Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

How did the gold standard work?

twitter.com

Post reply on HN
Print view View original

111–120 of 144 posts

Re: How did the gold standard work?

#111

Post by lazide »

paulpauper wrote: post #70
lazide wrote: post #46

Earlier quoted context omitted.

People are surprisingly motivated to try to steal generalized stores of value that are untraceable? Especially when it’s worth a lot in even small quantities. So everyone from guards to govts would love to get their hands on it. 6000 tons of gold is worth around 384 billion dollars.

u cannot get your hand on enough gold to make it worth the criminal penalties. that stuff is heavy

What if you could sneak off with some every day with no one noticing?

The criminal penalties are heavy and the investment in countermeasures is extreme BECAUSE the motivation/enticement and payoff is high.

Re: How did the gold standard work?

#112

Post by lazide »

eru wrote: post #58
lazide wrote: post #42

Earlier quoted context omitted.

Which means people need to work harder for every hamburger or the like and a deflationary spiral could occur which is even more terrible than an inflationary one. I think the parent was referring to ‘to keep the commodity/cash stable’

Why would people need to work harder for each hamburger? The relative prices of hamburgers to labour don't need to be impacted by the price of gold, or do they? What do you mean by deflationary spiral? A decrease in price level during a recession is bad news indeed; but a decrease in prices in some sector due to productivity growth is great for business. Just look at falling prices of electronics in the last few deca…

If ‘currency’ becomes more valuable every year (deflation), people try to save as much as they can and reduce spending as much as they can to compensate for it in advance. So people would get paycuts every year instead of raises, and the ‘better employers’ would just cut less than everyone else.

The hamburger shack would also have layoffs regularly, as every time the expectation for how fast the ‘currency’ got valuable increases, everyone would cut back on non-essential (or even essential) spending to save more. And burgers are generally not seen as truly essentially/someone would die from not having it.

Especially since in a deflationary spiral, ideally you’d literally not spend ANY of the currency, since any that you save now would be worth far more the more you delay it. Folks would rather grow food in their back yard than go to the grocery store so they’d be rich in a year.

This is in contrast to a inflationary spiral, where the incentive is to spend all money as soon as you get it, so the value of it doesn’t have time to decrease and prices increase before you do.

Re: How did the gold standard work?

#113

Post by ItsMonkk »

jerf wrote: post #34
rr808 wrote: post #12

There are real practical problems with gold and changing economies. What happens when your population goes up - you need more gold. Or economic growth. Similarly if gold is discovered like Spain's Latin American winnings it causes inflation.

The thought has crossed my mind that the answer is, it is impossible to have a long-term gold-backed system (or any other commodity), for all the various reasons that doesn't work, and it's impossible to have a long-term system not based on gold or some other set of commodities, because it is impossible for a government to be given the power to print arbitrarily without eventually using it, unto the death of that cur…

I'm not so sure that this is true, but I do agree that as of this moment it is so.

The key thing you are looking at is (capital goods at time 1 / currency at time 1 ) / (capital goods at time 2 / currency at time 2).

Under a gold standard, mostly this means deflation with some periods during a gold rush rapidly going the other way. It becomes better to hoard gold and do nothing, and as you hoard the value rises further. This leads to economic stagnation because we don't actually encourage innovation.

Under a Fiat currency scheme, the reverse happens. The value of the currency is constantly dropping. So what you see is people hoarding capital goods. What makes this worse is that we are incorrectly treating land as a capital good. So this is what we see today, people buy shares or land, that value appreciates as the money is printed, and they earned nothing. And as people learn of this, we get crazy things like 401k's that invest in everything in order to grab a piece of this appreciation. We get crazy things like companies taking out bonds, then using those bonds to buy their stock, never actually using it to become more productive, because productivity doesn't pay. More economic stagnation.

If this rate is changing over time, we get speculation. We get rent-seeking. But if we were to introduce a system that forced this rate to never change, we could get through. Of course, the leading power would never allow that, because it's the leading power that is speculating on the assets that are appreciating.

Re: How did the gold standard work?

#114

Post by shrimp_emoji »

randomhodler84 wrote: post #28
doomroot wrote: post #17

Earlier quoted context omitted.

I'm really into bitcoin but comments like these make me cringe. Please add to the discussion or don't say anything at all. For example you could draw parallels between a gold standard and a bitcoin standard and highlight why a bitcoin standard makes more sense than a gold standard if fiat currencies collapse.

Please don’t tell me how to talk. Please don’t go round the internet telling people how to talk, it is unbecoming. A real Bitcoiner would never try to impose their rules around speech on others. It seems that having a controversial opinion is fuel for a good conversation.

This is crypto controlled opposition. Stop it.

Re: How did the gold standard work?

#115

Post by yarky »

throw0101a wrote: post #108
yarky wrote: post #107

Earlier quoted context omitted.

So we must trust that money printing is better, yet I have not seen any evidence of such a system being any better for average people than a gold-based system. Do you mind explaining with an example what could potentially happen ? I don't see it. This is all I see : 1. Group A has tons of gold because it's the ultimate (physical) store of value. Group B has nothing. 2. Group B gets nano bits of gold in exchange for g…

> So we must trust that money printing is better, yet I have not seen any evidence of such a system being any better for average people than a gold-based system. Do you trust the historical record? > What about economic growth? Again, the gold standard was associated with greater volatility, not less. The following chart plots annual growth as measured by gross national product (gross domestic product only came into…

> Pre-Columbian societies (e.g., Actecs) were quite fond of gold for jewelry, but were puzzled by the Spanish fetish for it.

