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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)

#111

Post by dnautics »

handrous wrote: post #68
dnautics wrote: post #38

Earlier quoted context omitted.

> Governments don't work like a household. That's right. If a individual accumulates too much debt, then the individual can choose to discharge obligations through bankruptcy resulting in loss of credit, or death of the debtor, and ultimately the lessor is on the hook for the risk, and those two parties with agency over the debt contract are the only two who directly must suffer consequences. (yes there is tangential…

> Or, you can choose to reject the principle of "no taxation without representation", which if you are happy to do that explicitly and publically I will shut up. That "principle" covers some territory a lot broader than the specific way you're requesting it be interpreted. The idea that those born into a country cannot be held accountable for debts accrued before they were born—or anything relating to the situation o…

> but your tactic of trying to pin someone down with these words

Sir, this is hacker news.

Ok, but seriously, to put it in a less-memey way. Many of the posts that I post about topics where I feel like "the word must be spread" are performative but interesting. I actually don't give a shit about convincing the parent poster of mine. Most of those people are going to be closed minded, bias-confirming, and unreceptive to rethinking their belief structures. I care about giving ideas to receptive people who are reading it with a memorable twist. Probably most people have not considered the injustice of sovereign debt explained in the context of "taxation without representation". These folks can then digest what I have to say, and re-articulate it with their own personal touch (possibly more effectively than the way that I did), and then spread the word to 100 unreceptive people with a low yield (say, 2%) and 100 more receptive people, who will then spread it, etc.

Anyways, given your response it seems to already have worked. Here you have given an alternative way to deliver the same message. Fantastic. Also, my response has enough upvotes for me to think, "gee, here are X more people now have this brainworm about the fundamental unfairness of sovereign debt".

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

#112

Post by dnautics »

nicoffeine wrote: post #108
dnautics wrote: post #103

Earlier quoted context omitted.

> 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 h…

going back to your original point:

> [the gold standard] is a terrible idea for civilizations that have technologies like accounting systems and currencies that are difficult to counterfeit. Tying economic expansion to the ability to mine and store one type of element doesn't make any sense.

Hear me out. I will first start a counterstatement with two supporting points (I'm sure it's easy to find more supporting points too, but let's keep this simple).

It is a terrible idea for a civilization that exists in a system with finite resources to use a currency that is unbounded and exponential. The disconnect between the nominal economic substrate and raw reality will lead to broad class theft and environmental destruction.

1. For class theft, don't just take my word for it, take Paul Krugman's: https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...

"even in the long run, it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation rate would lead to lower unemployment, not just temporarily, but on a sustained basis."

Now, let's unpack what he says very carefully. In short it is this:

"we need to keep our society looking like it's humming by posting great employment numbers, and the most effective way to do this is to incrementally cheat the labor class out of the value of their wages"

2. As for environmental destruction, surely you can see how putting society on a compounding treadmill of devaluation encourages consumption as a driver of economic growth (if we fail to post a positive growth number, we WILL have at least a transient economic crisis), and it's patently evident that we buy more, shittier things that need to be replaced, because there is diminished opportunity cost for saving your money to buy something better and more robust: but hey, it's good for circular flow.

--

Now, if you accept that an unbounded currency is terrible for a society in a finite resource regime - then, in the big picture it doesn't matter too terribly much what is restricting the expansion of the nominal basis[0]. What matters is that something restricts the expansion. If that's physical mining of metals, the capacity to expand the currency is soft-capped to a certain rate that flexes with real economic performance -- and hard-capped to the total amount of metal in the earth; if that's some digital ledger that can't be expanded, that would be fine too, but anyways the point is it's bounded.

Or, maybe you like environmental destruction and screwing the poor. If you do, you should probably say that up front, instead of hiding it behind difficult-to-unpack-ese like Krugman does.

[0] in the small, probably cryptocurrencies (which burn to make CO2) are better than mining, which dumps mercury effluent into the environment, and maybe there will even be efficient cryptocurrencies that burn up less CO2. But all are better than, say, an economic system that has the unboundedness property AND is propped up by paying off defense contractors that build depleted uranium tipped rounds that are dropped on civilians halfway around the world.

