Would Returning to the Gold Standard Resolve Our Most Pressing Monetary Problems?

We all know the problem with fiat currency: the temptation to print more currency is irresistible, but ultimately destructive.

Money in all its forms attracts quasi-religious beliefs and convictions. This makes it difficult to discuss with anything resembling objectivity. But given the centrality of money (and its sibling, greed) in human affairs, let's press on and ask: would returning to the Gold Standard (i.e. gold as money / gold-backed currency) resolve our most pressing monetary problems?

The conviction that the answer is "yes" is widespread. In this view, President Nixon "closing the gold window," in 1971, i.e. ending the convertibility of the US dollar to gold in international foreign exchange (FX) markets, is the Original Sin that doomed us to the inflationary Hell of fiat currency, i.e. currency unbacked by anything tangible such as gold or silver.

In this view, the only way to avoid the consequences of this Original Sin--the eventual reduction of fiat currency to zero value via hyper-inflation as the currency is "printed" without restraint--is to return to the gold standard.

So far, so good, but from here on in it gets tricky. We have a long history of precious metals being the only form of money in various economies, and an almost as long history of paper money augmenting precious-metal "real money" (in China, for example) and the issuance of copper coinage to grease small transactions.

Gold-backed currency rolls off the tongue rather easily, but what exactly does this mean? In theory, it means every unit of paper / digital currency in circulation can be converted on demand to a physical quantity of gold or silver at an exchange rate either set by the nation-state's government or by the market.

This conversion acts as a governor on the issuance of new currency: if the nation has $100 billion in gold/silver, it cannot issue $1 trillion in currency, as the whole idea of conversion is that each unit of currency can be fully converted to gold/silver. So in a truly gold-backed currency, the money supply in circulation must be limited to $100 billion.

There are various tricks that can be played here, of course. The government can assign a conversion rate that doesn't align with the actual market value of gold/silver, for example. Or it can limit conversion to the settlement of foreign trade with other nations.

Let's return to Nixon's Original Sin and stipulate that there is no such thing as "free trade", as all trade has geopolitical and domestic-economic elements. Those nations whose domestic growth depends on increasing exports, i.e. mercantilist economies, will naturally trumpet "free trade" as a cover for their exploitation of trade for domestic growth while they restrict imports.

Many observers seem to forget the US was engaged in an existential geopolitical struggle with the USSR in the 1950s, 1960s and beyond. Gaining and maintaining allies and "spheres of influence" were core dynamics in this global contest, and the US had over-riding reasons to support the war-devastated economies of its allies in Europe and Asia by enabling them to export goods to the US.

The US also had over-riding reasons to maintain the US dollar (USD) as a reserve currency, a currency that is available in sufficient quantity globally to grease commerce and credit and also act as a stable foreign exchange reserve for both private enterprises and nations.

Issuing a reserve currency offers an exorbitant privilege--what we might call monetary hegemony--but it comes with a price, a price explained by economist Robert Triffin as Triffin's Paradox, which has two key paradoxical dynamics:

1. The issuing nation must run a sustained trade deficit in order to "export" sufficient quantities of its currency into the global marketplace to meet the expansive needs of global trade and other nations. (This helps explain why the USD is roughly half of all reserves (48%) while China's RMB is only 2% of reserves: exporting nations running surpluses don't "export" their currencies for use by others.)

2. This need to serve international trade / geopolitical goals is fundamentally in conflict with the goals of the domestic economy: the currency cannot serve two masters equally well.

Why did Nixon end USD conversion to gold? He had no choice, as the geopolitically necessary trade deficits were rising to the point that America's gold holdings would have diminished to zero were the rising trade deficits settled in gold.

Existential challenges take precedence. To say that the US should have given up its reserve currency and insisted our struggling allies maintain balanced trade with the US is to ignore the geopolitical realities.

We must also recognize that markets discover the price/value of competing currencies, and so nations whose currency is priced higher than others will have difficulty exporting their goods, as these goods are priced in their own strong currency and are therefore more expensive in nations with weaker currencies. Nations with weaker currencies will have an easier time selling their goods to nations with stronger currencies, as their goods are cheaper as a result of their weaker / lower value currencies.