At the beginning, but later they realized what was going on. They first "traded" their gold for mirrors, a new technology to them. Once they learnt that gold could be easily created by humans they stopped and started to hide their gold. Eventually it became clear what they were there for : to steal their gold. It ended, of course, in a war.

They even got a saying out of it in Spanish : "El vivo vive del bobo". It's sad but empirically true.

Re: How did the gold standard work?

#116

Post by jerf »

eru wrote: post #57
jerf wrote: post #34

Earlier quoted context omitted.

The thought has crossed my mind that the answer is, it is impossible to have a long-term gold-backed system (or any other commodity), for all the various reasons that doesn't work, and it's impossible to have a long-term system not based on gold or some other set of commodities, because it is impossible for a government to be given the power to print arbitrarily without eventually using it, unto the death of that cur…

You are portraying a false dichotomy here: Why would the government need to be involved in your currency at all (commodity based or otherwise)?

Well, we tried that, and it has its own problems too.

However, in practice, the monopoly on violence ends up implying a desire for the monopoly on money. Drawing that out would take more than an HN comment, but I don't think it's too shocking a thesis.

Re: How did the gold standard work?

#117

Post by Xorakios »

bendergender wrote: post #89
gurjeet wrote: post #65

Earlier quoted context omitted.

Even in a world where the only model is commodity -> gold/money -> commodity, there will be people who will hoard a commodity to sell it when the demand is high. So, hoarding and making profits is a human nature, that just cannot be avoided.

The desire to do that is human, sure, but we can build systems to limit its impact. We could have a negative interest rate, tax wealth rather than income, etc etc. People going to try to hoard, but you can add friction to make that harder.

That is popular thinking right now but exactly the opposite of what makes economic sense.

Taxing income is counterproductive - an economy should reward, not penalize, the creation of value, whether that is individually or in groups/companies.

But taxing wealth is even worse - savings and investment are what generates higher rates of productivity.

By far the best thing to tax is consumption. But it will always be unpopular because it just seems unfair since people must consume to survive. But it's the only truly fair tax, since it actually makes taking from the world more expensive, rather than making contributing to the world less valuable/profitable.

Re: How did the gold standard work?

#118

Post by pyuser583 »

eru wrote: post #56
rr808 wrote: post #12

There are real practical problems with gold and changing economies. What happens when your population goes up - you need more gold. Or economic growth. Similarly if gold is discovered like Spain's Latin American winnings it causes inflation.

When I first read up on economics, I had similar doubts about the gold standards. It doesn't help that most modern day advocators of a gold standard have but a dim understanding of history and economics. So, first: if the population in one country goes up, they can import more gold from elsewhere. It's a commodity after all. Similar for one country digging up a lot of gold. (The global economy wasn't quite as integra…

How does the greater number of nations (and therefore currencies) affect things?

For example, when Sudan splits in half, there are now two currencies that need gold reserves.

Re: How did the gold standard work?

#119

Post by chii »

ItsMonkk wrote: post #113
jerf wrote: post #34

Earlier quoted context omitted.

The thought has crossed my mind that the answer is, it is impossible to have a long-term gold-backed system (or any other commodity), for all the various reasons that doesn't work, and it's impossible to have a long-term system not based on gold or some other set of commodities, because it is impossible for a government to be given the power to print arbitrarily without eventually using it, unto the death of that cur…

I'm not so sure that this is true, but I do agree that as of this moment it is so. The key thing you are looking at is (capital goods at time 1 / currency at time 1 ) / (capital goods at time 2 / currency at time 2). Under a gold standard, mostly this means deflation with some periods during a gold rush rapidly going the other way. It becomes better to hoard gold and do nothing, and as you hoard the value rises furth…

> So what you see is people hoarding capital goods.

owning capital goods isn't hoarding, since that implies you are not making use of it (like a squirrel would "hoard" nuts, which over time would rot).

Capital goods are doing something productive - or the capital is misallocated and is losing you money. Too much misallocation would indeed cause problems, but every owner of capital is incentivized to allocate their capital to the highest returning task they can accept a risk for.

Those who do not own capital will sell their labour. Any excess they earn apart from their sustenance would be spent on acquiring capital. In this way, everyone who produce more than they consume would accumulate capital, and partake in the economic growth.

As for why land is treated as capital good - land is required for a lot of things, and the properties of land is not any different from any other capital good. The problem may be that there are some gov't interventions on land use that prevent it from being used for the most productive purpose - this should be corrected, but i have no idea how as vested interests are preventing it from happening.

Re: How did the gold standard work?

#120

Post by chii »

moltke wrote: post #97
throw0101a wrote: post #94

Earlier quoted context omitted.

> […] prices would drop and there would be deflation, for better or for worse. I have yet to see an historical example of "good" deflation: * https://en.wikipedia.org/wiki/Deflation#Deflationary_spiral

I think most of the poorer people would be happy with deflation right now. Between housing and fuel inflation hasn't been kind to people either.

those poorer people imagines, incorrectly, that their jobs would remain when deflation happens.
Post reply on HN