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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)

#121

Post by sleepysysadmin »

anonporridge wrote: post #7
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.

The United States at least is actively in a great depression. It's just being papered over with currency debasement so rich people don't notice. But if you actually visit parts of this country that are outside of the wealthy, coastal bubbles, you'll see first hand the real world devastation that's happening to people. It's why there's a major opioid epidemic in the Midwest. It's why homelessness is exploding. It's wh…

>The United States at least is actively in a great depression. It's just being papered over with currency debasement so rich people don't notice.

There are technical defintions. USA's GDPgrowth is at 6.7% and inflation is at 5.4%.

china is at 0.2% gdp growth and 0.7% inflation. The numbers are scary bad if you exclude all of capitalist china. China is at 300% debt to gdp and on the verge of collapse. Greece was what 250% peak during their collapse? That's the importance of taiwan, hongkong, shenzen, and others. It's not the USA that's of concern.

>But if you actually visit parts of this country that are outside of the wealthy, coastal bubbles, you'll see first hand the real world devastation that's happening to people.

Oh for sure. You can read about the failure of krugman from his own words. https://www.bloomberg.com/opinion/articles/2019-10-10/inequa... Which he still doesn't understand how much failure he has had.

> It's why there's a major opioid epidemic in the Midwest.

This has far more to do with marijuana legalization. They cant legally market their own product but they can FUD their competitors.

>It's why homelessness is exploding.

Far more related to rising minimum wage rates. There's a >95% correlation between homelessness and minimum wage in california. That's basically causation.

>It's why rampant, degenerate speculation in stocks and crypto is going crazy and rife with scams and conmen selling hope to the hopeless. It's why populists like Trump and Sanders have so much political energy behind them.

Oh yes, check the bloomberg link above.

>People are depressed and dying everywhere, but us winners in our gilded bubbles have the privilege of being able to look away and continue living in our illusory, drunken stupor.

That's actually a super interesting factor. Is there any relationship between psychology depression and economic depression. This was analyzed heavily during the great recession and it certainly seems like it is connected. Which is an argument for single-payer psychiatry. If a society could eliminate depression, economically we would likely be hugely benefited at a higher rate than the cost of the psychiatry.

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

#122

Post by imtringued »

caeril wrote: post #107
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 t…

Okay but have you wondered about what will happen if Blackrock buys more Bitcoin than you do?

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

#123

Post by imtringued »

throw0101a wrote: post #75
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…

> In a way, Germany was incentivized for hyperinflation. The importance of that cannot be overstated. If you look at the major examples of hyperinflation, the majority fall into three buckets: * Losing a war that results in money printing to fund the effort. * Large foreign denominated debts that require domestic money printing. * Regime changes generally coinciding with civil war or social upheaval. See Roche (2011)…

Add economic sanctions (Venezuela) and intentional destruction of food production (Zimbabwe) to that list.

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

#124

Post by imtringued »

andrewla wrote: post #46
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…

> the US never had gold reserves that matched the dollars in circulation. Not once. Ever. This cuts both ways. Proponents of "sound money" and the gold standard ignore this unwinding of the relationship. So pointing to the roaring 20s or the economic booms of the late 19th century as evidence of the power of sound money really say nothing of the sort. Proponents of the "gold standard caused the Great Depression" also…

> I think that view is descriptively accurate for the most part. Where I think they fall short (and I am working hard to challenge my own views here) is in their picture of inflation, which I feel is very incomplete.

The real economy has a surplus of X amount of real resources. You use the resources and are better off than not using the resources.

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

#125

Post by imtringued »

rat87 wrote: post #45
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…

I believe German reparations were shielded/unaffected from inflation. The allies were smarter then that. Germany did get a pause in reparations payments when hyperinflation drove their economy to possible collapse which led to reparations being paused then cancelled. They paid 16% of the reparations agreed to. Then after WW2 they agreed to pay half of the rest. German hyperinflation was useful for getting rid of inte…

USD were gold backed. Paying USD debts is the same thing as letting gold flow out of the country. If you believe gold is everything, then simply by having less gold the German currency becomes worth less. If Germany has no gold then the currency becomes worthless (=$0).

