Good afternoon, folks.
Hope everyone's ready for the weekend and the week ahead.
This week's Brisbane File is going to focus briefly on the topic of increasing the minimum wage in America. It's been brought to the forefront of American politics once again this week and many people have weighed in on whether or not low-wage workers should get a government-mandated raise. While one side of the debate focuses on the supposed "crippling effect" that such a move would have on private businesses, the other side makes the case for so-called "workers' rights." Naturally, this topic has inflamed passions in both of its respective camps, just as it has on the previous occasions where efforts to raise the minimum wage have (often successfully) been made.
As for me, I certainly agree that this particular topic is important and thus bears examination and discussion, though I would also be quick to point out that the entire topic itself goes much deeper than simply how much a minimum wage worker should receive for his or her efforts. Instead, I would argue that the issue of wages is connected to a broader topic that is getting very little to no mention by much of anyone involved in the discussion right now, least of all our elected officials.
The topic I speak of is inflation.
First of all, what is inflation? Simply put, it is the rate at which prices for goods and services rise, and, subsequently, purchasing power falls. This can happen at various times for a number of reasons, but for the U.S. dollar, it has happened a LOT over the past century and much of it can be traced to one particular event that took place in 1913; namely, the establishment of the Federal Reserve.
What is the Federal Reserve? Simply put, it is the central banking system of the United States responsible for controlling and regulating our nation's monetary supply and policy. Specifically, the chief duties of "the Fed" involve ensuring that enough cash remains circulating throughout the economy at all times and also ensuring that inflation remains moderate at all times. While the Federal Reserve is privately-owned, it is responsible for the currency of an entire nation.
Milton Friedman once said that "the first rule of economics is that there is never enough of anything to satisfy everyone; and the first rule of politics is: ignore the first rule of economics." This is never more true than when we take a cursory look at our nation's monetary policy. At one time, our currency, the U.S. dollar, was backed by real wealth as measured in gold. Obviously gold is scarce and so our currency, as a result, enjoyed purchasing power that was quite strong as a result of having been anchored to the gold standard. Consequently, prices were kept relatively low and relatively stable.
Over time, however, as elected leaders sought to divest our currency from the gold standard in the name of "increasing the monetary supply," the dollar's purchasing power plummeted as prices on goods and services rose. In other words, inflation happened. It happened because the gold standard was removed and the Federal Reserve then had the authority to print more and more money out of thin air that had no real value or purchasing power at all.
According to Michael Smith ( http://www.comparegoldandsilverprices.com/dollar-devaluation-since-1913/ ), the dollar has lost over 96% of its value since 1913, the year the Federal Reserve was established. While, once again, we cannot affix all of the blame for this on the Fed, it would be foolish of anyone to not give it the lion's share. When anything, the dollar included, becomes more numerous, it loses its value. When something loses its value, it cannot be as easily exchanged for another good or service. This is why goods and services cost more today than they did in 1913 and it is why clamoring for a higher minimum wage is essentially a band-aid solution to an amputation-level problem such as inflation.
Sadly, however, none of us are likely to hear this explanation from anyone with a say in raising the minimum wage (or not) anytime soon. While I won't delve into conspiracy theories here, I will say that it is telling that no one on Capitol Hill is talking about it. Furthermore, it should not surprise anyone to learn that politicians on both sides of the two-party aisle having a vested interest in keeping our monetary policy in a privately-owned, unelected banking structure with no accountability to the American people. Instead, it is likely much more expedient (and personally profitable) for these individuals to keep haggling over whether or not to apply a band-aid solution to an amputation-level problem.
Thus, it is highly unlikely that inflation, which is the root cause of issues like minimum wage levels, will be resolved anytime soon. And this is unfortunate.
In the meantime, those of us who wish to see a long-term permanent solution to this problem ought to take seriously the topic of inflation and our flawed monetary policy and continue lobbying for change. This can happen if the right people are elected. Thus, it behooves us to pay attention and, when possible, do all that is in your power to draft, support, and cast your vote for candidates who will fix the flawed system as it currently stands.
Until next week, live free.
-Warren Brisbane
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