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>It is a fact that both interest rates and the price level were exceptionally stable during the international gold standard, which lasted roughly from 1870 to 1

>It is a fact that both interest rates and the price level were exceptionally stable during the international gold standard, which lasted roughly from 1870 to 1900. A fact? Here's a sample of inflation from that period: 1878: -15% 1879: -10% 1880: 20% 1881: -5% 1882: 8% 1883: -2% And on and on...what exactly was "stable" about that period? Compare that to, say, the 30 years from 1986 to today. http://www.multpl.com/inflation/table http://www.multpl.com/inflation/table

runeks 10y ago
I stand corrected. I included inflation when I shouldn't have. My claim is true for interest rates, however. Here's one chart: http://www.businessinsider.com/us-treasury-yields-at-historic-lows-2014-11?r=US&IR=T&IR=T http://www.businessinsider.com/us-treasury-yields-at-histori... We have a 100-year long period here, starting around 1820, where interest rates basically moved within a band of 3-6%. The 100 years following that are a very different story. Here we see the interest rate move from 2% to 15% and back to 2% in 75 years, from 1945 to now.
- dragonwriter 10y ago
  Well, yes, when interest rates are manipulated to control inflation, the latter becomes more stable and the latter becomes less stable. This is not surprising, its obvious. I'm kind of baffled by the implied premise that stable interest rates are preferable to stable inflation, though.
  - runeks 10y ago
    > I'm kind of baffled by the implied premise that stable > interest rates are preferable to stable inflation, though. I didn't mean to imply that. I think the two are inextricably linked. With regards to achieving stable inflation, to me it just looks like we've flattened out the spikes, not gotten rid of them [1]. And, mind you, the two spikes at ~1865 and ~1914 were caused by wars. We can't exactly say we had either a world war or a civil war from 1965 to 1985. [1] http://www.economics-charts.com/cpi/cpi-1800-2005.html http://www.economics-charts.com/cpi/cpi-1800-2005.html

runeks 10y ago

I stand corrected. I included inflation when I shouldn't have. My claim is true for interest rates, however. Here's one chart: http://www.businessinsider.com/us-treasury-yields-at-historic-lows-2014-11?r=US&IR=T&IR=T http://www.businessinsider.com/us-treasury-yields-at-histori... We have a 100-year long period here, starting around 1820, where interest rates basically moved within a band of 3-6%. The 100 years following that are a very different story. Here we see the interest rate move from 2% to 15% and back to 2% in 75 years, from 1945 to now.

dragonwriter 10y ago
Well, yes, when interest rates are manipulated to control inflation, the latter becomes more stable and the latter becomes less stable. This is not surprising, its obvious. I'm kind of baffled by the implied premise that stable interest rates are preferable to stable inflation, though.
- runeks 10y ago
  > I'm kind of baffled by the implied premise that stable > interest rates are preferable to stable inflation, though. I didn't mean to imply that. I think the two are inextricably linked. With regards to achieving stable inflation, to me it just looks like we've flattened out the spikes, not gotten rid of them [1]. And, mind you, the two spikes at ~1865 and ~1914 were caused by wars. We can't exactly say we had either a world war or a civil war from 1965 to 1985. [1] http://www.economics-charts.com/cpi/cpi-1800-2005.html http://www.economics-charts.com/cpi/cpi-1800-2005.html