

And wealth disparity it explains why some people have become wealthy and some of them fairly easily and while others seem to struggle to get ahead they just no matter what they do they can't get ahead and you know I've had that tab

Open on my browser now for three months meaning to make a video out of it and today I'm going to do it so this explains a lot of the reason your life is the way it is and by knowing this again it will help you to see the future

The website is WTF happened in 1971 dot-com so what did happen in 1971 well on August 15th of 1971 President Nixon went on TV and said today I have directed secretary Connally to temporarily suspend the convertibility

Of the dollar into gold temporarily Milton Friedman once said there is nothing so permanent as a temporary government program now so that was the day that we August 15th of 771 we severed the final link between our

Currency and money we used to have money go real gold backing our currency that we use is the medium of exchange and they were fully convertible back and forth the the convertibility you know the dollar used to be a hundred percent

Backed before the Federal Reserve and then it was 40 percent backed from the Federal Reserve until 1944 when we started the Bretton Woods system and from then on there was no specified backing no reserve ratio and it fell to

About 8 percent when Nixon finally abolished the Bretton Woods system and took the entire world off of the gold standard because all of the other world's currencies were pegged to the u.s. dollar and the dollar was

Pegged to gold so WTF happened in 1971 well when we severed the tie between real money and fiat currency the fiat currency that is in our wallets neon none of it that no country on earth uses money they all use national fiat

Currencies and national fiat currencies leak they bleed value and so what we see here is this is growth in productivity and hourly compensation since 1948 and they used to grow together second we went off of precious metals

You know ty it doesn't matter whether it's precious metals it could be anything that is a fixed currency supply that the powers that be cannot manipulate where its nature dictating the rules not the Federal Reserve the

World's central banks the government and so on and so what has happened since 71 is compensation went flat and has grown just a little bit 115 percent productivity 246 percent so it hasn't kept up real GDP real real wages and

Trade policies I don't know where trade policies come into this next chart but from 1947 to 2014 1947 equals 100 so what they've done here is they've indexed all of these different things together at 100 and this is the percent

Change so this is a 50% growth a 200% growth and this is real GDP per capita so GDP per person real GDP per FTE and that is full-time equivalent worker average real wage using the GDP as the deflator average real wage using the

Consumer Price Index as the deflator and real median weekly earnings of full-time workers using the CPI as a deflator I would think when they say full-time workers here they're stripping out anybody in supervisory positions

Management positions and so on which would be included in this group and this is also average whereas this is median so that's one of the reasons but what you see here is this tremendous divergence between wages and GDP and it

All happened when we severed the tie between money and currency income gains widely shared in early post-war decades but not since then this is real family income between 1947 and 2016 as a percentage of the 1973 levels of what

They've done is they've indexed all of this to 1973 at a value of 100 and so these are the gains measured as a percent with 100 percent being the income in 1973 and in 1971 was the end of 71 remember August 15th we severed

That tie and if you're in the upper 5 percent of income earners you've made gains since 73 your life is about 75 percent better than it was your prosperity your level of the stuff you can own and so on is 75 percent better

Than it was in 73 for the bottom 20% there they're only about 5 percent better off than they were in 1973 consumer price index you know this I published this exact graph in my book and what's interesting here's the

Beginning of the the Federal Reserve this is the end of the Bretton Woods system so when we severed the link between money and currency but what you have here is inflation's and deflation x' and the inflation czar always leading

Up to war and then you've got deflation x' and inflation and deflation is the creation the Federal Reserve just in time for World War one so they inflated the currency supply big-time then we had a

Deflation and the roaring 20s and then another deflation called the Great Depression that we couldn't get out of now there's a reason this is called the Great Depression and not just the depression the reason was called the

Great Depression is because there were other depressions before that there was something called the long depression there was another depression in here I can't remember the names of the different depressions but there was the

Long depression and there were a couple of other depressions and what happens is eventually we come out of them without government intervention without the Federal Reserve we come out of the depression and they were not nearly as

Bad as the Great Depression which was the worst of all of the depressions that we had been to where the government did come in and try and save us and the Federal Reserve was established and they were using monetary policy tools to try

And get us out of it and they only made things worse it was the going into World War two and it was actually not the spending on war where you're spending a bunch of time energy and deficit spending which is

Dilution of the purchasing power of the public's currency supply stealing currency away from them so you can build things that are gonna blow up other true wealth destroyed buildings and factories and true wealth so that's war it wasn't

