Dear Kyle Kulinski, Leftists Need Sound Money

Share:

Why the working class has been misled through easy money solutions for inequality.

This article is very personal for me. I have been a follower of Kyle Kulinski since 2014, and have a great deal of respect for the work he does. He introduced me to politics, and many of my values such as free speech, social libertarianism, and workers rights have stemmed from viewing his content. His channel, Secular Talk, is one of the best political analysis channels on YouTube and offers well informed and entertaining populist content. I describe myself as a leftist, and have tended to support populism and programs which benefit the working class due to his influence.

However, I have been increasingly feeling lately that we have all been slightly misled. Kyle, myself, and everyone who supports the working class and those on the left have missed a key aspect of our society which will forever plague our mission until we address it. The aspect that we have missed is state-controlled monetary policy and its effect on the habits and wealth of the working class.

Lately, there have been huge discussions going on about inflation. We are currently experiencing the highest inflation rates for consumer goods in decades, and many remain unsure as to what the root cause of it is. Recently, I have seen many videos in which Kyle has stated that his economist friends have assured him that it is not the increase in the money supply which has caused inflation, but instead unregulated corporate greed. This could not be further from the case. Corporations are greedy, immoral, profit driven institutions, and have been able to increase in size and importance over the past few decades. But the beast which has caused this spike in prices is not the corporations, but instead the banks. I aim to convince you that inflationary monetary policy and state controlled money has been THE biggest factor for the decline in the wealth of the working and middle class.

Throughout human history, our evolution has been categorized by the parallel evolution of the tools we use and create to improve our lives. Whether it be language, the printing press, fire, the wheel, or even something as simple as a lever, tools and technology have propelled us into higher evolutionary states as a species. In a globalized world where production of certain goods is done in an efficient and specialized way, the most important tools we have are our tools to facilitate trade, or money.

Money is not a 21st century innovation. Money has evolved over millennia through three distinct stages. Commodity money, where things like salt, beads, or shells were used to facilitate trade, came as a way to make barter for goods possible when fair trade agreements couldn’t otherwise be reached. As time went on, these forms of money would become diluted and worthless as the commodities that people valued became more accessible. Glass beads traded in Africa became worthless once Europeans manufactured massive amounts of them. Salt lost its value after people living in coastal areas began exporting large amounts. And of course, if you are trading shells, someone can just go to a beach and find more shells. When any specific commodity of this nature was used as money, it created massive demand for it. The demand would drive an increase in supply, as people had lots of incentive to acquire more of that commodity. These inherent inflationary problems with these forms of money led to commodities like gold and silver taking over. Gold is a fairly scarce resource, and since it takes lots of time and effort to mine or find gold, gold was able to naturally become the ‘hardest’ and best form of money. In other words, since it is so hard to create new gold, it is very difficult to dilute the supply of it which already exists.

This was a good step, but gold still had problems. While gold is scarce and resistant to inflation, it can easily be taken by force or diluted in quality. The Roman Empire experienced this issue as it reached an unsustainable level of size. It wasn’t able to acquire more precious metals at the rate it was spending them, so it would dilute the amount in the coins until eventually the mercenaries caught on and stopped accepting them. This led to the fall of the empire. In addition, the incentive to enrich yourself by pilliging others is a fundamentally perverse one which does more damage to society than good. People who had large amounts of gold began seeing it as a risk to their safety, as the reward for someone taking it by force became very high. These concerns are what led to the second stage of money.

Representative money was the second stage of the evolution of money. People began bringing their commodity money such as gold to a central place to keep it safe, so they wouldn’t have to risk being robbed while carrying it around with them. In return, they were given a receipt which represented the amount of the commodity they held at the bank. This paper representation of the commodity could be traded with others for goods and services, without the actual asset ever having to leave the vault. This system worked well and provided a great deal of safety to those holding lots of any valuable commodity. It just had one flaw — trust. The holder of the receipt had to trust that the bank still had their gold, and the receiver of the receipt had to trust that it was legitimate and could actually be exchanged for what it represented. However with no real reason for people to cash in their receipts often and check, and the reward for creating more receipts then there really was gold so high, people started exploiting the system and breaking trust. All the way up to the level of nations, we saw banks and financial institutions create more receipts then they had gold to back them up, and use them to fund their own activities or to be distributed as they see fit. As others realized that the trust had been broken and the real source of their wealth, the gold, didn’t exist in full, people began trying to withdraw their gold from these institutions and the third stage of money started.

