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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)

#91

Post by andrepd »

tehjoker wrote: post #67
andrewla wrote: post #46

Earlier quoted context omitted.

> 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

Thanks, you have reminded me I need to finish that book ahaha.

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

#92

Post by shagmin »

cheeseomlit wrote: post #52
JumpCrisscross wrote: post #31

Earlier quoted context omitted.

> 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.

> 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. What are some good examples of this? Historically it seems to me like major inflation issues usually coincide with an expanding money supply, not the other way around

This is exactly Japan's lost decade - lots of government debt and only deflation - mainly in the 90s.

I think the difference is Japan is a a country with all its needs met. People already had enough money to spend on basic needs (unlike post WW1 Germany or Zimbabwe recently) so additional money didn't change that but there was a housing bubble.

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

#93

Post by andrepd »

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…

> Basically, liquidity goes to the banks. Anyone having a relationship with banks gets access to this liquidity and benefits.

Ding ding ding. This is a key issue. If you want to bail out the economy, you need to do it to increase aggregate demand, and therefore the best way to do this is to give money directly to the people. The programs in place since 2008 (1) benefit people with capital (2) leave the poor and the working class in the dust, and (3) are paid for by milking the taxpayers directly, or indirectly through inflation.

Banks are leacherous middleman in normal operation. Theoretically they are providing a valuable service of evaluating risk and allocating capitable to the most profitable ventures. But in practice the incentives are totally misaligned, since they do not get accurately punished/rewarded for doing a shit job. Not to mention old-fashioned corruption, understood as giving undue benefit to a party/parties due to their personal connections.

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

#94

Post by nicoffeine »

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...

The US was on the gold/silver standard from 1792-1850. Was that the reason it continued the genocide of millions of indigenous people, took their land, and then imported millions of slaves to farm that land? Maybe there are other possibilities for history other than the currency system during a given time period.

I remembered there were a series of financial crises leading up to the Civil War, and sure enough, the first use of fiat currency in the US was to solve a financial crisis caused by the gold/silver standard:

'In 1853, the U.S. reduced the silver weight of coins to keep them in circulation and in 1857 removed legal tender status from foreign coinage. In 1857 the final crisis of the free banking era began as American banks suspended payment in silver, with ripples through the developing international financial system. Due to the inflationary finance measures undertaken to help pay for the U.S. Civil War, the government found it difficult to pay its obligations in gold or silver and suspended payments of obligations not legally specified in specie (gold bonds); this led banks to suspend the conversion of bank liabilities (bank notes and deposits) into specie. In 1862 paper money was made legal tender. It was a fiat money (not convertible on demand at a fixed rate into specie). These notes came to be called "greenbacks".' [1]

Technically Continental Dollars were zero interest bearer bonds, but they were also issued to help finance the Revolutionary War[2].

So, your argument for the gold standard is not only logically incoherent, but even if it was, it's completely ignorant of the history of currencies in the United States.

[1] https://en.wikipedia.org/wiki/Gold_standard

[2] https://en.wikipedia.org/wiki/Early_American_currency#Contin...

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

#95

Post by nicoffeine »

loki49152 wrote: post #88
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 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,…

> 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.

Okay. What countries use representative currencies and how are they doing?

> 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.

Are you saying the world economy is literally impossible?

> 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.

You just said money a medium of exchange. As long as both parties agree to the transaction, and it wasn't a barter, whatever wasn't the good or service was the money.

And you don't mean the money must be a trade-able commodity. No one is going to walk around with a set of weights and tubs of water to determine the purity of coins so they can buy or sell a sandwich. You're making the argument that if the currency could be exchanged for lumps of metal at a treasury office that it would somehow be an improvement.

> 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.

I honestly have no idea what you're saying here. Which economists claim that no one can know how economies work?

> Well, obviously that's going to be true of people who refuse to learn what economics as a field actually is.