The spending on the war but during these periods of time are the gold stocks in the United States we exported you know once what's the so the the young men that we're on all of the farms in Europe and all over the world anybody involved

In World War one they take all their young men off the farms and turn them into soldiers they imported all of their grains from the United States and they imported all their consumer goods from the United

States and our gold stocks went up seventy percent here and in the run-up to World War two they went up another one hundred and seventy one hundred and seventeen percent I believe it was on top of that seventy percent by the time

We World War two the u.s. owned two-thirds of all the world's monetary gold two-thirds this is part of what created what made us a superpower also the shift from the Bank of England being the hub of the

Classical gold standard to the Bank of England and the United States being the clearinghouse for the International gold standard and then England left that in 1931 and it was just the United States was the clearinghouse for all of the you

Know the the international payments and so on it all went through these so this is what really made us into a superpower it isn't that we're better than everybody else it isn't that we're more efficient than

Everybody else it's a combination of laws not having war on our soil so none of our true wealth was blown up and it wasn't all of the people go it was partially people going back to work but it wasn't the deficit spending that we

Were using to confiscate the wealth of the citizens so that we could blow up true wealth but here we end this the the last time remember back here we've got full backing of the currency with with precious metals here we've got 40%

Backing after World War two we had an unspecified backing that fell to just 8% by the time Nixon took us off of money and we were on purely fiat currency and this just exploded I can't imagine the level of prosperity that we'd be at had

This not happened this is Boston New York and Boston and it's the median house price and the median household income so the red and gray is the income the blue and yellow is the house prices and you know here they are back in the

In 1960 they're all indexed together so this is the percentage change and what you see is after 71 they start to divert and go haywire and here we have the price of the homes and the income and so the home affordability is far far less

There's a piece on this I believe in episode 7 of hidden secrets of money I show my father who was managing a auto parts store as a performance equipment store and auto parts store in Salem Oregon and his income was like 9,000

Something dollars I show his tax return that year but then I went to the the Bureau of Labor Statistics or maybe it was the census I went to the US census website and he was making as much as a median price a single-family home in

Oregon so he was his annual wage as a manager of an auto parts store was equivalent was enough to in one year be able to buy a house so that has changed and part of it is severing the tie between money and currency and going

With the currency this is inflation but it's the Consumer Price Index is the for all urban consumers so this is for people living in the cities this is what the government says that our cost of living is how it's a how it's rising

However if you go to school or have children so this is tuition us other school fees and child care then this is your inflation if you get sick this is your inflation so this is the inflation of health care and suspension

Of the gold standard once Nixon did that you know it was all over with for all of these things the things you need are getting more expensive the things that you don't need are getting less expensive we're going

Into this deflationary period right now but as you've seen in some of my other videos the cost of food is going to be going up because of supply chain disruptions these are episodes of hyperinflation and it shows all of these

Episodes and what they're trying to show here is that there weren't any in this Bretton Woods section and after except for this one here in Chile I think that is so August 15th of 71 would be somewhere around

Here but what you see here the hyperinflations usually are connected with war or some other huge disaster or conflict and what we have here is world war 1 and right afterwards what's interesting about this period and when

You look at this where it says Europe you've got Austria you've got Germany and and here but most of the countries here are their Eastern Bloc countries we didn't have the Eastern Bloc after World War 1 but when they list Europe they're

Not listing all of Europe they're not listing all of Asia Latin America or Africa these are just countries that have experienced hyperinflation and since we're talking about World War 1 here and the the hyperinflations in

Germany this is where it took weeks for prices to go double this is where it took days and the red ones is where it took hours for prices to double I'm going to veer off on a little sidetrack here and Milton Friedman from his book a

Monetary history of the United States 1867 to 1960 quite a masterpiece I took a bunch of quotes out of it when I read it throughout most of the world for the victors vanquished and neutral alike I just love the way he writes prices rose

Sharply before or into 1920 and fell sharply thereafter so right after World War one ended prices rose and then fell about the only countries that were to avoid the price decline were those that were to experience hyperinflation and so

What you're seeing are the few countries all of the other countries almost all of them went into this big deflation in the United States I called it when I wrote my book the depression of 1921 and then later on other people started calling it

The impression of 1921 Jim grant wrote a book called The Forgotten depression the reason it was forgotten is because the government didn't rush in to save us neither did the Federal Reserve they

Allowed the free market to work it was actually a much greater price contraction that wholesale prices contracted twice as bad as the Great Depression so it was a very very simple severe contraction but the free market

