4 ms·

People vote their wallets, and we have two very different economies in America currently. We are in a period of history with a lot of similarities to the gilde

People vote their wallets, and we have two very different economies in America currently. We are in a period of history with a lot of similarities to the gilded age, and one of the big issues of that time was "Free Silver": https://en.wikipedia.org/wiki/Free_silver https://en.wikipedia.org/wiki/Free_silver. Back then, there was desire by the mostly-rural side to allow a silver-based monetary standard. This would effectively increase inflation. Today, we see significant inflation disparities between the big coastal cities like NY and SF and the rest of the country. Essentially, the fed rate is too low to have low inflation in the cities and too high for economic growth in the rest of the country. This becomes a self-reinforcing effect, as the relative cost of borrowing is lower in the cities. So, the city and the country are just not going to agree about what to do economically.

war1025 7y ago
Your last paragraph is very similar to what I've read is going on in the European Union with the Euro. (I don't remember what book I read it in) Basically their argument was that it works in America because the federal government is strong enough to redistribute wealth to places that can't keep up. In Europe the federal government is weak, so the southern countries have an economy they can't keep up with. I don't remember the specifics, but that was the gist of it.
- jgwil2 7y ago
  I've read that another problem is that unlike in the US with its relative cultural homogeneity, people in Europe are less willing to move where jobs are. The result is less efficient population distribution. EDIT: fixed typo.
  - aeternus 7y ago
    That may not be entirely desirable. In the US that ability to move where the jobs are is creating a concentration of prosperity in certain cities. Often those with above average skills are able to move, leaving the others behind. This leads to overcrowding in cities like NY and SF. Layer in economies of scale, increased competition, and better talent pools, and it becomes increasingly difficult for other areas to compete. Creates a kind of feedback loop which increases the geographical wealth disparity. The only thing that seems to balance that is the increase in cost-of-living in those areas.
mises 7y ago
This may have been where lacking a central bank could have helped us. One of the advantages of America is that the feds are only supposed to do a few things, so states can pick what works best for them. We've been joking about the "California Dollar" for years; maybe it should be separate? Just throwing out ideas. I know there would be consequences, but the proposition is not entirely without merit.
- FiatLuxDave 7y ago
  I figure that there has to be a way to arbitrage the inflation difference. If there actually were "California Dollars" and "Arkansas Dollars", then you could easily arbitrage the difference between the inflation differential and the change in their rate of exchange (which is currently set to zero by fiat). I've thought about using inflation swaps, but that ends up looking more like a carry trade than an arbitrage, and would require lots of invested capital to get good returns. An arbitrage trade between the two inflationary regions should be more scaleable. If anyone has any ideas, I'd be happy to discuss them via email (see profile).

war1025 7y ago

Your last paragraph is very similar to what I've read is going on in the European Union with the Euro. (I don't remember what book I read it in) Basically their argument was that it works in America because the federal government is strong enough to redistribute wealth to places that can't keep up. In Europe the federal government is weak, so the southern countries have an economy they can't keep up with. I don't remember the specifics, but that was the gist of it.

jgwil2 7y ago
I've read that another problem is that unlike in the US with its relative cultural homogeneity, people in Europe are less willing to move where jobs are. The result is less efficient population distribution. EDIT: fixed typo.
- aeternus 7y ago
  That may not be entirely desirable. In the US that ability to move where the jobs are is creating a concentration of prosperity in certain cities. Often those with above average skills are able to move, leaving the others behind. This leads to overcrowding in cities like NY and SF. Layer in economies of scale, increased competition, and better talent pools, and it becomes increasingly difficult for other areas to compete. Creates a kind of feedback loop which increases the geographical wealth disparity. The only thing that seems to balance that is the increase in cost-of-living in those areas.

mises 7y ago

This may have been where lacking a central bank could have helped us. One of the advantages of America is that the feds are only supposed to do a few things, so states can pick what works best for them. We've been joking about the "California Dollar" for years; maybe it should be separate? Just throwing out ideas. I know there would be consequences, but the proposition is not entirely without merit.

FiatLuxDave 7y ago
I figure that there has to be a way to arbitrage the inflation difference. If there actually were "California Dollars" and "Arkansas Dollars", then you could easily arbitrage the difference between the inflation differential and the change in their rate of exchange (which is currently set to zero by fiat). I've thought about using inflation swaps, but that ends up looking more like a carry trade than an arbitrage, and would require lots of invested capital to get good returns. An arbitrage trade between the two inflationary regions should be more scaleable. If anyone has any ideas, I'd be happy to discuss them via email (see profile).