I’ve seen a bunch of graphs about the major turning point in history that happened in 1971. But last week, a mate of mine pointed me towards this website: https://wtfhappenedin1971.com/ (cheers QB!). Someone has collated everything for us! It’s at the same time terrible and fascinating. If you could distill all the problems of modern post-industrial society into a single unifying theory, this would be it.

But first, let’s start with 1000 graphs because it’s fun.

Workers’ wages were linked to productivity, then they broke down. Company productivity continued to rise, but wages barely increased at all. The profit got increasingly concentrated in the hands of shareholders and business owners.

Double-income households became the norm.

Inflation began accelerating at a pace that mimicked wartime spending… and never stopped.

Median house prices began accelerating around twice the speed at which income increased.

House prices began accelerating around twice the speed at which rent could increase (since rents are linked to wages)

The incidences of hyperinflation began to increase greatly.

You can now buy fewer shares for each hour that you work than at any time in history.

A wealth divide that was previously falling suddenly widened. The rich got richer, and the poor got poorer.

Crime and incarceration rates exploded.

Mass school shootings went from non-existent to a monthly or bi-monthly occurrence.

People waited longer and longer to get married.

Birthrates declined precipitously.

So what happened in 1971?

The US abandoned the gold standard. Prior to this, the USD was redeemable for a fixed amount of gold, which meant that the money supply was linked to the amount of gold held in Fort Knox.

Gold is an extremely scarce metal. If you were to collect all the gold ever mined by mankind, it would only fill two Olympic-sized swimming pools. The supply expands at about 2% per year. The difficulty of extracting the metal meant that the pace at which the money supply could expand in the US was constrained, which limited inflation and prevented the corruption of money.

Once the gold standard ended, it meant that the US could increase the money supply indefinitely, which is a subtle form of robbery, and we’re now witnessing the end stages of this system called fiat currency. It’s a system with a 100% failure rate when we look at the long-sweeping current of history. The estimates for the total number of fiat currencies ever in existence range from 750 to over 3000. What is clear is that 100% of them have eventually been relegated to the scrap heap of history. The average lifespan is just 27 years. There is no evidence to suggest that this time will be any different. Since the USD became the defacto currency of the world after 1944, it had far-reaching effects, and we weren’t spared either.

This endless printing of money without producing equal value in the real economy has disastrous consequences for society. We’ve gone from a world where one income was enough to buy a house and raise some children to one where it becomes increasingly difficult for a dual-income household to even save enough money for a deposit, let alone start a family.

As money is created (out of thin air), it flows through the economy but doesn’t flow through the economy evenly. It first finds its way into asset prices and pumps them up before gradually working its way into consumer prices. Those who own assets get richer, and those who don’t (or are too young to start) get poorer. Given a long enough timeline, the result is a gradual hollowing out of the middle class and a growing wealth divide.

Increasingly, people who have been locked out of asset ownership become disillusioned with the prospect of a better future, leading to higher crime rates and lower birth rates.

As the money supply expands, asset prices have expanded alongside it, while incomes and company earnings haven’t. This is why we have continuous yield compression in property, where the denominator keeps rising faster than the numerator, leading to a steady decline in yield. It is also why we have continuously rising PE ratios in shares: the price increases at the pace of the money supply, but company earnings can’t keep pace. The production of value cannot keep pace with the debasement of currency.

The only solution for the average person is to own hard assets—things that are both desirable and difficult to produce, such as land, precious metals, and the like. We’re really forced to play this game or risk being left behind.

In other news, I’m 99.5% finished with a renovation that started two and a half months ago…. For some reason, the first 90% of a job takes 70% of the time, and the last 10% takes 30% of the time. Nobody knows why—it’s just the rule. My rent will increase by 35-40%, and I can finally return to my normal routine.

As painful as it is, property is one asset where you can add value and increase cash flow through renovation. I have a survival guide to renovations coming up later this year after I chose the wrong property manager and experienced a tenant nightmare scenario.