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The Gold Standard and the Great Depression (1997)

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Re: The Gold Standard and the Great Depression (1997)

#101

Post by SilasX »

VHRanger wrote: post #23
aazaa wrote: post #13

The article begins with the idea that the causes of the Great Depression are not known or too numerous to pin down. It then continues by claiming that "recent scholarship has resulted in striking agreement on the reason for the crisis." The cause of the Great Depression was the gold standard, according to the article: > ... The constraints of the gold-standard system hamstrung countries as they struggled to adapt dur…

It's extremely HackerNews-ish of you to propose that the author of the article ignores your pet theory. The author of the linked article is Barry Eichengreen, widely recognized as the premier scholar of the Great Depression. The article references about 900 pages worth of other articles, believe me: your pet theory about the 1920's events is considered in the conclusion. They're not ignoring it because they read fewe…

>Governments don't work like a household. What matters is borrow costs and use of funds. If a government can borrow and the net growth generated is greater than the interest rate on the debt, it's a good thing to borrow. Like any business debt.

If that was an attempt to show a difference from households, I don't see it, since those thing are equally true of households.

Re: The Gold Standard and the Great Depression (1997)

#102

Post by [deleted] »

cletus wrote: post #26

I honestly don't understand the obsession some people have with the gold standard. Even when the US had the gold standard, the US never had gold reserves that matched the dollars in circulation. Not once. Ever. Also, the gold standard doesn't stop sovereign devaluation as happened by FDR in the 30s. Historically gold existed as a currency because it had some useful properties: 1. Unusual appearance; 2. Relatively sca…

[deleted]

Re: The Gold Standard and the Great Depression (1997)

#103

Post by dnautics »

nicoffeine wrote: post #94
dnautics wrote: post #50

Earlier quoted context omitted.

> Modern monetary theory is doing just fine, How's that gap between the rich and the poor going? Look, the US was on the gold standard between 1850 and early 1900s, and not only recovered from a civil war, but ALSO freed all of its slaves AND went from a backwater country to a world superpower, and reduced inequality all at the same time. https://voxeu.org/article/american-growth-and-inequality-170...

The US was on the gold/silver standard from 1792-1850. Was that the reason it continued the genocide of millions of indigenous people, took their land, and then imported millions of slaves to farm that land? Maybe there are other possibilities for history other than the currency system during a given time period. I remembered there were a series of financial crises leading up to the Civil War, and sure enough, the fi…

> So, your argument for the gold standard is not only logically incoherent

Wrong. The argument is a refutation of the idea that economic growth cannot happen while on a gold standard, that it will be disastrous. It is an existence statement, not a universality statement.

Re: The Gold Standard and the Great Depression (1997)

#104

Post by txru »

vvoaterr wrote: post #16
aazaa wrote: post #13

The article begins with the idea that the causes of the Great Depression are not known or too numerous to pin down. It then continues by claiming that "recent scholarship has resulted in striking agreement on the reason for the crisis." The cause of the Great Depression was the gold standard, according to the article: > ... The constraints of the gold-standard system hamstrung countries as they struggled to adapt dur…

Anybody is welcome to download the Robinhood app, and buy FAANG/FAGMAN stocks with all your disposable income. Then you, too, will be contributing to the leading cause of the next "Great Depression", plus, you'll come out of it having become quite Rich. You're welcome.

> FAGMAN

...

So do you use that often in polite company...?

Re: The Gold Standard and the Great Depression (1997)

#105

Post by rsj_hn »

dnautics wrote: post #103
nicoffeine wrote: post #94

Earlier quoted context omitted.

The US was on the gold/silver standard from 1792-1850. Was that the reason it continued the genocide of millions of indigenous people, took their land, and then imported millions of slaves to farm that land? Maybe there are other possibilities for history other than the currency system during a given time period. I remembered there were a series of financial crises leading up to the Civil War, and sure enough, the fi…

> So, your argument for the gold standard is not only logically incoherent Wrong. The argument is a refutation of the idea that economic growth cannot happen while on a gold standard, that it will be disastrous. It is an existence statement, not a universality statement.