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

#113

Post by dnautics »

Kbelicius wrote: post #84
dnautics wrote: post #43

Earlier quoted context omitted.

I suppose you could use archimedes principle in its original form to verify density of gold, sure, but I think GP was referring to transportability. If anything it's to do with #1. But calling it "unusual" makes it seem like it's just a human whim and human subjective standards of desire that make it valuable, where it's very important to be explicit that there is an intrinsic property of gold that gives it subjectiv…

> I suppose you could use archimedes principle in its original form to verify density of gold, sure, but I think GP was referring to transportability. Under 5. point, the one about density, GP wrote: "(This is a big one) Density[...] Why does this matter? Counterfeit currency, as was a problem with anything based on silver.". What made you think that he was talking about transportability there?

ok fair. I didn't fully understand the point and wasn't aware that gold was, say, denser than lead. (not a metallurgist, just a biochemist), and I was fixated on the deficiency of point #1. Thanks for pointing it out. In either case, verifability of gold is thus a product of TWO easily assessed properties, not just one.

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

#114

Post by SilasX »

VHRanger wrote: post #109
SilasX wrote: post #101

Earlier quoted context omitted.

>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.

A house hold can spend to consume or invest, and I was only replying to the remark you made, not whatever new argument you might make later to salvage it.

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

#115

Post by lottin »

louloulou wrote: post #82
lottin wrote: post #76

Earlier quoted context omitted.

Confirmed then, you have no clue what hedging is. A hedge is not an investment, you fool. A hedge is position that is intended to offset an exposure. A successful hedge can very well be a terrible investment.

Yeah, in this case offsetting exposure to the inflating fiat monetary and banking system. No need for name calling.

That's not an exposure. You keep using technical terms in order to sound knowledgeable, but it's obvious that you don't know what they mean.

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

#116

Post by louloulou »

lottin wrote: post #115
louloulou wrote: post #82

Earlier quoted context omitted.

Yeah, in this case offsetting exposure to the inflating fiat monetary and banking system. No need for name calling.

That's not an exposure. You keep using technical terms in order to sound knowledgeable, but it's obvious that you don't know what they mean.

Yes, it is. If you have a deposit in a bank, you are a creditor of that bank. If the bank fails, you might not get that money back.

Also, maybe try to form an actual coherent argument, rather than continuing to claim I don't know what I'm talking about.

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

#117

Post by mohanmcgeek »

cheeseomlit wrote: post #27
mohanmcgeek wrote: post #19

Earlier quoted context omitted.

"printing" money does not cause inflation. Low interest rates can cause credit expansion, they don't necessarily cause inflation. Inflation rate higher than the deposit interest rate (negative real interest rate) is causes the wealth transfer. "Savers", in reality, lenders have always had a way out in this situation: investing. As in every investment boom, there are Ponzi schemes and during this one it happens to be…

I don't understand how printing money could not cause inflation, it sounds like mental gymnastics to me. Expand the money supply without expanding the value that money represents and the money now represents less value than it did before, I don't see how that could ever not be the case.

> Expand the money supply without expanding the value that money represents

Literally the only way to increase the money supply is increasing the underlying assets' value overall.

It's because people are somehow led into believing that the government can arbitrarily print money, everything that's normal seems like mental gymnastics.

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

#118

Post by mohanmcgeek »

louloulou wrote: post #35
mohanmcgeek wrote: post #19

Earlier quoted context omitted.

"printing" money does not cause inflation. Low interest rates can cause credit expansion, they don't necessarily cause inflation. Inflation rate higher than the deposit interest rate (negative real interest rate) is causes the wealth transfer. "Savers", in reality, lenders have always had a way out in this situation: investing. As in every investment boom, there are Ponzi schemes and during this one it happens to be…

Who said anything about inflation. It's about central planners arbitrarily moving around purchasing power in the system. If I have $10 and you have $10, and then someone prints $10 and gives it to you. You went from having the same purchasing power as me to double mine, without any change to the available goods and services. > lenders have always had a way out in this situation: investing Yeah, that's why we're inves…

If you choose to "invest" in a Ponzi scheme that's your predicament.