Those nations blessed with surplus essential commodities (energy, food, minerals, etc.) will naturally tend to run surpluses with nations less endowed with tradable goods, and as a result, the nations running trade surpluses will end up with the lion's share of the gold and silver. This generates global "haves and have-nots," with all the attending sources of conflict: "our lead will take your gold."

We might also note that fiat currencies issued by the sale of sovereign bonds are not actually "backed by nothing": they're backed by the interest payments made on the bonds and the entirety of the nation's economic-political-social stability and productivity which guarantee repayment of the bond at maturity.

We all know the problem with fiat currency: the temptation to print more currency is irresistible, but ultimately destructive: once currency is issued in excess of the actual expansion of goods and services, the result is devaluation / loss of purchasing power, a.k.a. inflation. Here's a snapshot of global money supply:



In response, central banks are adding gold reserves: gold reserves are now larger than the reserves of the second-largest reserve currency, the euro:



Where does this leave us? Not with an easy answer, but with more complexities, starting with credit. As David Graeber explained in his book Debt: The First 5,000 Years, credit has been an essential element of commerce from the earliest days of commerce, for very compelling reasons. How do we graft credit onto "money" when credit is itself a form of "money"?

We'll also have to consider the other crisis we face, soaring wealth-income inequality, which arose without restraint in ancient economies that used precious metals for money.

Looking at the history of Rome, we note that the wealth of Rome's elite in the Republic era has been estimated as 30 times the wealth of the average free male citizen, where by the Imperial era the elites had amassed fortunes 10,000 times the wealth of the average free male citizen. There was no fiat currency, so we must accept that politics is part and parcel of "money," social stability and economic vitality or stagnation.

We'll grind through these additional complexities in my next post. I discuss these issues with Richard Bonugli in a new podcast: CHS on Gold and What Currency Systems Make Sense (31:37 min).

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


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Is Anyone Else's Life as Stupidly Complicated by Digital "Shadow Work" as Mine Is?

We seem to have entered a world of anti-leisure and anti-productivity in which the unpaid "shadow work" demanded to keep all the complicated digital bits in motion obliterate our leisure and productivity.

Is your life as stupidly complicated as mine is? Of course it is unless you've withdrawn from all engagement with the digital realm and all devices containing digital components.

To rephrase the question: is anyone else a boiled frog like I am? Yes, a frog slowly boiled by the steadily increasing burdens of the "shadow work" required to maintain a life that has become, without us noticing, dependent on constant unpaid effort to keep all the stuff we now depend on functioning.

There are illusions galore in this mimicry of technological "empowerment:" the illusion that we "own" all the stuff that becomes a brick once a digital component fails or we fail to accept the new terms of service. The illusion that all these services and devices "free us" to enjoy more leisure. The illusion that performing all the unpaid shadow work needed to keep all the complicated stuff functioning is "worth it" rather than a form of digital servitude. The illusion that we have a "choice," an illusion that's broken once we "choose" to opt out of the shadow work and everything ceases to function.

Parody abounds in the digital realm. Pathetically wretched services and products are touted as "Progress" with a capital P. "Consumer choice" when your smart phone screen dies is reduced to buying a replacement phone from one of the phone quasi-monopolies. Do you really want to endure learning a new system, or would you rather bite the bullet and stick with the same monopoly so you don't have to spend unpaid hours trying to figure out a new system?

Our dependence on the quasi-monopoly platforms is complete, and so we are wary of violating the infinitely capacious caprices of their terms of service, which mean exactly what we want them to mean, which means you can be sent to the Demonetization Gulag in Digital Siberia without warning or recourse.

Consider a typical experience of the stupidly complicated time-sink unpaid shadow work we endure on a daily basis. A payment platform that we depend on recently informed me mid-day on May 18 that I was required to update "business information" by May 18 or my ability to access my own earnings would be suspended.

Well, thank you very much for the advance notice. So I navigate their wretchedly confusing site to the "business information" page and discover it's blank: there is literally nothing there. (Metaphorically, how apt.) Okay, so all of us busy digital shadow workers know the drill: reload the page--no dice. Okay, open another browser and try that--nope, the page I need to update to avoid being sent to the Demonetization Gulag is still blank.

It's obviously hopeless now, but we continue to play along because we're trapped in Kafka's Castle, always churning 24/7 with busy-work that is completely unproductive. So we email tech support, knowing it will be useless.