Healed it and it healed it so quickly that it became the Forgotten depression this is World War two I wrote a chapter that got cut out of my first book about the Hungarian hyperinflation and what you see here though is this big band of

Hyperinflations this is the USSR collapsing and almost all of these in this 1991-1992 period almost all of these countries are connected with the USSR back then so but you know obviously not Africa and Latin America so it's

Very interesting there's a Zimbabwean here's Venezuela today the all major currencies have declined over the past century relative to gold we've shown this chart in the past I think this was in my book there's an anomaly in here

These were pegged to gold so this being this is purple the yen Japanese yen I don't think that it increased against gold if it was being backed by gold but what you see here is the mark and what they don't show is that after the market

Completely collapsed in 1923 that came out with the rentenmark which just went to zero within a matter of months and then here is the rice mark and that went to zero during World War two and then here's the deutsche mark which is then

Spliced to the euro the u.s. is the blue one here so this is where gold in 1934 Gold's price went from 20 dollars and 60 seven cents an ounce to $35 an ounce in other words instead of requiring only twenty dollars and 67 cents to buy an

Ounce of gold it now tuck $35 more dollars to buy an ounce of gold that was the dollar going down not gold going up and then this is during the period of the London gold pool you'll have two out maybe I'll make a video on that later I

Can't explain it right now this video will become too long but then gold became free trading and we've gone from the dollar being worth one twentieth of an ounce of gold to being worth 117 hundredths of an ounce of gold that's

The dollar falling not necessarily gold going up we've got income growth from 1917 through 2012 and you have here the blue the top one percent and the bottom ninety percent so the income growth in

Different time periods now it's not good for the bottom 90% to just be expanding their income and the rich during this period here in the 50s there was a the top tax bracket was 94 percent you got to if you made enough you got to keep

Six pennies for every dollar that you made and so what happened during this time period is productive individuals that own businesses and hire people create jobs create prosperity they spend all their time looking for some tax

Loopholes trying to figure out how to keep the government from stealing 94 percent of what they earn it was just absolutely insane and so and all you know there's I'll show you something probably in the next special report

That'll go more in depth on this I don't have time to show it to you here but you know Nixon suspends the gold standard the bottom 90% or stop getting more of the income growth and it's the top 1% that start in 1982

And this is when the stock market started its boom and it's interesting this goes up and down with the value of the stock market which is very similar to the financialization of government chart that I showed you and so on a

Number of countries with banking crises so this is the number and this is during the interwar Bretton Woods period however these aren't back here aren't caused because of the different gold standards they're caused because of

World War two and World War one you know so but since we left that look at this this is crazy this is oh so this only goes to the year 2000 if we had 2008 in here it would be somewhere up here and so mm maybe this is 2008 I don't know

This would be the year 2000 it looks like and that would go along with the crash of the Nasdaq and so on so the banking crisis this might be 2000 and that's 2001 as stock markets around the world were crashing as the tech bubble

Popped income inequality in the US Federal Reserve established Bretton Woods and the gold standard but this was also a gold standard and there was a gold standard before that the best one was this one this one's 40 percent

Reserve this one starts with a 40 percent coupling to gold for the dollar and we and falls to 8 percent and then we sever the tie between gold and the dollar and income inequality increases this is basically different ways of

Looking at the same thing this is the top decile so the top 10 percent this is the top 1% the top 5% the income share of the top 1 percent relative to the bottom 90% so it's all basically the same thing this is another way of

Viewing the same thing this is the bottom 90% and the top 1% share of the national income the u.s. wealth and so 71 is where we went off of gold now I'll show you in a another presentation sometime this is part of what I call it

The income distribution cycle and if you go to episode 7 of hidden secrets of money you'll see that I've got anecdotal data before this that there was an income distribution cycle and it peaked and it went back down peaked again and

It's probably going to head back down in this next cycle and as we go as there's a backlash toward capitalism because we've had manipulated market cronyism not free market capitalism that but capitalism will get blamed and the free

Markets will get blamed which is a tragedy because that is where all prosperity comes from and they'll get blamed and so we'll go more socialistic and so this will reverse and we'll see this cycle repeat federal debt held by

The public now this held by the public I'm going to explain go much more in depth in that in a separate video I tried to couple it to this video but it would would have made this video last for an hour federal debt

Held by the public so this is the amount of the federal debt that's held by the public and I believe this yeah this is as a percentage of GDP and what you see is after the Revolutionary War we ended up with a debt that was about 30 percent

