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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)

#21

Post by newsclues »

praxulus wrote: post #17
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…

> This is, of course, the very definition of a Ponzi scheme. Most Ponzi schemes don't have the authority to levy taxes on the largest economy the in world, nor are they backed by the most powerful military force humanity has ever seen.

Does that mean modern monetary policy is not a Ponzi scheme because it has a nuclear military?

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

#22

Post by newsclues »

hirundo wrote: post #10
anonporridge wrote: post #7

Earlier quoted context omitted.

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…

If there's a great depression and few people are noticing, then it isn't that great. The great ones aren't subtle. I live in the rural southwest. Business isn't booming here. But it isn't that bad either, yet. Maybe we're in the "so far so good" phase, but there's a big difference between the fall and arriving at the pavement.

Great is an interesting term.

Would it not be a Great Depression if it impacts millions of Americans for years or decades if the academic elite don’t see it from their ivory towers to document it?

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

#23

Post by VHRanger »

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 fewer books than you.

> The US president talks, without a hint of embarrassment, about the need to borrow to continue to service debts.

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.

A government can be in debt forever, the only thing that matters is borrowing costs and growth rate (and how the growth is generated see eg. Chinese real estate for malinvestment).

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

#24

Post by kiba »

praxulus wrote: post #17
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…

> This is, of course, the very definition of a Ponzi scheme. Most Ponzi schemes don't have the authority to levy taxes on the largest economy the in world, nor are they backed by the most powerful military force humanity has ever seen.

No society can outrun living beyond their means, no matter how deep their reserves are.

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

#25

Post by mohanmcgeek »

hirundo wrote: post #10
anonporridge wrote: post #7

Earlier quoted context omitted.

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…

If there's a great depression and few people are noticing, then it isn't that great. The great ones aren't subtle. I live in the rural southwest. Business isn't booming here. But it isn't that bad either, yet. Maybe we're in the "so far so good" phase, but there's a big difference between the fall and arriving at the pavement.

The impression that I get from the media is that a lot of people have quit their jobs to become full time retail traders now that the market is booming. And there is a labour shortage affecting production and logistics

And when the market crashes, as it always does, many of these people will be in the red and that would greatly affect consumption..

How true is this?

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

#26

Post by cletus »

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 scarce;

3. Inert;

4. Fungible; and

5. (This is a big one) Density. Up until the modern times it was the densest material someone could be expected to have (eg Iridium, which is denser, wasn't common in the Middle Ages). Why does this matter? Counterfeit currency, as was a problem with anything based on silver.

Currencies only have value because people give them value.

There's a lot here but this jumped out at me:

> The Germans fell into a policy of financial excess, ending in hyperinflation. Their experience was considered one of the object lessons proving the value of the gold standard.

No mention of the Treaty of Versailles here. Germany was forced to pay war reparations. Those were denominated in deutschmarks. Hyperinflation actually "solved" Germany's reparation debt problem. In a way, Germany was incentivized for hyperinflation. The importance of that cannot be overstated.

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

#27

Post by cheeseomlit »

mohanmcgeek wrote: post #19
louloulou wrote: post #11

Earlier quoted context omitted.

All printing money does is transfer wealth from savers (people long the currency) to debtors (people short the currency) without their consent. Large financial crises occur because this keeps happening. Bitcoin is a way out, as savers learn it's foolish to be long fiat currency.

"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.

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

#28

Post by VHRanger »

louloulou wrote: post #11
andrewmutz wrote: post #8

Earlier quoted context omitted.

100% Agree. From everything I've read, our being able to print money is an indispensable tool during financial crises. Fixing the great depression and the great recession depended on this ability. If the world transitions to cryptocurrencies whose supply is unmanaged or fixed, that will not be possible and presumably will be stuck during financial crises.

All printing money does is transfer wealth from savers (people long the currency) to debtors (people short the currency) without their consent. Large financial crises occur because this keeps happening. Bitcoin is a way out, as savers learn it's foolish to be long fiat currency.

Any asset that isn't the currency is "a way out"

When people specify Bitcoin or Gold as a particularly good "hedge for inflation" they betray the fact that they failed Macroeconomics 101.

Everything that isn't the currency is a "hedge for inflation".

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

#29

Post by mabub24 »

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…

In many ways, the concept of "printing money" is too simplistic to describe how the banking system and monetary systems interact with each other, especially once you get your head around the fact that money is (almost always) "created" endogenously through the expansion of balance sheets.

You can't just think like a customer going to the bank; you have to think of it like a number of actors in a complicated network of credits and debits as well as global trade with imports and exports.

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

#30

Post by JumpCrisscross »

kiba wrote: post #24
praxulus wrote: post #17

Earlier quoted context omitted.

> This is, of course, the very definition of a Ponzi scheme. Most Ponzi schemes don't have the authority to levy taxes on the largest economy the in world, nor are they backed by the most powerful military force humanity has ever seen.

No society can outrun living beyond their means, no matter how deep their reserves are.

> No society can outrun living beyond their means, no matter how deep their reserves are

Which is why we have inflation. No reserves needed. The price levels incorporate the distance between the means and the living.

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