And sure enough, it is utterly useless. The tech rep (or chatbot, who knows) apologizes for the inconvenience, but has no solution. All of us shadow workers know we have to enter the rat-maze again and hope the page loads so we can jump off the train taking us to the Demonetization Gulag. Perhaps our prayers to the Digital Gods and Goddesses are answered, or the Matrix self-corrected, who knows, but the page finally loads hours later and we dutifully enter the same data the platform already had on record. This seems to satisfy the Kafkaesque requirements, and we breathe a sigh of relief.

But wait, there's more! No sooner do we get that unpaid waste of our lives done than we receive another email from the same platform demanding another update to our "business information." Gee, is it really asking too much to send a single email with all your required updates instead of torturing us with a string of emails?

So back we go to the same page and re-enter the exact same information and click "update." Um, is this a parody of technical simplicity and productivity, or is it simply a gigantic waste of time, a form of digital servitude we cannot escape?

Then the final slap of parody: the "how did we do?" email requesting us to waste even more time answering a questionnaire about their wondrous tech support. You mean the tech support I was forced to contact because your site was broken, the tech support which did nothing to address the problem? No thank you, I'm already boiled alive and don't really feel like wasting more of life rating your "service."

Want to sign up for a short-term vacation rental platform? Sort through these 4,000 photos and select all those with a frog (live or boiled) and then move to the next excruciating step of our "validation process."

Please submit photos of your bank statements, a voided check, your big toe, a retinal scan and your passport. Or go ahead and lose access to your own money. That's a heckuva "choice," isn't it?

We're sorry, we cannot accept your form because it's out of date. Oh, do you mean the form on your website?

Please follow the instructions via this link. Um, the link you sent to explain how to navigate your system is dead. It seems monopolies don't need to bother fixing dead links and outdated instructions.

Social critic Ivan Illich's 1981 book Shadow Work describes how the modern wage-earner economy demands unpaid shadow work to do all the necessary domestic / daily-life work so the wage earner can spend hours commuting to work, performing at work and then returning home too drained / zombified to do much in the non-paid-work realm. Highly processed "food" (that makes us ill) is offered up as a "time saver" and a plethora of "conveniences" (that break down after a few years of service) are available for purchase to reduce the shadow work.

The digital realm has created an entire new universe of unpaid shadow work over which we have little choice or control other than to give up access to our own earnings and the proliferating accounts we now need to function in the digitally-dependent world: the airline booking accounts, the subway / bridge toll accounts, the insurance accounts, the bank accounts, the rental car accounts, the healthcare accounts, and so on, dozens upon dozens of accounts that must constantly be updated, new passwords entered and recorded in our own paperwork, and then all the accounts we might need to maintain a livelihood.

This digitally boiled frog looks at the time-sink of unpaid shadow work required to "be productive" (heh) and wonders: what happened to the techno-enthusiasts' promise of greater leisure? We seem to have entered a world of anti-leisure and anti-productivity in which the unpaid shadow work demanded to keep all the complicated digital bits in motion obliterate our leisure and productivity.

This is a world ruled by rather tiresome irony and parody.





New podcast: CHS on Leafbox (1:20 hrs)--authentic community, going grey, Doom Loops and more.

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

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Maybe We're Closer to "You'll Own Nothing" Than We Realize

Maybe we should rephrase the slogan to "you'll appear to own things you don't actually control and be happy."

The World Economic Forum's catchphrase you'll own nothing and be happy was widely mocked as an eyebrow-raising vision of a "sharing economy" future without the implicit agency granted by full ownership. Renting stuff that one needed only for one-time use has long been a market, and car-sharing makes sense for urban dwellers who only need a vehicle on occasion.

But to own nothing still implies powerlessness and poverty, not happiness, which continues to be associated with owning income streams and nice things, i.e. wealth.

Given our dependence on software / digital rights and the phantom wealth of credit-asset bubbles,"how much do we actually own?" is a fair question. Consider the recent New York Times article Why Tech Companies Are Not Your Friends: Lessons From Roku, which was reprinted in other publications with the more accurate title Our Gadgets Are Not Ours.

