6 ms·

In 1972, NASA landed astronauts on the moon for the last time. Coincidence? Yes. Edited to add: when you think of all the myriad social, demographic, economic

by hyko 6y ago

In 1972, NASA landed astronauts on the moon for the last time. Coincidence? Yes. Edited to add: when you think of all the myriad social, demographic, economic, and political changes that have occurred in the last 50 years, focusing on some shiny yellow metal as some sort of first cause is an abdication of reason. It actually pisses me off that someone is peddling this horse manure to promote their private money scams, and they have the brass neck to blame all the world’s ills on public monetary policy in order to enrich themselves. Economics may well be the dismal science, but it is luminary enough to instruct us that restoring gold convertibility to the US dollar has zero chance of solving problems such inequality and government budget deficits.

roenxi 6y ago
Well, maybe. I'm looking at the "Official US Gold Reserves" chart about half-way down, and it looks like the US was accumulating gold 1900-1935, then bleeding gold 1955-1970, then couldn't cope with the losses so bumped the economic malaise to other parts of the economy. Cutting back on luxury spending, like sending people to the moon, could be connected to a general belt-tightening, in line with a sudden curtailment of per-capita energy growth (World per Capita Energy Consumption, 3/4 of the way to the bottom of the page). It would be a bit suspcious if in 1972 there are astronauts were on the moon, then after 50 years of exponential real economic growth there is nothing going on, even to show off.
- logicchains 6y ago
  >then bleeding gold 1955-1970, then couldn't cope with the losses so bumped the economic malaise to other parts of the economy. That's literally want happened. From https://en.wikipedia.org/wiki/Exorbitant_privilege https://en.wikipedia.org/wiki/Exorbitant_privilege: "As American economist Barry Eichengreen summarized: "It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries had to pony up $100 of actual goods in order to obtain one."[2] In February 1965, President Charles de Gaulle announced his intention to exchange its U.S. dollar reserves for gold at the official exchange rate. He sent the French Navy across the Atlantic to pick up the French reserve of gold and was followed by several countries. As it resulted in considerably reducing U.S. gold stock and U.S. economic influence, it led U.S. President Richard Nixon to end unilaterally the convertibility of the dollar to gold on August 15, 1971 (the "Nixon Shock"). "
freetime2 6y ago
Could you elaborate further on why you think there is no relationship between decoupling the US dollar from gold and inflation? Perhaps it’s obvious to you, but I actually found the parent’s suggestion to be thought provoking. If you’ve got a strong justification to back up your strong opinion, I would be interested to learn more. Admittedly it’s not something I know much about, but it certainly seems plausible that allowing the Fed to print unlimited amounts of money could lead to inflation. And, as that website suggests, that inflation could disproportionately benefit people who own things that retain value (real estate, stocks, etc) or who have good credit ratings and are able to borrow during inflationary periods.
- hyko 6y ago
  I didn't really comment on the relationship between the gold peg and inflation. What I was trying to say is pulling in disparate indicators like wage growth and national debt and blaming them on coming off the peg is wrong. What's interesting about the inflation picture is that there was significant inflation while on the gold peg. It wasn't like people were using gold coins in 1970; they were using dollars, created from loans. In theory, there is now no limit to amount of money the Fed can create, but in practice there is a limit. Unlimited money creation without a matching rise in economic output would lead to massive inflation. They actually show incredible restraint in money creation, because their aim is not to see who can create the biggest pile of money in the world, but rather to keep inflation and unemployment low. You're right that there are opportunities for wealthy people with good credit ratings to make money, but that would be exactly the same in the gold pegged world. If it's any consolation, a lot of that "wealth" is in fact unrealisable, at least not in the aggregate. Only increased productivity and new discoveries can raise our collective stock of wealth.
logicchains 6y ago