> The argument is a refutation of the idea that economic growth cannot happen while on a gold standard,

This is correct. Rapid economic growth happened on the gold standard. The issue is not about long term economic growth, but volatility. Hard money creates an environment with lots of rapid inflation and deflation and very strong boom/bust cycles. That volatility has costs (human costs of the pain of mass layoffs) but also benefits (weaker companies are more rapidly weeded out). After the Great Depression, it was decided that the costs outweigh the benefits, but it's a legit question that should not be so readily dismissed.

Re: The Gold Standard and the Great Depression (1997)

#106

Post by marcusverus »

throw0101a wrote: post #77
nums wrote: post #51

Earlier quoted context omitted.

"Helicopter" Ben famously said that the Great Depression could have been averted by throwing $100 bills from helicopters to pump liquidity into the economy. I believe the implementation of this concept via the Fed (bank of banks) is the real issue. Basically, liquidity goes to the banks. Anyone having a relationship with banks gets access to this liquidity and benefits. Of course, we plow these "gains" back into asse…

The Fed cannot do helicopter money. It is not connected to the "real" economy directly, only through the banks as middle-men. Helicopter money comes via fiscal policy. As for so-called "asset inflation", I like Cullen Roche's take: > In any case, I would argue that most of the asset price appreciation of the last 10+ years appears largely rational in the sense that it is supported by corporate fundamentals (record pr…

> In any case, I would argue that most of the asset price appreciation of the last 10+ years appears largely rational in the sense that it is supported by corporate fundamentals (record profits, record GDP, etc) and other robust economic data that is consistent with a growing economy. It isn’t just a fictitious boom as many “asset price inflation” narratives like to imply.

The PE ratio for the S&P 500 is currently ~28X, which is roughly double it's historical average and ~50% more than the average from 2010-2020. Is it really supported by corporate fundamentals?

[0] https://www.multpl.com/s-p-500-pe-ratio

Re: The Gold Standard and the Great Depression (1997)

#107

Post by caeril »

cletus wrote: post #26

I honestly don't understand the obsession some people have with the gold standard. Even when the US had the gold standard, the US never had gold reserves that matched the dollars in circulation. Not once. Ever. Also, the gold standard doesn't stop sovereign devaluation as happened by FDR in the 30s. Historically gold existed as a currency because it had some useful properties: 1. Unusual appearance; 2. Relatively sca…

You forgot the most important one, which is, has been, and always will be:

6. The inability for a central bank to print gold.

I understand the various arguments for fiat money in advanced economies, and many of them make sense, but the one thing that should stop everyone from advocacy of CB-printed fiat is the Cantillion Effect [1].

Any system in which the first-at-the trough benefit exclusively to the detriment of those last-at-the-trough is prima-facie wrong. It causes MORE inequality than any tax structure, redistribution plan, or Elysium-style Capitalist dystopia you could ever dream of.

If you advocate for management of money supply by printing of fiat, that's not necessarily bad. But there are no Bernanke-style helicopters coming to distribute it fairly or evenly. It's always: Blackrock and Citadel first, you twenty-third. And that's not a system of money supply management that's even remotely just.

Until the Federal Reserve stops handing free money to Larry Fink that may eventually get to me, much too late, at money velocity cycle #18, whilst publishing press releases bemoaning THE VERY INEQUALITY THEY CREATE, I'm going to stack gold and cryptocurrencies. I have no interest in their lies, and you shouldn't either.

[1] https://en.wikipedia.org/wiki/Richard_Cantillon#Monetary_the...

Re: The Gold Standard and the Great Depression (1997)

#108

Post by nicoffeine »

dnautics wrote: post #103
nicoffeine wrote: post #94

Earlier quoted context omitted.