The gist of the article is that since we don't own control of the software, our "ownership" of the device is illusory. Here is an excerpt:

More than a decade ago, when we bought a TV it was just that--a big screen that let you plug into it whatever you wanted. Nowadays, the vast majority of TVs connect to the internet and run the manufacturer's operating system and apps. Even though you bought the TV, the software component, a major part of what makes the product work, remains controlled by the company.

Changes to the product's software interface and data collection practices can happen at any moment. In extreme examples, a device can stop working. In 2020, for instance, Amazon deactivated the Echo Look, a camera that helped people organize their wardrobes. It issued a promotional credit for owners to buy a different Amazon gadget that lacked similar features.

The less extreme, more common situation is when companies stop supporting older products because they need to sell new gadgets. Apple's original Apple Watch from 2015, for example, no longer gets software updates and now barely works.

This issue is not new but has grown more problematic as more of our devices rely on apps and internet connections, said Nathan Proctor, a director for the U.S. Public Interest Research Group, a consumer advocacy organization. With computers, consumers could modify their machines by installing a different operating system. But with many other types of electronics with locked-down software systems, from streaming devices to e-book readers, those modifications are typically not possible.

"When you get to the core of it, do you even own it anymore?" he said.

Indeed. Now think about the "ownership" of software-dependent systems such as vehicles and Smart Homes, and income streams running through software platforms such as Stripe. Payment software platforms can block your access to your money and delete whatever illusion of control you might have had by informing you that you violated their "terms of service," which are open-ended and cannot be questioned.

One's "ownership" of money and income streams turns out to be highly contingent.

As for vehicles, if the software fails (or is rendered inoperable), your vehicle becomes an expensive brick. So what exactly do we own if the vehicle is inoperable?

Widening the scope of our inquiry, consider our ownership of a house that is mortgaged. If the fine print doesn't preclude the lender calling the mortgage, then should the lender (or current owner of the mortgage) call the loan, the "owner" must pony up the sum owed or the "ownership" reverts to the lender.

Given the valuations' dependence on phantom capital asset bubbles, we might say that "ownership" of a mortgaged house is more an option bet on future valuation than actual ownership, for should the Everything Bubble pop and the house value drops below the mortgage owed, then "ownership" means "ownership" of an asset with negative value, i.e. it's worth less than zero as the "owner" owes more to the lender than the property is worth.

If the house is in a high property tax state / county, "ownership" includes a hefty annual payment which may well have no upper statutory limit. If the "owner" owes $20,000 in annual property tax, the "ownership" is in effect a lease, as non-payment of the taxes/"lease" eventually leads to confiscation of the property as a means of collecting back-taxes.

The same dynamic occurs in condominium "ownership" when common-area fees and special assessments have no statutory limits and must be paid. This article on outsized special assessments being mandated for older condo buildings raises the question, what exactly does the owner own, and what is in essence an open-ended lease?

New Florida Law Roils Its Condo Market Three Years After Surfside Collapse: More units are being dumped on the market because of six-figure special assessments tied to repairs for older buildings.

Ivan Rodriguez leapt at the chance to buy a unit at the Cricket Club, an exclusive bay-front condominium in North Miami. In 2019, he liquidated his 401k retirement account to purchase a nearly 1,500-square-foot unit with water views for $190,000.

But because of a recent state law that requires older buildings to meet certain structural safety standards, the condo board recently proposed a nearly $30 million special assessment for repairs, including roof replacement and facade waterproofing. It would amount to more than $134,000 per unit owner.

Rodriguez, 76, didn't have the money. So he reluctantly put his two-bedroom condo up for sale, joining dozens of others in the building who are doing the same. After originally listing his unit for $350,000, he kept marking it down until finally it sold for $110,000 last month, or 42% less than what he paid for it.

Every time a potential buyer learned of the assessment, he said, "they'd run in the opposite direction."

Maybe we should rephrase the slogan to you'll appear to own things you don't actually control and be happy. Does that generate the intended warm and fuzzy feeling?





New podcast: CHS on Leafbox (1:20 hrs)--authentic community, going grey, Doom Loops and more.

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

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The Decay of Everyday Life

So where does this leave us? We're on our own.

This month I've described what can be summarized as The Decay of Everyday Life: the erosion of the fundamental elements of everyday life: work, opportunity, social mobility, security and well-being, which includes civility, conviviality and a functional, competent social-political order.

