The Nixon Shock of 1971 — the closure of the gold window, the final severing of money from any physical constraint — did not immediately impoverish ordinary people.
Instead, it created something more insidious: the illusion of prosperity, financed by debt, distributed through asset price inflation, and sustained by ever-lower interest rates.
In the United States, median real wages stagnated after 1971. The economic pie did not stop growing, but the share accruing to labour contracted sharply relative to capital.
The compensation was the credit card, the home equity line, the student loan, the 30-year mortgage on an asset perpetually inflated by the monetary expansion that was compressing real wages in the first place.
People felt wealthier because their houses were worth more. They did not feel wealthier because they were more productive or better compensated.
The distinction matters enormously.
