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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)

#61

Post by wahern »

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…

> I believe German reparations were shielded/unaffected from inflation

It was all much more complicated than that. Hyperinflation wasn't intended as a simplistic way to repay reparations. It had a number of motivations. For one thing, Germany also had alot of private debt outstanding. And from the perspective of the exacerbated Allies, the most important motivation behind hyperinflation was to drive the Allies back to the negotiating table; which it did. Except the renegotiations proved a mixed bag for Germany, giving them enough breathing space to standup their economy (not long after hyperinflation, Germany had a surfeit of foreign investments), but nonetheless leaving the political albatross of reparations in place.

The basic point is that Germany didn't naively step into hyperinflation. For the most part it was strategic and temporary--it only lasted a few years, after all.

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

#62

Post by AnimalMuppet »

louloulou wrote: post #59
lottin wrote: post #49

Earlier quoted context omitted.

Do you even know what a hedge is? The perfect hedge against inflation is a large basket of consumer goods and services, because it correlates perfectly with inflation. Anything else correlates less perfectly with inflation and therefore is a worse hedge against inflation compared to a basket of goods and services.

You're talking about consumer price inflation, I'm talking about monetary supply inflation. A basket of consumer goods and services is a nonsensical way to hedge monetary inflation under anything but the most extreme conditions, since those things should be getting cheaper as production processes/technology/understanding of the world improve.

But, unless you're a central bank or something, why do you care about monetary inflation instead of consumer price inflation? How is it going to affect you? Consumer price inflation is the one that affects you.

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

#63

Post by VHRanger »

louloulou wrote: post #39
VHRanger wrote: post #28

Earlier quoted context omitted.

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.

Bitcoin doesnt have good monetary properties? Go back to your textbook:

- Medium of exchange: bad. Caps out at a few transactions per second, transaction cost go up massively when actually used.

- Unit of account: Terrible. Because of price volatility you denominate BTC in terms of USD - something priced in BTC has a different price depending on the minute you look at it

- Store of value: Hilariously terrible. Storing value has to do with *low price volatility* something which Bitcoin does not have. The average price might be up over time, but this is *speculation*, not storing value! If you store value you want as close to what you put in as possible, not more (or less).

People claiming Bitcoin is a "store of value" don't understand what the word "storing" means, nor the textbook definition.

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

#64

Post by slowhand09 »

nicoffeine wrote: post #37
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…

I posted this yesterday.

Food for thought. In 1964 you could take two silver dimes and purchase ~1 gallon of gas. Gas was ~20 cents per gallon. Dimes were 90% silver. Fast forward to 2021. You could take two silver dimes to a coin dealer, sell them for fiat currency, and purchase 1 gallon of gas. Gas is ~$3.50 per gallon, silver is ~$23 per oz, and 2 silver dimes from 1964 contain ~5grams of silver.

But using 2021 dimes, you need 35 dimes to purchase a gallon. Precious metals have kept their value. Fiat currency has lost nearly 90% of its value since moving off the gold standard. The government needs more money, they print it. Based on their promise to pay it back later, with cheaper inflated currency.

Paper currency representing a given quantity of gold/silver/etc is a good idea. When you divorce it from that backing value is when governments print money to inflate. We all lose when that happens.

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

#65

Post by anonporridge »

dnautics wrote: post #60
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…

> It's just being papered over with currency debasement It's also papered over by things like Norman Borlaug's agricultural revolution and supply chain innovation. Even with crappy broken supply chain, americans are not starving in the streets at depression-levels. But a whole lot of other stats support your hypothesis. Like mass exoduses from state to state.

It's largely a crisis of meaning and purpose.

As the machines churn out more and more of the essential things we need to live, and as we need fewer and fewer humans to keep the machines running, we're left with an overabundance of humans who don't know how to live without a job driving them.

I think a lot of people miss that the Great Depression wasn't just about economic breakdown. People were literally depressed and society seemed aimless. It wasn't FDR's social programs that broke us out of that. It was kicking ass in WWII and emerging the victorious badasses ruling the world. THAT is what broke the spell of depression and injected vigor in American society.

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

#66

Post by AnimalMuppet »

dnautics wrote: post #50
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 is doing just fine, How's that gap between the rich and the poor going? Look, the US was on the gold standard between 1850 and early 1900s, and not only recovered from a civil war, but ALSO freed all of its slaves AND went from a backwater country to a world superpower, and reduced inequality all at the same time. https://voxeu.org/article/american-growth-and-inequality-170...

> How's that gap between the rich and the poor going?

It's quite high - as high as it was in 1850, when we were on the gold standard. So... what's your point?

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

#67

Post by tehjoker »

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…

It's worth noting that MMT is related to chartalism. I found Debt: The First 5000 Years very persuasive, though I only got about 1/4 the way though so far.

https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years

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

#68

Post by handrous »

dnautics wrote: post #38
VHRanger wrote: post #23

Earlier quoted context omitted.

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…

> 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.

That "principle" covers some territory a lot broader than the specific way you're requesting it be interpreted. The idea that those born into a country cannot be held accountable for debts accrued before they were born—or anything relating to the situation of the budget before they have a say in government, I suppose—is, I think it's fair to say, not a common interpretation of the slogan's meaning, now or (most certainly) in the past.

That's not even to say you're wrong, morally or whatever, but your tactic of trying to pin someone down with these words isn't a good one.

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

#69

Post by louloulou »

AnimalMuppet wrote: post #62
louloulou wrote: post #59

Earlier quoted context omitted.

You're talking about consumer price inflation, I'm talking about monetary supply inflation. A basket of consumer goods and services is a nonsensical way to hedge monetary inflation under anything but the most extreme conditions, since those things should be getting cheaper as production processes/technology/understanding of the world improve.

But, unless you're a central bank or something, why do you care about monetary inflation instead of consumer price inflation? How is it going to affect you? Consumer price inflation is the one that affects you.

Uh, because they're stealing the purchasing power that I worked hard to obtain, and then using it to bail-out debtors without my consent.

Also, I don't really care what the price of a "general basket of goods and services" is (whatever that means). I care about the prices of the specific things that I want now or will want in the future.

Edit: And I would say my personal CPI seems to track money supply inflation pretty closely.

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

#70

Post by ogogmad »

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 result. In doing so, it increases demand, drives prices up, thereby further incentivising people to borrow money, creating a vicious spiral of debt and increasing prices.

While the former sounds strange to me, I find the latter to be interesting. But I'm not an economist, so I don't know whether my summary is accurate.

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