Of GDP and we grew the economy faster than the government could spend the national income so the government was yeah during this whole time for most of the time that governments exist they always increase their spending they

Never stop increasing their spending what they what happens is there are periods of time where the economy grows faster than they increase their spending but they almost never cut spending and then right in here Andrew Jackson was

President and we had the first bank of the United States back in here and it's charter ended and so this was the first central bank of the United States and then we had the second bank of the United States and its charter was coming

To and as you saw in that quote from I think two videos ago or maybe it was just the last video maybe it was three videos ago but Andrew Jackson basically said that they were a den of vipers and thieves and he would route them out and

Basically he swore to kill the bank and he did and we paid down the national debt there's probably a tiny surplus in here so this is the last time that the United States had a savings account something for a rainy day and you know

What in just the past couple of months it started a downpour we're in the middle of a giant pandemic hurricane and we have no savings we've spent ourselves into a pit but then we grew the national debt than the civil war grew the

National debt hugely so we're up at about 35 percent or so now this is the biggest war in US history measured as a percentage of GDP measured as a percentage of the u.s. population killed this is the bloodiest war we've ever

Fought then we establish the Federal Reserve it funded World War one then here we have the roaring 20s and so we're growing the economy faster than the politicians can spend it then we go into the Great Depression and this is

Not us borrowing more and spending more this is GDP shrinking so the the debt becomes a larger percentage of the size of the economy because the economy got so much smaller then this is deficit spending for World

War two then we grow the economy a lot faster than the politicians can spend it and we get back down to the same levels of the debt that was left over of the Revolutionary War and we didn't continue this is you know

It goes on and on and on but right now it's saying that we're here now this is debt federal debt held by the public if you just take gross federal debt this level is actually way up here it's very close to that and I'll show you that in

An upcoming video and then this is what's projected and this is probably yes congressional seat projection Congressional Budget Office projecting where this is going in the future so the guys that make the plans on how much

We're going to spend they're there they're making this as their projection this is the endgame to their this bed this is basically a close-up of this area of this chart so just World War two – that dashed line

Actually this gets updated a little this goes out looks like it goes to about 2019 it's gone up a little bit since this I just checked it so we went off of using money to back our currency where there

Was a link between the two and that's when things went haywire this is all sectors debt securities and loans this includes private and corporate liability level and compared to the GDP of the country so this is the economy this is

All the debt that we've taken on as a society and this is over a year old that's up at 77 trillion today u.s. national debt we're getting close to the end of this from 1900 to 2020 and so it just goes to the beginning of 2020 and

This doesn't even fit on my screen but what we see here World War one the roaring 20s Great Depression World War two and then and notice there's only a couple of years in here there's a couple of times where

This actually goes down but it goes up in all years including the supposed Clinton surplus years right here these there's four years where this should be going if if the surpluses during the Clinton years are true if you're in debt

But you have a couple of years where your income is greater than your expenditures where you spend less than your income the difference would reduce the debt and this doesn't go down it goes up and it shows that there's a

Bunch of smoke and mirrors accounting going on I've identified some of the smoke and mirrors accounting and here is federal surplus or deficit as a percentage of gross domestic product this is that lie that I'm talking about

These may be real they weren't doing as much smoke and mirrors back then this is the same chart again presented in a different way federal surplus or deficit it's not as a percentage of GDP but there were one two three four years each

One of these bends here is a data point and so that for years that was all below this zero line this chart is a lie when you add it all up it's more than a seven if you add up the national debt and you go back right to the beginning here and

You add up every surplus and deficit together there's a set more than a seven trillion it's almost an eight trillion dollar discrepancy personal savings rates so now we're getting into a little bit more of the social and implications

To not just economics but you know we had a savings rate and this has nothing to do with GDP okay a savings rate of greater than 10% and when I was a kid this was just standard everybody would save ten percent of their income and you

Put it away in a savings account which used to pay enough interest to where you could retire and expect to live off of the interest from the savings that you it earned you didn't invest in risky things you put it into a savings account

And then that fell throughout the boom of the 1980s and 90s and then once we got into this the Cris 2016 12 2004 yeah so 2008 is about here and it went up again as people get scared and down now if you measure it as a percent of gross

National income you know you see this 10 percent area but it actually went negative during the crisis of o8 and right now I am absolutely certain the data isn't in yet but you just know that all of these people that are unemployed