So far the fiat currency system has been a part of the most rapid progression of technology and trade in recorded history. I'm not saying it was the driver behind it, but that has been the dominant currency system in place for the last 70ish years. It absolutely has flaws, and absolutely can be ruined by corruption and poor governance. It also works so well that people who hate fiat currencies still use them every day. I'd bet .225 ounces of 99% pure gold alloy that you bought your lunch with it.

I wonder how much money that is.

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

#96

Post by newsclues »

rat87 wrote: post #48
newsclues wrote: post #22

Earlier quoted context omitted.

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?

So in other words it's not Great? The great depression effected a much larger percentage of the population in a much more negative manner You seem to be talking about local economic difficulties in some regions of the country. Which isn't a great thing but not nearly as terrible as the great depression.

Great for who?

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

#97

Post by AniseAbyss »

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…

Except pensions for the SS. They payed those until well into the 1990s.

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

#98

Post by BenoitEssiambre »

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.

While printing money doesn't create value by itself, not printing enough really puts the economy into a gridlock. I tried to give an intuitive explanation here:

"Imagine an isolated village where people farm for subsistence. This is a village disconnected from the world that has not had a currency up to now. People rely on barter instead. Every fall, villagers usually produce excess food to have something to eat in the winter, even if, the real returns on the investment is low. Because of spoilage, crops stored for the winter are only worth 90% of their usual real value. 10% rot away in storage. That is, these crops have a return of negative 10%.

One day, this village mandates its government to create a currency that always keeps 98% of its real value on a yearly basis (2% inflation) even during times when private savings assets can’t retain this much. The government puts money into circulation by buying part of farmer’s crop during the summer (civil servants have to to eat). Most farmers produce enough food for the summer, sell some of their crop and keep their money to be able to buy something to eat in the winter. They do not produce a crop to store for the winter since it would only return -10% on their initial investment and the central bank promised money would keep value at a rate of at least -2% (plus maybe a bit of interests).

What happens when winter comes? People have cash but few have anything to sell because they didn’t reinvest in the production of a crop to be stored!

In this situation, it’s going to be very difficult for the government to control inflation because there will be too few goods for the amount of money people will want to spend. If the government does manage to control inflation, it will be through high taxes or by depressing the nominal value of the crops of the few farmers who did store something for the winter. The central bank might do this by giving high enough interests payments on cash to prevent people from wanting to spend it immediately.

In any case, people won’t eat much during the winter because the food will simply not exist.

The point is, government money can easily jam markets and crowd out productive investment."

https://medium.com/@b.essiambre/the-world-deserves-a-pay-rai...

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

#99

Post by tastyfreeze »

nicoffeine wrote: post #95
loki49152 wrote: post #88

Earlier quoted context omitted.

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,…

> 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. Okay. What countries use representative currencies and how are they doing? > 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 g…

> So far the fiat currency system has been a part of the most rapid progression of technology and trade in recorded history.

There is an argument to be made that the progress would have occurred regardless of the currency system in place. That is to say it is nothing more than coincidence that fiat was in place during this period of progress. The progress is the result of capitalism not the currency system. However, had this progress occurred under a gold standard we would have been much better off. Fiat monetary policy has bled value from the economy for nearly 90 years. All of that value lost to inflation would still be in the economy if we had stayed on a gold standard.

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

#100

Post by kaesar14 »

tastyfreeze wrote: post #99
nicoffeine wrote: post #95

Earlier quoted context omitted.

> 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. Okay. What countries use representative currencies and how are they doing? > 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 g…

> So far the fiat currency system has been a part of the most rapid progression of technology and trade in recorded history. There is an argument to be made that the progress would have occurred regardless of the currency system in place. That is to say it is nothing more than coincidence that fiat was in place during this period of progress. The progress is the result of capitalism not the currency system. However,…

Where do you get this notion from? If you separated the economic system from the global economy during the biggest expansion of the economy ever, we’d have been even better off? Based on absolutely what information?
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