In other words, Everyday Life includes far more than the financial statistics of Gross Domestic Product (GDP), the stock market, wealth and income. Everyday Life is fundamentally about relationships, agency (i.e. control of one's life and ownership of one's work), the fulfillment of life's purposes (livelihood, family, friends, community and self-growth), leisure time and the experiences of everyday living, both the stressors and the joys.

As I've explored in recent posts, the experiential elements of Everyday Life have decayed over the past 40 years: life is more difficult and less secure in ways that are not offset by technological advances. Indeed, the most highly touted technological advances (Internet and mobile phones) have increased the burdens of shadow work and introduced new pathways of addiction and stress that have reduced well-being. Rather than being free, they include structures of control that we have yet to grasp, much less limit.

Here are my recent posts:

Precarious: One Misfortune Away from Insolvency
Squeezed for Decades, America's Working Class Is Finally Up Against the Wall
Lost in the Vast Wasteland of Social Media
Hikikomori and Lying Flat: When "Making It" Becomes Hopeless
Withdrawing from the Rat Race Is Going Global

The Decay of Everyday Life echoes the title of one of the more important books I've long recommended, The Structures of Everyday Life Civilization and Capitalism, 15th-18th Century Volume 1 by Fernand Braudel. The book outlines how changes in the economic structure led to changes in everyday life.

The structures I outline in the five posts describe the economic structures that shape our daily lives and the political and social structures we inhabit. While I focus attention on the way globalization and financialization have hollowed out our economy and increased the precarity of labor, in the larger context we can identify these structural drivers of decay:

1. The balance between labor and capital has been skewed to capital for 50 years. Labor's political power and share of the economy has declined while capital's political and economic power has become dominant. This has driven income-wealth inequality to extremes that are destabilizing the economy and the political-social orders.

Increasing the sums labor can borrow to keep afloat only works until debt service consumes all disposable income, crushing consumption. The end result is mass default of debt and the erasure of debt-based "assets" held by the financial elites (top 10%).

Labor will have to restore the balance with capital or the system will collapse in disorder. History is rather definitive about this causal chain.

2. Process and narrative control have replaced outcomes as the operative mechanisms and goals of the status quo. The illusions of limitless "progress" and "prosperity" have generated a mindset in which outcomes no longer matter, as "progress" and "prosperity" are forces of Nature that can't be stopped, so we can luxuriate in Process--completing forms and compliance documents, submitting reports to other offices, holding endless meetings to discuss our glacial "progress", mandating more Process, elevating managers who excel at Process--with the net result that building permits that were once issued in a few days now take months, bridges take decades to build, and incompetence reigns supreme.

To obscure the dismal outcomes--failure, delays, poor quality, errors--narrative control is deployed, expanded and rewarded. The managerial class has been rewarded and advanced not for generating timely, on-budget, high-quality outcomes, but for managing Process and Narrative Control: everything's going great, and if it isn't, the fault lies elsewhere.

The net result of this structure is that the competent either quit in disgust or or assigned to Siberia, while the incompetent are elevated to the highest levels of corporate and public-sector management.

3. The dominance of monopolies and cartels has fatally distorted markets and politics, undermining the foundations of everyday life. By eliminating competition and buying political-regulatory complicity, monopolies and cartels lock in ample, stable profits, profits that are increased by squeezing labor and reducing the quality and quantity of goods and services, to the point that quality services and goods are either luxuries available only to the elite or simply unavailable at any price, as the knowledge, systems and values required to produce high-quality goods and services have been irrevocably lost.

4. The dominance of digital communications in everyday life has increased the unpaid shadow work we're forced to do and injected new forms of narrative control, digital hypnosis, addiction and derangement into daily life that cannot be reversed in any meaningful way other than drastically limiting our exposure to the toxic flood tide.

So where does this leave us? We're on our own. The status quo is incapable of unwinding the fatal distortions generated by the dominant economic structures, and so it is also incapable of "saving" us from being seated at the banquet of consequences. This is why the only rational response is to focus on increasing our Self-Reliance.

Rather than becoming enraptured by the apologists and cheerleaders proclaiming everything's great, launching a lifeboat and setting a course for land is a strategy with much higher odds of success.