With the collapse of all the customer there's nobody in anybody that's an entrepreneur there's nobody in their stores they're spending their savings right now so this is – and it's already – a lot more than the 2.5 or say 2.6

Percent of the 2008 minimum here this is probably already exceeding 5 and it's going it's gonna wipe out a whole lot of savings that people had built up over these time periods the trade balance of trade in the United States we supplied

The world with food and merchandise and services we were the world's economic engine we used to be in the position that China has been for the last few decades that was the US until 1971 and right there where we separated currency

From money and we started using currency and money was just this oddity this barbaric relic as Keynes called it once that happened you know we had one year with a surplus but other than that it's all debt because why not I mean if if

The world is using your currency as the reserve currency and you have the ability to type digits and buy real stuff with it why wouldn't you use it however that all stores up energy that's going to be coming back to haunt us too

This is negative energy now you know the balance of trade again repeated this is interesting the cost of a barrel of oil in nominal terms so this is just in price and you can see that when we were coupled to gold it held this in check

And kept things in balance and once we severed that tie this is right here 1971 things went crazy they not only went crazy to the upside but they've gone crazy down to the deflationary side where people were being paid 40 bucks a

Barrel so this chart is updated recently 40 bucks a barrel to take oil away and then we get to something interest rates since 3000 BC and what you see is there's a natural sort of rate of interest and so you've got short-term

Rates and long-term rates the Federal Reserve was established right in here and things were very smooth also notice that there's sort of a cycle going on here in this dip and bump they've gotten a little closer together since the

Federal Reserve was established right about there and that is the point where interest rates started going to the lowest in history look at these short-term rates and the highest in history this has never had these wild

Out-of-control swings never happened before the Federal Reserve in all of human history now I'm going to take a little side detour here and take you to a chart that I created for a presentation a long time ago I updated

It for the early warning presentation that's this chart which would have been done in July of 2018 so it's a little bit old data but if you remember there was a cycle going on here and if you go to the minimum here and the minimum here

So the lowest points of entry at the interest rate the number of months there and here is almost identical and you can pretty much balance that arrow on top of it so the same amount of years for a rise as as the decline

And so if you did that same thing using this minimum as a and then that arrow and drop that sometime between 2021 and 2023 interest rates should bottom and reverse now these interest rates have continued to decline – I mean we're in

Territory where you know we're here at the very beginning of 2020 and we're way way down here this is long term interest rates so it's the thirty-year but still it's in insane areas and it's going to reverse sometime I'm going to have a

Separate video on that because this has really big consequences for all of us in the future so look for the next special report to go over all of that getting back to WTF happened in 1971 this is just the 10-year bond yields for a bunch

Of different countries and they were highly synchronized before a 71 and then sort of went crazy after they've become quite synchronized again but they've gone into negative territory Wow how is it possible this is not economically

Possible for it to go into negative territory unless you have Keynesian economist running the world's central bank's it's just not possible that you're going to loan somebody says lonely some currency I need some

Currency I've been spending more than my income and I need a little bit more because I'm still spending more than my income now you're going to charge the if you loan them something and take that risk that you might not be paid back

Typically you're going to say well you know there's a risk here I need some sort of compensation I'm gonna charge you 10% so I'll loan you a million dollars but I'm gonna you're gonna have to pay me back 1.1 million dollars well

Here the government is saying you loan me a million bucks and I'll only charge you 1.1 million bucks you know lonely 1.1 million I'll pay you back a million in ten years this isn't possible in economic

Except in the crazy the world we live in led by these Keynesian central bankers it's it's totally insane now we're getting in really into the social implications incarceration rate so this is inmates per 100,000 population you

Know you can see when we went off of the Bretton Woods system that regardless we guard las' of which ones male and which ones female it exploded and so there's something socially significant about using fiat currency making it difficult

For people to plan for the future making it difficult for a whole class of people to get ahead Italy it leads to more crime and and this is just horrible to see and then we've got 25 to 29 year olds living with their parents or

Grandparents and it had fallen down into the 70s and as soon as we separated money from our currency it exploded again and that is because it's so hard to get ahead so hard to get by especially if you're starting out then

We've got divorce and this is the last chart so this is just you know there's 1971 I the only comment I want to make on this is it's very interesting that the 18 to 34 years or olds have this lowest divorce rate and as you get older

It is higher this is very interesting and then I was thinking well maybe it's just because these can diffuse people can't yet afford the divorce attorney when they get to this age they'll get divorced I want to thank you very much

For watching we'll see you next time

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