Replace Fiat with Bitcoin to End Poverty

Poverty in the Land of Prosperity: Problems and Solutions

Introduction

Poverty is a major problem in American society—one that has only gotten worse in recent years. One of the big factors in poverty is the offshoring of labor, which means the loss of domestic job opportunities, which are sent overseas. It means lost wages for Americans. At the same time there is also the other problem of the devaluation of the dollar, which lessens the purchasing power of the lower and middle classes. All of this leads to wealth transfer from the lower to the upper classes, and it helps the top 1% to become wealthier, while the lower 99% stay poor and become poorer. This paper argues that the offshoring of labor and the devaluation of the dollar are the two main problems regarding the issue of poverty; at the same time, others make the counterargument that globalization and central banking policies are needed for economic growth and social stability; nonetheless, this paper rebuts that belief and suggests that the solutions are to onshore as much labor as possible and replace the devaluing dollar with a limited supply currency, like Bitcoin.

Offshoring of Labor and Its Impact on Poverty

Offshoring labor refers to the moving of jobs from a company’s home country to countries where labor costs are less (typically in Asia or third world countries). Offshoring is part of the process of globalization, which is good for the bottom lines of big corporations—but not great for domestic labor markets. That is because when companies offshore, they reduce costs and increase profits, but at the expense of domestic workers. The loss of jobs leads to higher unemployment rates. Indeed, that has been happening for years in the US—and the rise of AI is now making even some skilled labor jobs redundant.

According to the Economic Policy Institute, between 2001 and 2013, the U.S. lost 3.2 million jobs due to rising trade deficits with China (Scott, 2015). These job losses impacted whole communities. Local economies were hurt; consumes could not spend as much as they could before. The need for social welfare began to rise. And that comes with a cost, too.

Devaluation of the Dollar and Its Consequences

The devaluation of the dollar is another problem related to the issue of poverty. When the value of the dollar decreases, the cost of goods rises, which means everyday items like food and clothing and shelter cost more. Poverty ends up being right around the corner as families struggle, paycheck to paycheck, to make it from one month to the next. The slightest unforeseen cost can tip the house over into bankruptcy.

Moreover, the devaluation of the dollar reduces the purchasing power of wages. In dollar terms, wages might be rising over the years—but not in terms of purchasing power thanks to inflation as a result of central bank policies like quantitative easing in the wake of the 2008 financial crisis. In response to the crisis, the Federal Reserve launched quantitative easing policies that increased the money supply and devalued the dollar. This was the central bank’s attempt to stimulate the economy, but it just resulted in rampant speculation and higher inflation, which further devalued the dollar and increased Americans’ cost of living (Bernanke, 2013). Those in lower income brackets really suffered.

Wealth Transfer and the Benefits to the Top 1%

The problem of poverty, therefore, is really a problem of wealth transfer from the bottom 99% to the top 1%, who benefit from offshoring and central bank policies. The 1% owns the corporations and has excess money to invest, which benefits from rampant speculation whenever the central bank starts up another round of quantitative easing. Everyone else in the 99% has to deal with inflation eating away at their paycheck. Companies can continue to reduce costs through offshoring at least for a time, but eventually even they have to admit they can only do so much once the consumer is tapped out.

All of this is more than apparent in the fact that there is a stark income inequality in the US. The Congressional Budget Office says that the top 1% of households saw their income increase by 226% between 1979 and 2016, while the bottom 99% saw only more modest gains (CBO, 2018). Added to this is the fact that the concentration of wealth among the top 1% restricts social mobility and gives greater political influence to the wealthy, who can use their resources to influence politicians. And all of that helps to keep the cycle of inequality going.

Counterargument: Benefits of Globalization and Currency Policies

The counterargument is that offshoring is just a necessary part of globalization and that globalization actually helps with global economic growth which benefits global society. It is an argument that puts emphasis on companies being able to reduce costs and thus supposedly lower prices for consumers.

Supporters of currency devaluation argue that it can boost exports by making goods and services more competitive in the global market which, in turn, stimulates economic growth and helps with job creation. An example of this argument is that during the Great Depression, countries devalued their currencies to boost exports and recover from the economic downturn (Eichengreen, 1992).

However, while these arguments have merit, they fail to focus attention on the unequal distribution of benefits. The gains from offshoring and currency devaluation tend to be concentrated among the wealthiest individuals and corporations, and the costs are all felt by the lower classes who are either falling into poverty or continuously skirting the line. So, it may be admitted that globalization and currency policies can contribute to economic growth for some people (or companies) at least for a time, there is a cost felt by others who are ignored. There is also a great deal of assumption about companies lowering costs because they can or more jobs being created (where are they being created again?).

Solutions

One solution is to reverse trade policies to such an extent that it obliges companies to keep jobs onshore. This would mean putting tariffs on imported goods produced by offshored labor or it could mean giving tax breaks and subsidies to companies that keep their domestic operations intact. The point would be to make it more financially attractive for companies to keep jobs at home.