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How did the gold standard work?

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Re: How did the gold standard work?

#131

Post by imtringued »

simula67 wrote: post #66

Why some arguments for 'Gold money standard wouldn't work' do not make a lot of sense 1. 'Co-operation under anarchy is impossible to achieve' The whole point of money is to get people with different motives to co-operate. It is a technology that allows people to produce, store and exchange value. This system does not require perfect coordination, it only has to be good enough and humans have built good enough system…

I'm pretty sure the fatal flaw of a gold standard is that we are using something permanent to account for fleeting human "energy". People age but gold does not.

Re: How did the gold standard work?

#132

Post by imtringued »

yarky wrote: post #43

I don't get what's so confusing about gold. It's limited because it was created by the universe and it can be easily stored. If we had some gold-backed system, a real one, then where's the inflation ? Where's the problem for the average person ?

The average person is mortal.

Re: How did the gold standard work?

#133

Post by imtringued »

yarky wrote: post #99
throw0101a wrote: post #96

Earlier quoted context omitted.

> It's limited because it was created by the universe and it can be easily stored. If we had some gold-backed system, a real one, then where's the inflation ? Where's the problem for the average person ? Being on the gold standard does not help with inflation specifically, or with monetary stability generally, as the historical record in the US shows; see the first chart: * https://www.theatlantic.com/business/archiv…

> as the historical record in the US shows; see the first chart. The Greeks didn't print money out of paper. But let's be us-centric and focus on a short span of history to keep your point. > a monetary system based on fixed currency often leads make deflation a problem for the average person Why is this a problem? The problems arise from rising prices not the contrary. Yeah we've moved on for a reason : to print mor…

Deflation has lead to two world wars in Germany.

Remember the austrian school of economics? They thought all you have to do in a depression is do austerity and liquidationism.

At the beginning of the 20th century the Germans followed their advice strictly and made a third of its population redundant in the process. This happened twice and everyone knows how many world wars they started.

By the way, central banks don't print money and commercial banks usually lend out money because saving reduces the active money supply and lending replenishes the active money supply. What people refer to as printing money is actually people saving more money.

People complain about low or negative interest rates because they want to save but they are too stupid to notice that this increase in savings leads to an increase in the money supply. Maybe they aren't stupid maybe they are just evil?

Re: How did the gold standard work?

#134

Post by imtringued »

kayamon wrote: post #122
recuter wrote: post #11

Earlier quoted context omitted.

Pray tell why bitcoin is inevitable as opposed to the gold standard :)

I suspect this isn't a good-faith question, but I'll attempt an answer at least: Bitcoin's game theory creates a system for agreeing on a worldwide price for energy in a way that self-regulates, as opposed to relying on people like OPEC to price-fix the energy market. It works by effectively selecting a random power plant on the planet, every 10 minutes, and kinda asking them to vote on how best to use their energy.…

I will admit that energy is not a terrible "commodity" to base an economy around but I don't see how Bitcoin is supposed to guarantee that a single bitcoin equals wasting a certain amount of energy.

It fails as a unit of account for energy.

Re: How did the gold standard work?

#135

Post by imtringued »

vba616 wrote: post #127
kayamon wrote: post #122

Earlier quoted context omitted.

I suspect this isn't a good-faith question, but I'll attempt an answer at least: Bitcoin's game theory creates a system for agreeing on a worldwide price for energy in a way that self-regulates, as opposed to relying on people like OPEC to price-fix the energy market. It works by effectively selecting a random power plant on the planet, every 10 minutes, and kinda asking them to vote on how best to use their energy.…

>The idea of energy=money is an important development that, while people today seem to refuse to try and get their heads around, will ultimately change the world. If you really believe this, it would help if you could spare the time to refute people, like me, who currently believe it's a huge step backwards, even more than that, a kind of self-sustaining cancer, the vanguard of the "grey goo scenario" people talk abo…

Isn't it a story of gold and maybe even oil?

After all, people did fight wars over those. By that I mean territory that bears oil and gold.

Re: How did the gold standard work?

