What economic recovery?

April 19, 2013

By John Seiler

Supposedly the economy has been recovering for three years, with the stock markets setting new records. But all those numbers are based on inflated dollars.

The United States was on the gold standard from 1789 until President Nixon foolishly imposed his Nixon Shock program in 1971. Doing so caused the massive inflation of the 1970s, with the price of gold rising from $35 an ounce in 1971 to $80 in 1980.

A quasi-gold standard then existed from 1981 to 2001, with gold averaging about $350 an ounce, although it fluctuated a little.

After 9/11/2001, Federal Reserve Chairman Alan Greenspan panicked and debased the currency. Gold’s price soared to more than $1,700, although in recent weeks it has crashed to around $1,400. In any case, it’s still way above the $350 average of the two decades from 1981-2001. That’s why gasoline costs four times what it did in 2000.

What if America had stayed on the gold standard? How would stocks have performed? The following chart shows the Dow Jones Industrial Average pegged against gold.

Dow and Gold, April 19, 2013

As you can see, the DJIA dropped for the past decade, although it has blipped upward recently. Far from the economy making progress, even during the supposed “boom” of the early 2000s, there has been a continuous decline.

The early Bush years, 2001-06, supposedly were years of strong growth. In fact, as the chart shows, the market was declining. Far from being a “free market” president, he was anti-capitalist. He went on a wild spending spree; let Greenspan inflate the dollar; hyper-regulated the economy with Sarbanes-Oxley; and even his tax cuts were worthless, as they had an expiration date.

The Obama years continued the Bush disaster. Although the past few months show the DJIA increasing, as the chart also shows, against gold; that might be because of gold’s sharp decline. We’ll see if that lasts.

By contrast, the Clinton years were quite good. The early Clinton tax increases of 1993, still bragged about by him and his partisans, brought stagnation, as the chart shows, from 1993-95. But in 1996, Clinton agreed with Republicans controlling Congress to cut capital gains taxes — and the dot-com boom soared.

Today in 2013, we’re basically at the same economic level we were in 1995. It was 18 years wasted.

8 comments

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  1. Donkey
    Donkey 19 April, 2013, 18:31

    But John, the RAGWUS feeders are doing great!! 🙂

    Reply this comment
  2. fish
    fish 20 April, 2013, 10:05

    Donkey,

    What pray tell is a RAGWUS feeder?

    fish

    Reply this comment
  3. Hondo
    Hondo 20 April, 2013, 10:24

    I feel so good about this economy I think I’ll go out and buy a new car. Could some of my liberal friends here front me $30,000 in ‘stimulus’ money, first?
    Hondo….

    Reply this comment
  4. Dyspeptic
    Dyspeptic 20 April, 2013, 11:55

    “Could some of my liberal friends here front me $30,000 in ‘stimulus’ money, first?”

    What, no tenderhearted and compassionate ProgBots with donations for Hondo?
    My faith in humanity has been crushed!

    @Fish,
    RAGWUS is Donkey’s peculiar pejorative for government employees like the infamous Robert Rizzo of City of Bell Scandal fame. It’s some sort of acronym that I can never remember.

    Reply this comment
  5. Donkey
    Donkey 20 April, 2013, 12:59

    Fish, and acronym: Robert Rizzo and Government Worker Union Scam. 🙂

    The whole system has become so slimey and dirty it is quite disgusting. The moral compass of most RAGWUS feeders points to their pockets. 🙂

    Reply this comment
  6. fish
    fish 20 April, 2013, 13:24

    Good to know. Thanks!

    Reply this comment
  7. Steve Mehlman
    Steve Mehlman 22 April, 2013, 07:59

    So we are indeed creating a permanent class of jobless Americans. And let’s be clear: this is a policy decision. The main reason our economic recovery has been so weak is that, spooked by fear-mongering over debt, we’ve been doing exactly what basic macroeconomics says you shouldn’t do — cutting government spending in the face of a depressed economy. It’s hard to overstate how self-destructive this policy is. Indeed, the shadow of long-term unemployment means that austerity policies are counterproductive even in purely fiscal terms. Workers, after all, are taxpayers too; if our debt obsession exiles millions of Americans from productive employment, it will cut into future revenues and raise future deficits.

    Reply this comment
  8. SkippingDog
    SkippingDog 22 April, 2013, 19:40

    Interesting that your chart shows our economy going into decline at the same time George W. Bush took office. Wasn’t there also a federal budget surplus when he took office?

    Someday soon GWB will be known as the Herbert Hoover of the 21st Century.

    Reply this comment

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