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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)

#81

Post by shagmin »

nums wrote: post #51
jihadjihad wrote: post #2

Ben Bernanke has studied and written [0] extensively about this topic; a copy of a speech he delivered at Washington and Lee University in 2004 can be found at [1] for those interested. 0: https://www.nber.org/system/files/chapters/c11482/c11482.pdf 1: https://www.bis.org/review/r040305e.pdf

"Helicopter" Ben famously said that the Great Depression could have been averted by throwing $100 bills from helicopters to pump liquidity into the economy. I believe the implementation of this concept via the Fed (bank of banks) is the real issue. Basically, liquidity goes to the banks. Anyone having a relationship with banks gets access to this liquidity and benefits. Of course, we plow these "gains" back into asse…

I imagine that's more of an issue now than during the Great Depression. Back then you could easily put that money into large pools of labor, whether assembly lines at factories or agriculture or infrastructure projects and gave a pretty good return on investment. Now a large pool of labor at a company is treated more like a liability, and yeah just putting money into real properties may get you a better return than anything that directly benefits any meaningful number of people. Even if the money goes towards something like infrastructure - the cost of equipment is one thing, but I imagine there are plenty of instances where a handful of lawyers and beaurocrats involved in a project get paid more than some massive crews that do the actual labor combined.

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

#82

Post by louloulou »

lottin wrote: post #76
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.

Confirmed then, you have no clue what hedging is. A hedge is not an investment, you fool. A hedge is position that is intended to offset an exposure. A successful hedge can very well be a terrible investment.

Yeah, in this case offsetting exposure to the inflating fiat monetary and banking system.

No need for name calling.

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

#83

Post by srean »

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.

I need healthcare, real estate, educational services. I hear that they are not appropriately represented in CPI. Personal basket of goods and services can be quite different from the tracked CPI

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

#84

Post by Kbelicius »

dnautics wrote: post #43
truculent wrote: post #41

Earlier quoted context omitted.

Isn’t this just the density point restated?

I suppose you could use archimedes principle in its original form to verify density of gold, sure, but I think GP was referring to transportability. If anything it's to do with #1. But calling it "unusual" makes it seem like it's just a human whim and human subjective standards of desire that make it valuable, where it's very important to be explicit that there is an intrinsic property of gold that gives it subjectiv…

> I suppose you could use archimedes principle in its original form to verify density of gold, sure, but I think GP was referring to transportability.

Under 5. point, the one about density, GP wrote: "(This is a big one) Density[...] Why does this matter? Counterfeit currency, as was a problem with anything based on silver.".

What made you think that he was talking about transportability there?

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

#85

Post by aazaa »

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…

> It's extremely HackerNews-ish of you to propose that the author of the article ignores your pet theory.

What pet theory is that? All I did was to mention two historical episodes that preceded the event under discussion, and which the paper fails to mention.

> The author of the linked article is Barry Eichengreen, widely recognized as the premier scholar of the Great Depression.

So what? We're talking about the paper, not a person.

> 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.

On what pages does the paper take up the issue of the speculative bubble leading up to the Great Depression?

> 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 main MMT talking point. Yes, I've read Kelton's book and yes, a government that prints its own currency is not like a household.

MMT is an experiment. For all our sakes, I hope its proponents are right.

> 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).

What if malinvestment looks like investment until it doesn't?

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

#86

Post by nicoffeine »

slowhand09 wrote: post #64
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…

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 di…

Gas is more expensive because fossil fuels are more difficult to extract, we have some environmental standards instead of none, consumption has skyrocketed, and there's an organization called OPEC that maximizes the price. Pretending that none of that would be true if dimes still had silver in them is ridiculous.

If you had taken those same two 1964 dimes and put them in a DJIA index fund, you'd have $7. That's because storing shiny things in a vault does not contribute to economic activity. It doesn't invent anything, manufacture anything, provide any service, or create any new markets.

No one thinks that their economy would be better off with a huge stockpile of gold instead of a huge stockpile of CPUs. No one thinks that a reduction in mining capacity should restrict the amount of currency available for business loans. Representative currency is a vestigial technology that is no longer useful.

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

#87

Post by louloulou »

lottin wrote: post #80
louloulou wrote: post #69

Earlier quoted context omitted.

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 pret…

I'd argue that the only person stealing purchasing power from you is yourself. Read some books, get an education, have ambition, work hard, take care of yourself. If you did that, instead of blaming others for your failures, your purchasing power would be fine.

My purchasing power is fine, because I became a bitcoiner. I was pretty angry during the financial crisis though, and am letting it come through in this thread.

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

#88

Post by loki49152 »

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…

Modern monetary theory isn't doing fine and neither are the countries with fiat currencies. They're all in absolute crisis because their economies are built on ever-shifting quicksand.

The "gold standard" isn't a theory of economics, it's an observation. Money is a medium of exchange - a mechanism for judging the relative value of unlike goods. That is literally impossible if the thing used as money is non-economic, like fiat currency. The money must be itself a tradeable commodity. Commodities that are useful as money have all the traditional traits you learn in elementary school, and gold is the traditional and current best fit for those traits.

Belief in the viability of "monetary policy" and fiat currencies always comes from a belief that no one can really know how economics works, so whatever anyone does right now might not work in the future. Well, obviously that's going to be true of people who refuse to learn what economics as a field actually is.

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

#89

Post by louloulou »

AnimalMuppet wrote: post #79
louloulou wrote: post #69

Earlier quoted context omitted.

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 pret…

> because they're stealing the purchasing power that I worked hard to obtain... "Purchasing power" is exactly CPI inflation, not monetary inflation. > And I would say my personal CPI seems to track money supply inflation pretty closely. This I can buy. If the CPI figures are wrong, then we need to get ones that are right. But CPI inflation is still the one we actually care about. Why should we not care about monetary…

> The point stands: CPI inflation is the one that actually affects us.

If your only purpose in life is to be a "consumer", sure. But changes in relative purchasing power between people also distort you're ability to affect the world. Increasing purchasing power of a bank or home owner relative to a saver through policy decisions increases their power to affect the world relative to the saver. This ability to arbitrarily choose winners and losers is not what you want in a monetary system IMO.

Edit: ability to affect the world as well as freedom to act, since you can substitute money for your own time.

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

#90

Post by tastyfreeze »

rat87 wrote: post #73
tastyfreeze wrote: post #71

Earlier quoted context omitted.

As I have said many times on HN, a gold standard protects the wealth of the people from government excess. That is also why the gold standard was ended by government.

That seems like another way of saying that a gold standard is inflexible and impractical and can't represent the actual economy particularly well

The inflexibility of a gold standard is a benefit. More gold or an increase in gold value is required to represent greater wealth. The gold can be traded for or mined. However, the gold standard ensures that the dollar you earn today maintains purchasing power for as long as you care to keep it. Your gold backed dollar can't be made worthless in a generation by the excess of politicians seeking money, power, and control.

Politicians are people subject to all the same emotions as you or I. Money and power are powerful motivations for corruption. There is access to a lot of both in government. The gold standard was a check on greed at the government level and in turn a restriction on the power government had to manipulate the economy for the benefit of a few.

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