#136

Post by kayamon »

imtringued wrote: post #134
kayamon wrote: post #122

Earlier quoted context omitted.

I suspect this isn't a good-faith question, but I'll attempt an answer at least: Bitcoin's game theory creates a system for agreeing on a worldwide price for energy in a way that self-regulates, as opposed to relying on people like OPEC to price-fix the energy market. It works by effectively selecting a random power plant on the planet, every 10 minutes, and kinda asking them to vote on how best to use their energy.…

I will admit that energy is not a terrible "commodity" to base an economy around but I don't see how Bitcoin is supposed to guarantee that a single bitcoin equals wasting a certain amount of energy. It fails as a unit of account for energy.

It takes electricity to make one bitcoin. You can't lie about that -- if someone gives you a bitcoin, it means provably someone somewhere on the planet took some time to bottle some energy up to make that bitcoin.

Re: How did the gold standard work?

#137

Post by kayamon »

imtringued wrote: post #135
vba616 wrote: post #127

Earlier quoted context omitted.

>The idea of energy=money is an important development that, while people today seem to refuse to try and get their heads around, will ultimately change the world. If you really believe this, it would help if you could spare the time to refute people, like me, who currently believe it's a huge step backwards, even more than that, a kind of self-sustaining cancer, the vanguard of the "grey goo scenario" people talk abo…

Isn't it a story of gold and maybe even oil? After all, people did fight wars over those. By that I mean territory that bears oil and gold.

Indeed. By allowing the price of energy to settle very quickly online, Bitcoin ultimately makes it hard for world governments to keep accumulating debt to fund their wars in foreign countries. As long as the price of assets can be settled truthfully online faster than the liars can spread their propaganda, the system should work. As long as honest nodes control the CPU power, the economy remains provably secure.

Just to be clear, because it seems some people still don't have any idea this stuff: Bitcoin invented a viral, self-healing economy. It's an algorithm to replace capitalism with a new economy against its will. It's possibly one of the cleverest things since the Manhattan Project. It just really annoys me that everyone on HN seems to think it's designed for trading pogs or something.

Re: How did the gold standard work?

#138

Post by eru »

kayamon wrote: post #123
eru wrote: post #69

Earlier quoted context omitted.

And why bitcoin, and not dogecoin or ethereum?

Their blockchains are shorter. Longest blockchain always wins in the long term -- that was proven in the Bitcoin paper.

Which Bitcoin paper are you talking about? (Do you mean the original white-paper that introduced bitcoin?)

I'd be very curious about any such proof comparing different crypto-currencies. I can't imagine how that one would work. Do you mean a mathematical proof?

Re: How did the gold standard work?

#139

Post by eru »

lazide wrote: post #112
eru wrote: post #58

Earlier quoted context omitted.

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 valuab…

What you are describing as a 'deflationary spiral' is a collapse of nominal demand. Or, equivalent, of nominal GDP. Nominal GDP unexpectedly dropping is indeed bad news.

However, it's perfectly feasible to eg stabilize nominal GDP at some desired level. Productivity increases would then lead to a drop in the price level; without any of that spiral you describe.

That's similar to the productivity increases we have seen in eg the electronics industry over the last few decades, which lead to dropping prices for electronics.

George Selgin wrote a lot about this topic. See eg https://www.mercatus.org/bridge/podcasts/05232016/george-sel...

Re: How did the gold standard work?

#140

Post by kayamon »

eru wrote: post #138
kayamon wrote: post #123

Earlier quoted context omitted.

Their blockchains are shorter. Longest blockchain always wins in the long term -- that was proven in the Bitcoin paper.

Which Bitcoin paper are you talking about? (Do you mean the original white-paper that introduced bitcoin?) I'd be very curious about any such proof comparing different crypto-currencies. I can't imagine how that one would work. Do you mean a mathematical proof?

Yes, in the original bitcoin paper. The blockchain with the longest proof of work is always the real one, given multiple competing blockchains. That’s literally the whole point of blockchains. It’s like Highlander, there can only be one.
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