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

#126

Post by OldHand2018 »

nums wrote: post #51
jihadjihad wrote: post #2

Ben Bernanke has studied and written [0] extensively about this topic; a copy of a speech he delivered at Washington and Lee University in 2004 can be found at [1] for those interested. 0: https://www.nber.org/system/files/chapters/c11482/c11482.pdf 1: https://www.bis.org/review/r040305e.pdf

"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…

> Great Depression could have been averted by throwing $100 bills from helicopters

A lot of people don't know this, but the main reason Calvin Coolidge suddenly, and without warning, decided not to seek reelection in 1928 was that he couldn't find any helicopters. Hoover was set up.

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

#127

Post by imtringued »

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…

> 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.

Exactly. All those people talking about money printing don't understand that money doesn't exist in a vaccum. Every dollar created is backed by one dollar of debt which ads up to a net worth of $0.

So the Fed cannot helicopter money for the obvious reason that they cannot ever pay that money back. The government can borrow and spend money into the economy because it can tax its citizens. The money will come back one day.

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

#128

Post by imtringued »

ogogmad wrote: post #70

What do people think of the thesis expressed in The Bitcoin Standard that the replacement of the gold standard by fiat currency led to a short-termist mindset among people? In other words, we now have artificially high "time preference" as a result of our currency inflating and the resulting disincentive to save money. The book also argues that fiat currency encourages people to get into debt and risk bankruptcy as a…

You got that backwards. Gold leads to extreme short-termist mindsets. Just read up on the Great Depression. During a recession people hold onto money to isolate themselves from losses in the real economy. People would rather speculate on currency than do real work that may be unprofitable today but highly profitable in 5 years. If you have a company that is losing money, then simply holding onto interest bearing money nets a superior return. The strange part is, what do you spend the money on, now that the company is gone? Even stranger, that company might not be needed today but it certainly will be needed in 5 years when the economy has recovered.

If your money goes up in value you would burn down the rain forest today to earn as much money as quickly as possible. You would sell your company and fire everyone to get your hands on money that goes up in value or at least doesn't lose value in a recession. Unfortunately, reality doesn't work that way. You cannot wash this year's dishes in January. You cannot grow all the food you will ever eat in your 20s and then preserve it until you are 90 years old. So your money is going up in value and you stop working. Who's making the damn food? Who's washing the dishes? Either the young or nobody.

If your money goes down in value you want to burn down the rain forest as late as possible because burning it down today will leave you with money that decreases in value. Burning it down tomorrow lets you avoid your money going down in value. Inflation raises the expected value of future cash flows. It encourages you to exchange decaying money for durable goods that decay at a slower rate. This is important because the real world decays through aging (living organisms and materials like steel). If money decays at a slower rate than the world then people will pretend that the world doesn't decay and perhaps accelerate its decay. If money decays at a faster rate than the world then people will try to minimize decay in the real world.

So if anything, extremely low inflation is bad.

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

#129

Post by imtringued »

loki49152 wrote: post #88
nicoffeine wrote: post #37

Earlier quoted context omitted.

The gold standard was abandoned because it 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. There are countless asteroids out there with quadrillions of dollars of precious metals. Does that mean the first private company to create a…

Modern monetary theory isn't doing fine and neither are the countries with fiat currencies. They're all in absolute crisis because their economies are built on ever-shifting quicksand. The "gold standard" isn't a theory of economics, it's an observation. Money is a medium of exchange - a mechanism for judging the relative value of unlike goods. That is literally impossible if the thing used as money is non-economic,…

>Money is a medium of exchange - a mechanism for judging the relative value of unlike goods. That is literally impossible if the thing used as money is non-economic, like fiat currency. The money must be itself a tradeable commodity. Commodities that are useful as money have all the traditional traits you learn in elementary school, and gold is the traditional and current best fit for those traits.

If "money" is a physical medium of exchange then advanced economies do not have or need "money".

Our modern banking system simply lets people promise each other goods and services. It's effectively a system built around relationships.

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

#130

Post by imtringued »

tastyfreeze wrote: post #99
nicoffeine wrote: post #95

Earlier quoted context omitted.

> Modern monetary theory isn't doing fine and neither are the countries with fiat currencies. They're all in absolute crisis because their economies are built on ever-shifting quicksand. Okay. What countries use representative currencies and how are they doing? > The "gold standard" isn't a theory of economics, it's an observation. Money is a medium of exchange - a mechanism for judging the relative value of unlike g…

> 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,…

Globalization has exploded since we got off the gold standard. It was heavily slowing the world economy down. There just isn't enough gold to represent all the amazing things people want to do.
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