My point is that equity: public or private, has always been an alternative everytime lending money isn't worth the while.

Bitcoin brought nothing to the table.

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

#119

Post by nicoffeine »

tastyfreeze wrote: post #90
rat87 wrote: post #73

Earlier quoted context omitted.

That seems like another way of saying that a gold standard is inflexible and impractical and can't represent the actual economy particularly well

The inflexibility of a gold standard is a benefit. More gold or an increase in gold value is required to represent greater wealth. The gold can be traded for or mined. However, the gold standard ensures that the dollar you earn today maintains purchasing power for as long as you care to keep it. Your gold backed dollar can't be made worthless in a generation by the excess of politicians seeking money, power, and cont…

> More gold or an increase in gold value is required to represent greater wealth.

Not true. A restriction in supply can raise the price, and the discovery of new sources can lower it. Plus wealth is entirely subjective. Would you rather have a warehouse full of food, water, and ammunition during a crisis, or a warehouse full of gold? (Hint: people may not want to trade food for a soft metal that can't be fashioned into anything but decoration.)

> The gold can be traded for or mined.

It can also be lost in a shipwreck[1] contributing to a banking panic[2].

> However, the gold standard ensures that the dollar you earn today maintains purchasing power for as long as you care to keep it. Your gold backed dollar can't be made worthless in a generation by the excess of politicians seeking money, power, and control.

Of course it can. Private banks failed all the time, despite claiming that you could trade their notes for gold/silver. Governments can simply abandon the gold standard (and they did).

It all comes down to the fact that gold backed currency does not solve the primary problem of credibility and corruption at the levels of institutions and governments. It only adds another variable. Your ability to trade your paper for gold is still dependent on the ability and willingness of that bank or government to make the exchange. If they say no, what are you going to do?

The next step you could take is to refuse currency and to use only gold/silver/clam shells/whatever to do your transactions, which simply puts you at a huge disadvantage in any modern economy. Literally no one is going to do business with you if they have to add the burden of authenticating your clam shells to buy your product or rent your time.

In the end, there is no functional difference between "We promise that we will give you a grain of gold for this dollar if you ask" and "We promise to not mismanage this currency into hyperinflation." During an existential crisis, both promises may be broken. Hell, they probably will be broken. But the promise on the paper you're holding isn't going to matter either way.

[1] https://en.wikipedia.org/wiki/SS_Central_America#Sinking

[2] https://en.wikipedia.org/wiki/Panic_of_1857

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

#120

Post by sleepysysadmin »

mabub24 wrote: post #6
sleepysysadmin wrote: post #4

We are pre-great depression in many respects. Debt levels being at very high percentages. Income inequality out of control. Inflation out of control. Fundamentally as well it's the baby boomer's fault. Right before the great depression was when the boomers of the american civil war were retiring. The 1980s inflation and crashes were WW1 boomers and now is the WW2 baby boomers retiring. History repeats.

Not to say it can't happen, but there are quite a few new institutional and regulatory safeguards that (in spite of the attempts by some to neuter them) exist now that did not exist pre- and during the great depression that make such a thing happening again, or to the extent that it did, quite hard. The more interesting question is whether there is the political will, let alone ability, to accurately and quickly resp…

>Not to say it can't happen, but there are quite a few new institutional and regulatory safeguards that (in spite of the attempts by some to neuter them) exist now that did not exist pre- and during the great depression that make such a thing happening again, or to the extent that it did, quite hard.

So it's interesting. 1 of the key rules is that you cannot borrow money to invest. You know what ive never seen all my life until recently? THAT! My bank and others that have nothing to do with me have been advertising, 'you can borrow $5000 to get your investment fund going!'

People said the reason the great depression happened was stuff like this.

I personally dont expect it's a depression level event. I think most people were hoping for this because it's better than extreme inflation like the 1980s. HArdly a prediction given inflation is so high already.

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