>Economics may well be the dismal science, but it is luminary enough to instruct us that restoring gold convertibility to the US dollar has zero chance of solving problems such inequality and government budget deficits. Economics tells us that inflation in the current format is a massive source of inequality. The 1-2% purchasing power lost every year doesn't just disappear: it is transferred to the first spenders of the newly created money, which is overwhelmingly banks and financial institutions (which receive it from the Fed). Literally making the rich richer and the poor poorer. Yes in theory that might not be the case if the newly created money was distributed by UBI or something similar evenly to all citizens, but that's not what's happening. >It actually pisses me off that someone is peddling this horse manure to promote their private money scams, and they have the brass neck to blame all the world’s ills on public monetary policy in order to enrich themselves. Jeff Bezos doesn't have $50 billion of wealth in cash, he has it in inflation-proof stock. Inflation doesn't hurt him, but it does hurt 50 million Americans with $1000 each in the bank, especially given lower and middle-class Americans have less access to financial products to hedge against inflation. If Goldman Sachs was granted the right to print US dollars, everybody'd be up in arms, yet when the Fed does it and gives it to Goldman Sachs suddenly nobody cares any more.
- RC_ITR 6y ago
  Uhhh, inflation lowers the real cost of debt (you put back in dollars worth less than you received) & is generally considered very progressive for that reason. Idk how you think Bezos is hedging for inflation, but being in nominal debt is literally the worlds best inflation hedge.
  - nybble41 6y ago
    That works if inflation turns out to be higher than whatever the lender estimated when you took out the loan; otherwise the expected loss of purchasing power would be priced into the interest rate. Rest assured, the bank knows that you will be paying back the principle with less valuable money, and they're not going to take a loss as a result. A policy which continually ensured that inflation was higher than expected, however, would inevitably result in currency collapse via hyperinflation. Those with means can also generally get secured loans at preferential interest rates, borrowing against the value of their other assets, whereas those without assets are mainly borrowing via credit cards and the like where the interest is far higher than inflation. Penalizing saving and pushing them to borrow instead does them no favors.
josu 6y ago
Your first sentence seems to imply that losing the gold peg had no impact on the real economy, yet, your edit points to the contrary. Although establishing a clear causality isn't easy, intuitively it seems that leaving the gold standard did have an impact on prices. >Economics may well be the dismal science, but it is luminary enough to instruct us that restoring gold convertibility to the US dollar has zero chance of solving problems such inequality and government budget deficits. Your last sentence is pretty loaded. "Solving" those "problems" would imply that, first, they are indeed "problems" that need solving, and second, that there is actually a way to "solve" them. Some people just think that the world would be a better place if governments don't have control over the currency. No need to "solve" the world, just make it a little bit better (or less worse).
- hyko 6y ago
  That's the thing though, there was plenty of inflation while on the "gold peg", e.g. 4.19% in 1968 alone. You could make the argument that central banks have done a better job of controlling inflation since making it a specific target. They could probably reduce the target close to zero with better financial technology in the future. The wtf 1971 site presents national debt and growing inequality as problems created by coming off the gold standard, I'm saying that if you do think those things are problems, pegging your currency to gold won't resolve them. Something like a government budget deficit cannot effectively be solved with monetary policy; they have to borrow their money just like everyone else (apart from a few special emergency arrangements). Reducing wealth inequality requires a broad range of policies, from education to taxation. the world would be a better place if governments don't have control over the currency I have a lot of sympathy for anarcho-capitalist schemes, and of course private money predates central bank money so that would be nothing new. There's no economic reason why a country should necessarily form an optimum currency area. So I'd be happy with that, so as long as we don't just peg it to some arbitrary thing. The value of all money lies inside minds and not mines.
  - josu 6y ago
    Thanks for your reply.
- 6y ago
RC_ITR 6y ago
It’s even worse. Nearly every single chart on that site is some riff on “cumulative inflation since 1971,” which just shows we had a lot of inflation in the 1970’s and ignores the fact we’ve had very little since.

