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About those "artificial recessions": The historical experience with a gold standard without central banking is the closest we have to what an economy built on
by atq2119 8y ago
About those "artificial recessions":
The historical experience with a gold standard without central banking is the closest we have to what an economy built on only Bitcoin would look like. If you look at the 19th century, it had far worse cycles of strong recessions than we've ever seen in the 20th or 21st century since central banking was established, and then later we got rid of the gold standard.
So... were those frequent 19th century recessions somehow preferable because they were "natural"?
- Chris2048 8y agoGold standard might be the "closest" example, but is it a reasonable one? cyber-currency differs in significant ways - You don't need to bite a bitcoin. Also, without knowing why the difference (wrt recession cycle) exists, there's no reason to think it has anything to do with the gold standard, which could just be coincidental (ala "spurious correlation").
- CryptoPunk 8y agoBanking was regulated by states. There was no free market. "Free banking" laws passed by various states prevented banks from branching. These "unit banks" lacked the financial diversity that comes from having multiple branches and thus were more subject to collapse in the event of monetary shocks. After the civil war, the federal government required banks to hold federal bonds as reserves on their deposits at an ordained ratio. Changes in the supply of federal bonds translated to fluctuations of the money supply, which is what caused the national booms and busts. There were other places in the world that tried free banking, like Canada before it created a central bank, and Scotland during its free banking era, and their financial systems were famously stable.