Fiat money is the third stage of the evolution of money, and it is what we currently have as our primary form of money worldwide. This is paper money in which value isn’t derived from any real intrinsic value, or even a guarantee that it can be converted into some other valuable commodity like gold. It instead has value through government order. Governments simply make it legal tender and make it unlawful not to accept it as a means for repayments of debts, public or private. This system started in 1971 when the United States suspended the convertibility of the dollar into gold. This system, to a government, is an excellent system. The value of the currency can be closely controlled and not impacted by foriegn actors as heavily as previous ones could. Since the supply of currency is completely within their control, any spending plans can be nominally funded with very little trouble. Federal programs can expand, recessions can be kicked down the road through bailouts and stimulus, and any mercenary or military operations they see fit can be funded. However, as any Econ 101 class would tell you, there is no such thing as a free lunch. While this system works with a restrained government and proper budgeting, it too relies on trust. Citizens have to be able to trust their government that the money they work for can be exchanged for the same amount of goods at a later date. And when we have a government where money in politics has corrupted it and led to the fed checkbook being used as a loan of last resort to companies and wealthy individuals, everyday citizens cannot trust that their money will preserve it’s value.

This is the reason why social security, pension plans, and retirement funds even need to exist in the first place. In a perfect world, someone could work until they had enough money to last them to the end of their lives, and then simply retire and spend the money as they need. Instead, since the expectation is that money will reduce in it’s real purchasing power over time, and since the working class have had their share of the money diluted down to such a small percentage that they could never dream of having enough cash to retire comfortably, we must create systems where we place bets on the future performance of assets, companies, and commodities. As long as growth in these assets continues to at least meet the growth of the money supply, this can be used to match inflation and fund people’s retirements.

This simply is an unsustainable system. There is no such thing as infinite growth of an economy. We have chased growth, chased the production of new goods, new technology, new jobs, new houses, and eventually there simply isn’t enough to be found. This relentless chase also makes society less healthy. Products we don’t need are created as an investment, people who don’t need to work are forced to do tasks that aren’t actually required by society so that they can simply live and feed themselves, and the level of quality and external impact of a good becomes very unimportant as long as revenue is beating inflation. This is what has led to the death of the single job household, the death of the nuclear family, the mental health crisis we have today, and the climate crisis in which there is no accountability for businesses which create products which on net destroy our planet. Yes, fiat money has been a driving factor behind consumerism, climate change, and the need for more parents to work longer and harder hours than before.

We are now in an incredibly interesting period in the history of money. The United States has 125% Debt to GDP, corporations and households have the most debt in history, and even the individual citizen likely has a great deal of student debt, credit card debt, or automobile debt. We cannot afford for the true value of the economy to stop growing, but due to factors like COVID-19 and diminishing returns of technology, we are faced with a real economic downturn. Inflation is the only way to reduce the value of the debt and make it able to be repaid, but since wages lag and the working class are generally the lenders and not the borrowers, it is incredibly politically unpopular and will likely cause shortages, bankruptcy, and the destruction of whatever wealth workers had left. But it is either inflation of the currency to pay all the debt, or it is default and massive civil unrest and potentially global war.

US Debt to GDP

The Federal Reserve and other central banks, contrary to what they will tell you, actually like inflation. The wealthiest people in this country, the biggest corporations, and the government itself are all huge holders of debt, or borrowers. And if the supply of money inflates, the dollar denominated debt becomes cheaper to repay. This allows them to continue to become more and more wealthy and swallow up all the real wealth and assets from the working class, like houses, land, and energy.

Social democracy is still the best form of government. It is very important to separate the criticism of the function of our monetary policy from the function of our fiscal policy. We should still advocate for more spending, as crazy as that may sound after all that I have told you. IF we are going to print money, monetize debt, and spend beyond our means, I would greatly prefer that it goes towards programs like universal Pre-K, universal healthcare, cancelling student debt, and paid leave. The bloated military budget and all the corporate bailouts and write-offs are quite literally the worst way to spend all of this newly printed money. But again, the problem is trust and incentives. Do you trust Joe Biden and the corporate democrats to spend the money they create in a way which substantially benefits the lives of the working class more than it costs them through inflation? And even more importantly — should you have to trust them for our society to function?

But the point is, with the system we have now we need more and more support for the working class by the government over time. And that is not because they have become less productive or lazier, in fact it is the opposite. It is because by nature, wages never keep pace with the printing of new money. Trickle down doesn’t work, and percentages are eaten up by the elites who get the newly printed money first. They use it to buy all the things a everyday person would want to buy, like land, housing, equities, and assets like gold and silver. This bids up the price, and centralizes the wealth. By the time a worker at Wendy’s is finally getting a 2% raise, houses could be 15% more expensive and stocks could be 25%. Those who get the new money first benefit the most, and we cannot trust politicians who have been corrupted by that same money to choose your Grandma and Grandpa to get it first over a banker at Goldman Sachs.

