Federal Reserve balance sheet trends

> The fallacy here is assuming that capital is finite over all time.

Capital is "finite"—as opposed to "infinite", "unlimited", "superabundant"—but I agree that it isn't fixed. There is no law of conservation of capital; it can be created or destroyed.

With that said, taking on debt is not necessarily a bad thing; it depends on how you use it, and whether you have a viable plan to repay the debt out of future earnings. QE fails on both counts; there's no real direction beyond "inject more money into the economy", and no viable repayment plan.

> I also disagree with the premise that recessions/depressions are good because they clear out dead or dying companies.

I'm not sure whose premise that was, but I would also disagree. Clearing out underperforming companies would be a silver lining at best, and not enough to make recessions or depressions "good". In any case the companies hit the hardest are not necessarily the ones with marginal profits but rather the ones which are incapable of adapting to changing circumstances. That can include old companies set in their ways as well as new, experimental ones which depend on emerging opportunities.

If you had $35 US, you theoretically had the equivalent of an ounce of gold. You couldn't actually buy the gold, though, not until (IIRC) 1965.

> I'm more than happy to agree it is not a precise comparison. A lot has changed over the last 50 years. But even after leaving a reasonable allowance for that, someone arguing that the move off the gold standard would destroy the value of the dollar appears to be (100-2)=98% correct. If you like we can agree that the starting price was $150/oz in market prices, in which case we can agree they were 90% right.

Sure, I'd go with that. But that also means that there was (150-35)/150 = 77% destruction of the value during the time when we were nominally on the gold standard, but people couldn't actually use the dollars to buy gold.

If you wanted to argue that it wasn't a real gold standard when people couldn't use the dollars to buy gold, I would agree with you. I wouldn't even complain about "no true Scotsman", because the difference seems to me to be a crucial one.

> The US government has an inflation policy; they explicitly want to reduce the value of the dollar at a rapid pace. The government is publicly on the record as thinking that is a good outcome.

Well, they say they're targeting 2% inflation. To me, that's eroding the value of the dollar, but not "at a rapid pace" - I saw 14% inflation in the late 1970s. I will admit that even 2% inflation adds up rather shockingly when you look at 50 years, though.

> So maybe they would have destroyed the value of the dollar even if it was on a gold standard. That seems likely to me.

If they had a real gold standard, I don't think they could have - they would have hemorrhaged gold until they had none left, and then they would have had to give up the pretense. But a "gold standard, but you can't actually convert" let them inflate while pretending that they weren't.

> Whether this was a bad outcome or not is debated, but given the collapse of real wage growth vs steadily growing productivity after 1970s I don't see how it can be argued that inflation is working. Working to do what, get everyone indebted to banks? High real GDP growth is good for the averages but hasn't done very much for real median wages for example.

I see it like this: After World War II, there were cycles of prosperity and recession, but each cycle was at a higher rate of inflation than the previous (comparing the same points in the cycle, obviously). Then in 1979, the Fed changed strategy. Since then, each cycle has had lower inflation, but also a lower fraction of the population employed. I think (but cannot prove) that the lower fraction of employed workers has something to do with the lack of wage growth.

As to what the Fed should do differently... that's way past my level of understanding.