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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)

#31

Post by JumpCrisscross »

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 and the money now represents less value than it did before

Prices are a function of money supply and velocity. Inflation can rage while no money is printed because velocity surges. Just as deflation can fester while central banks print as velocity toys with absolute zero.

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

#32

Post by dnautics »

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 verifiable. you don't need advanced technology (not much more than a black rock) to get a good estimate of the purity of gold which can be used as a neutral negotiating point in an exchange. Due to its relativistic quantum mechanical properties, gold lowers the activation barrier of creating trust between two parties.

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

#33

Post by desine »

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…

>Even when the US had the gold standard, the US never had gold reserves that matched the dollars in circulation.

The US Dollar is/was originally defined as a measurement of silver, and based upon the Spanish Real - the same coin you hear in piratey accents as a "piece of eight" because it was usually cut into 8 pieces to make change. The US absolutely had metal to back every dollar in existence for about 100 years, though it wasn't gold. The real "gold standard" era was a stopover/band-aid effect of the growing disparity in value due to bimetallism, and came into effect after "The Crime of 1873".

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

#34

Post by [deleted] »

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.

[deleted]

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

#35

Post by louloulou »

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…

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 investing in a fairer monetary system, where this power to create money arbitrarily doesn't exist.

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

#36

Post by colinmhayes »

Lifelarper wrote: post #20
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.

Venezuela, once one of the richest coutries on Earth with more oil than Saudi Arabia thought this way too. Turned out great for them. By all metrics they should be Western Europe level rich and yet many young kids find it more profitable to mine coins in runescape 12 hours a day rather than actually get a job, strange how that happens hey, if only they printed more Bolivar this all could have been avoided?

Venezuela also nationalized every sector of the economy and handed the reins to Chavez/Maduro's corrupt buddies. Not sure why you think hyperinflation is a problem as opposed to a symptom of their failed institutions.

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

#37

Post by nicoffeine »

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…

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 currency "backed" by a claim to one of them is worth more than the US economy? No, of course not. The US economy produces food, shelter, water, goods, services, etc etc. It's worth far more than a chunk of atoms. Even if you could magically spirit those atoms into a vault somewhere, what do you do with them at that point?

Modern monetary theory is doing just fine, and so are all of the nations issuing fiat currency, selling bonds and notes, building infrastructure, and providing fertile ground for markets to do interesting things. Nostalgia for the gold standard is just way for people to claim the superiority of economic theories that are simply not useful anymore.

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

#38

Post by dnautics »

VHRanger wrote: post #23
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 fewe…

> 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 collateral damage, like if there are dependents, but it's not a whole lot).

If a government goes into debt, it externalizes the consequences of the spending to the public. "well, we vote for our representatives who spend". But that's not true. Suppose you were 16 (or, even more extremely: -1 years old), and couldn't vote against representatives voting for something stupid, like, say the US government invading Iraq. You are still on the hook for paying off the costs of those decisions. Sovereign debt is an end-run around the principle of "no taxation without representation", and it's in a much more morally questionable place.

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.

Finally, the burden of amortizing sovereign debt is often achieved through the printing press, which in the long run causes inflation. Households usually can't do this. This disproportionately hurts the poor, so that adds onto the moral objection to sovereign debt.

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

#39

Post by louloulou »

VHRanger wrote: post #28
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.

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".

Some things are better hedges than others. Bitcoin happens to have been the best over the past decade.

Edit: I'd argue this is because it has better monetary properties than the alternatives.

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

#40

Post by rovolo »

Lifelarper wrote: post #20
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.

Venezuela, once one of the richest coutries on Earth with more oil than Saudi Arabia thought this way too. Turned out great for them. By all metrics they should be Western Europe level rich and yet many young kids find it more profitable to mine coins in runescape 12 hours a day rather than actually get a job, strange how that happens hey, if only they printed more Bolivar this all could have been avoided?

There isn't 1 kind of economic crisis. Monetary expansion works well when you're dealing with a credit crunch, but it doesn't work great when your issue is lack of supply.
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