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Inflation: Civilization’s Death Spiral

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The cost of living continues to ratchet up in the United States.

You don’t need me to tell you this. You probably feel the squeeze in your own wallet. As Peter Schiff pointed out in his most recent podcast, the average wage rate has gone up 2.7% in the last year. Meanwhile, the Consumer Price Index (CPI) has increased by 2.9% during the same period. The CPI almost certainly understates the cost of living, but even if you take that number at face value, Americans are losing ground.

Most people accept inflation as “part of life.” But why? Why do prices steadily increase? As Nick Giambruno put it in an article published by the International Man, “This is all a predictable consequence of the US abandoning sound money.”

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 US money supply has exploded 2,106% higher since 1971. The rejection of sound money is the primary reason inflation has eaten up wage growth since the early 1970s—and the primary reason the cost of living has exploded.”

Looking at US hourly wages priced in gold vividly shows just how much ground Americans have lost since the US government abandoned sound money.

Measured in gold, US wages have dropped by 84% since 1971.

By the same measure, the US minimum wage has dropped by 87% since 1968. The problem isn’t that politicians won’t raise the minimum wage. The problem is that politicians and central bankers have destroyed the value of your money.

Giambruno said he believes the spiraling cost of living will drive the US toward more socialist government policies. And that will only exacerbate the problems.

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. Perverse as it is, the policies demanded by people suffering from inflation create even more inflation. Inflation has a way of perpetuating itself. The more inflation reduces living standards, the more people push for programs that create even more inflation. This includes things like universal basic income and a higher minimum wage… which in turn creates a cycle of inflation.”

Giambruno calls inflation “Civilization’s Death Spiral.”

  1. In a fiat currency system, the government will invariably print an ever-increasing amount of currency.
  2. This makes prices and the cost of living rise faster than wages.
  3. The average person feels the pain but doesn’t understand what’s happening.
  4. More people support politicians who promise freebies.
  5. In order to pay for the “freebies,” the government prints more money.
  6. This creates even more inflation, and the cycle repeats.

If you want to see the logical conclusion of this cycle, look no further than Venezuela.

Can the US break the death spiral?

That possibility seems remote. When you factor in entitlements, government wages and outright handouts, more than 50% of the US population depends on government money.

The growing majority of people who depend on the government guarantee that socialist policies will continue and likely accelerate. It’s why Bernie Sanders and his ilk are growing in popularity.”

If we can’t break the death spiral, what can we do? We can at least prepare ourselves for the inevitable consequences. Because at some point, the system will become unsustainable. Giambruno offers this advice. Buy gold.

Owning some physical gold is step one. This is something everyone should do. Gold is the ultimate form of wealth insurance. It’s preserved wealth through every kind of crisis imaginable. It will preserve wealth during the next crisis, too.”

Get Peter Schiff’s latest gold market analysis – click here for a free subscription to his exclusive monthly Gold Videocast.
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