New podcast: CHS on Leafbox (1:20 hrs)--authentic community, going grey, Doom Loops and more.

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

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NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Julian N. ($70), for your splendidly generous subscription to this site -- I am greatly honored by your support and readership.		Thank you, Ben P. ($70), for your magnificently generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Daniel R. ($7/month), for your marvelously generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, SG ($7/month), for your monstrously generous subscription to this site -- I am greatly honored by your support and readership.

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Precarious: One Misfortune Away from Insolvency

As a result, a significant percentage of households that are considered middle-class are one misfortune away from insolvency.

We can summarize the changes in our economy over the past two generations with one word: precarity, as life for the bottom 90% of American households has become far more precarious over the past 40 years, despite the rising GDP and "wealth" as measured in phantom capital.

This reality is expressed in the portmanteau word precariat, combining proletariat (someone whose livelihood comes from their labor) and precarious: outside of government employment, work has become far more precarious. Where it was still common 40 years ago to work for a company for much or most of one's career and have a private-sector pension, now private-sector pensions have vanished, replaced by self-managed 401K funds, and private-sector work is characterized by a series of not just job changes but career changes.

The source of one's livelihood can dry up and blow away almost overnight, and to fill the hole many turn to gig-work with zero benefits that saddles the worker with self-employment taxes (15.3% of all earnings, as the "self-employed" gig worker must pay both the employee and the employer shares of Social Security-Medicare payroll taxes).

This isn't true self-employment, of course, as true self-employment means the owner-worker can hope to extract the full value of their labor; in contrast, much of the value of the gig work is skimmed off by corporate platforms (Uber et al.). The gig worker is a precariat wage-slave, not a self-employed owner of their own labor and enterprise.

Forty years ago, households with healthcare insurance being driven into bankruptcy by medical bills was unknown. Now this is commonplace. We're forced to ask, what exactly does "insurance" even mean if our share of the medical bills is so burdensome that we're forced into insolvency?

This is just one of many examples of the increasing precarity of life in America. Need dental work? "Insurance" covers only the basics; the rest requires savings, an inheritance, a line of credit or a top 10% income.

Speaking of income, even a substantial earned income doesn't go that far nowadays. Consider what a typical family spends on what we consider middle class birthrights: eating out, going to a movie, etc.



This budget of a household earning a top 1% income (top 2% in high-income states) of $500,000 is interesting on several fronts. Those living in lower-cost states may view it as bloated beyond belief, while those living in NYC, Los Angeles, San Francisco et al. will view it as entirely realistic: yes, property taxes are $20,000, "enrichment" childcare costs $42,000, and so on.

What's not realistic is $5,000 for home maintenance and $18,000 for three vacations a year. Given the age of American houses (40 years being average), the poor quality of a significant portion of recent construction and the soaring cost of labor, $5,000 doesn't buy much in the way of maintenance. A more realistic estimate for pretty much anything serious is $20,000, and $50,000 is remarkably commonplace for even modest kitchen makeovers. The $18,000 in charitable donations may be sucked up by a new roof.

As for vacations, unless it's a very short trip, a camping trip or travel to a low-cost destination, $6,000 per vacation may not be realistic.



The point of this exercise is to examine the buffers needed to survive a serious misfortune, such as losing one's job or a medical crisis. Two generations ago, costs were lower and households generally had enough savings or credit to cover the emergency expense or survive a bout of unemployment. With costs now prohibitive, modest savings are no longer enough.

As a result, a significant percentage of households that are considered middle-class are one misfortune away from insolvency. The concentration of income and wealth into the top 10% isn't just a statistical abstraction; in the real world, it means the buffers of the bottom 90% have thinned while the buffers of the top 10% have increased: for the family holding hundreds of thousands of dollars in 401K accounts and sitting on $1 million in home equity, a $25,000 medical or home repair bill is an inconvenience, not a push off the cliff into insolvency.



This precariousness extends into small business as well. Costs have soared and buffers have thinned. A great many small enterprises are one misfortune away from closing / insolvency.

As the tide of precarity rises, the apologists and cheerleaders of the status quo are cheerily predicting a "Roaring 20s" of widespread prosperity ahead. Correspondent David E. forwarded this cartoon which captures the current zeitgeist perfectly:





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