The US was on the gold/silver standard from 1792-1850. Was that the reason it continued the genocide of millions of indigenous people, took their land, and then imported millions of slaves to farm that land? Maybe there are other possibilities for history other than the currency system during a given time period. I remembered there were a series of financial crises leading up to the Civil War, and sure enough, the fi…

> So, your argument for the gold standard is not only logically incoherent Wrong. The argument is a refutation of the idea that economic growth cannot happen while on a gold standard, that it will be disastrous. It is an existence statement, not a universality statement.

Who said economic growth cannot happen on a gold standard? I said it's a useless technology for civilizations that have better ones. You responded with an incoherent argument and a claim that 1850-early 1900s is a time period that shows the value of representative currency.

Instead of the straw man and the red herrings, please explain how abandoning the gold standard in order to survive the Civil War is evidence of how effective it is. Here's more context that might help:

"The beginning of 1862 found the Union's expenses increasing, and the government was having trouble funding the escalating war. U.S. Demand Notes — which were used, among other things, to pay Union soldiers — were unredeemable, and the value of the notes began to deteriorate. Congressman and Buffalo banker Elbridge G. Spaulding prepared a bill, based on the Free Banking Law of New York, that eventually became the National Banking Act of 1863.

Recognizing, however, that his proposal would take many months to pass Congress, during early February Spaulding introduced another bill to permit the U.S. Treasury to issue $150 million in notes as legal tender. This caused tremendous controversy in Congress, as hitherto the Constitution had been interpreted as not granting the government the power to issue a paper currency. "The bill before us is a war measure, a measure of necessity, and not of choice," Spaulding argued before the House, adding, "These are extraordinary times, and extraordinary measures must be resorted to in order to save our Government, and preserve our nationality." Spaulding justified the action as a "necessary means of carrying into execution the powers granted in the Constitution 'to raise and support armies', and 'to provide and maintain a navy'".

https://en.wikipedia.org/wiki/United_States_Note#The_Legal_T...

Re: The Gold Standard and the Great Depression (1997)

#109

Post by VHRanger »

SilasX wrote: post #101
VHRanger wrote: post #23

Earlier quoted context omitted.

It's extremely HackerNews-ish of you to propose that the author of the article ignores your pet theory. The author of the linked article is Barry Eichengreen, widely recognized as the premier scholar of the Great Depression. The article references about 900 pages worth of other articles, believe me: your pet theory about the 1920's events is considered in the conclusion. They're not ignoring it because they read fewe…

>Governments don't work like a household. What matters is borrow costs and use of funds. If a government can borrow and the net growth generated is greater than the interest rate on the debt, it's a good thing to borrow. Like any business debt. If that was an attempt to show a difference from households, I don't see it, since those thing are equally true of households.

A household spends to consume or enjoy leisure. You might invest it as well, but that's not "spending"

A business spends to generate ROI.

Re: The Gold Standard and the Great Depression (1997)

#110

Post by tastyfreeze »

kaesar14 wrote: post #100
tastyfreeze wrote: post #99

Earlier quoted context omitted.

> So far the fiat currency system has been a part of the most rapid progression of technology and trade in recorded history. There is an argument to be made that the progress would have occurred regardless of the currency system in place. That is to say it is nothing more than coincidence that fiat was in place during this period of progress. The progress is the result of capitalism not the currency system. However,…

Where do you get this notion from? If you separated the economic system from the global economy during the biggest expansion of the economy ever, we’d have been even better off? Based on absolutely what information?

The growth would have happened anyway. The economic system is just a way to trade wealth and keep score. It doesnt matter if it is fiat currency, gold or grains of sand that are traded. Being on a fiat system allows an outside player to siphon value out of the economy for their own gain the same as a tax. If we had been on a gold standard during this amazing growth period the only way an outside party could siphon off wealth is with taxes.

If we were on a gold standard and the government took 2% of every single transaction for the last 90 years we would still be better off. Inflation is a tax that is compounded over time.

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