Houses are an interesting case too, because everyone assumes it makes sense that houses get more expensive over time. But what is a house? It is comparable to a consumable good, just one that lasts for a much longer timeframe. Like a car, if it is not maintained or imporved through material investment, it will rot, deteriorate, and become outdated over time. More houses are built, we find better ways to build them and cheaper materials to use, and new houses have much better technologies integrated into them then old ones do. There are only three potential reasons why houses should get significantly more expensive over time. One is that demand greatly increases for them, which to some extent is true. However, the ratio of people per home in existence in America is relatively flat, and even in decline over some timeframes, so I don’t see that as the reason. Another is that the supply decreases, meaning homes become unusable or are destroyed. This could be a bit of the case, but again, the ratio of people to house in America is essentially flat. The third is that the pricing tool to measure their value is decreasing in value relative to the homes because of increases in its own supply. This is what I believe is the case. Money is a ruler, a measuring stick of value. And the Federal Reserve has been distorting the ruler and changes are reflected in the prices of goods like houses.

The centralization of wealth through distribution of new money and ownership of assets

I know you have advocated for Universal Basic Income, and I have too. But that policy would be like a band-aid on a flesh wound. Imagine the prices of goods if everyone in America had 1000 dollars every month which they didn’t have to work for to go and spend. It doesn’t take a mathematician to see that within months, the purchasing power of the median annual income would be exactly the same as it was before if not slightly decreased, and the only real change is that now in order to survive and remain competitive in your own earnings, you need to stay on the good side of the government and not get cut off from these monthly checks. A dangerous game, and a counter-productive one.

To touch on one point from earlier, the banks here are the issue, not the corporations. I am no fan of corporation, especially not the ones we have in our modern lives. But the core cause of inflation is the expansion of credit and the money supply, and then those who have access to the credit or new money using it to buy up desirable goods. Many of these goods like oil, land, wheat, and other commodities are needed to produce the consumer goods which show up in CPI inflation. When these prices get bid up through the printing of new money, those who now own it benefit, but those who need to buy it to make things are hurt. This is show in the Producer Price Index, or PPI, which has been slightly higher than CPI inflation through this inflationary year. I am no fan of government numbers, but if we are going to use them, it is important to be objective and not further spread false narratives around inflation.

PPI Inflation tops even CPI readings

So, our money is backed by the enforcement of its use through the authority of the government, and our working class has been destroyed through massive inflation and deficit spending which serves to aid the elites in power instead of the people working and producing the real value in society.

Now what do we do about it?

We need to remove the control of money from the hands of the Federal Reserve, and Federal Government itself. That does not mean that the government shouldn’t exist and be able to spend. What it means is that we need a currency rooted in reality, which cannot be created out of thin air. This would force the government to spend responsibly, as there is no get out of jail free card if things go wrong and our tax dollars are wasted. This would force the government to be more accountable to the people earning the money, as they would actually need their consent through taxation to survive. War, which is incredibly unpopular, could not make up huge portions of the budget. WWI was almost prevented because none of the citizens of Britain wanted to buy war bonds to finance it. It was only through the first use of bank sponsored credit financing that the war even was funded. Big bailouts for companies which fail and cause harm to our environments and lives would not be possible, or else the people would simply stop funding the government. We would have a strong working class where money gets slightly more valuable over time, so saving is rewarded and wealth can be accumulated by those who create it.

The left cannot succeed in its efforts to improve the quality of lives for the multiracial working class without sound money. We will not be able to convince our overlords who control the supply of money to fund programs which make us genuinely more free. We will continue to be robbed of our savings, live paycheck to paycheck, and be able to afford less and less until we can stand up as Martin Luther did (and Martin Luther King Jr.) and peacefully demand that we are paid in sound money, out of the control of the government.

Leftists need sound money to start to substantially implement their policies and improve the lives of the working class. Until we have that economic baseline, none of our goals will be achievable.

I hope you found this long rant interesting at a minimum. If you have any questions, rebuttals, or disagreements, I would love to hear them and have a further discussion. I unfortunately am consumed by politics and economics, and would be more than happy to share more of my perspective and hear more of yours.

One last note:

The meeting which created the new standard of money which we live under today was called Bretton Woods. It took place with 44 countries central banks and governments coming together to decide the monetary future for the world. It is one of the most sinister and disastrous gatherings for the future of the working class, in my humble opinion.

Bretton Woods

Interestingly, right now there is another meeting being held between 44 countries central banks and governments.

El Salvador

May be something worth looking into.