by hyko 6y ago

roenxi 6y ago

Well, maybe. I'm looking at the "Official US Gold Reserves" chart about half-way down, and it looks like the US was accumulating gold 1900-1935, then bleeding gold 1955-1970, then couldn't cope with the losses so bumped the economic malaise to other parts of the economy. Cutting back on luxury spending, like sending people to the moon, could be connected to a general belt-tightening, in line with a sudden curtailment of per-capita energy growth (World per Capita Energy Consumption, 3/4 of the way to the bottom of the page). It would be a bit suspcious if in 1972 there are astronauts were on the moon, then after 50 years of exponential real economic growth there is nothing going on, even to show off.

logicchains 6y ago
>then bleeding gold 1955-1970, then couldn't cope with the losses so bumped the economic malaise to other parts of the economy. That's literally want happened. From https://en.wikipedia.org/wiki/Exorbitant_privilege https://en.wikipedia.org/wiki/Exorbitant_privilege: "As American economist Barry Eichengreen summarized: "It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries had to pony up $100 of actual goods in order to obtain one."[2] In February 1965, President Charles de Gaulle announced his intention to exchange its U.S. dollar reserves for gold at the official exchange rate. He sent the French Navy across the Atlantic to pick up the French reserve of gold and was followed by several countries. As it resulted in considerably reducing U.S. gold stock and U.S. economic influence, it led U.S. President Richard Nixon to end unilaterally the convertibility of the dollar to gold on August 15, 1971 (the "Nixon Shock"). "

freetime2 6y ago

Could you elaborate further on why you think there is no relationship between decoupling the US dollar from gold and inflation? Perhaps it’s obvious to you, but I actually found the parent’s suggestion to be thought provoking. If you’ve got a strong justification to back up your strong opinion, I would be interested to learn more. Admittedly it’s not something I know much about, but it certainly seems plausible that allowing the Fed to print unlimited amounts of money could lead to inflation. And, as that website suggests, that inflation could disproportionately benefit people who own things that retain value (real estate, stocks, etc) or who have good credit ratings and are able to borrow during inflationary periods.

hyko 6y ago
I didn't really comment on the relationship between the gold peg and inflation. What I was trying to say is pulling in disparate indicators like wage growth and national debt and blaming them on coming off the peg is wrong. What's interesting about the inflation picture is that there was significant inflation while on the gold peg. It wasn't like people were using gold coins in 1970; they were using dollars, created from loans. In theory, there is now no limit to amount of money the Fed can create, but in practice there is a limit. Unlimited money creation without a matching rise in economic output would lead to massive inflation. They actually show incredible restraint in money creation, because their aim is not to see who can create the biggest pile of money in the world, but rather to keep inflation and unemployment low. You're right that there are opportunities for wealthy people with good credit ratings to make money, but that would be exactly the same in the gold pegged world. If it's any consolation, a lot of that "wealth" is in fact unrealisable, at least not in the aggregate. Only increased productivity and new discoveries can raise our collective stock of wealth.

logicchains 6y ago

>Economics may well be the dismal science, but it is luminary enough to instruct us that restoring gold convertibility to the US dollar has zero chance of solving problems such inequality and government budget deficits. Economics tells us that inflation in the current format is a massive source of inequality. The 1-2% purchasing power lost every year doesn't just disappear: it is transferred to the first spenders of the newly created money, which is overwhelmingly banks and financial institutions (which receive it from the Fed). Literally making the rich richer and the poor poorer. Yes in theory that might not be the case if the newly created money was distributed by UBI or something similar evenly to all citizens, but that's not what's happening. >It actually pisses me off that someone is peddling this horse manure to promote their private money scams, and they have the brass neck to blame all the world’s ills on public monetary policy in order to enrich themselves. Jeff Bezos doesn't have $50 billion of wealth in cash, he has it in inflation-proof stock. Inflation doesn't hurt him, but it does hurt 50 million Americans with $1000 each in the bank, especially given lower and middle-class Americans have less access to financial products to hedge against inflation. If Goldman Sachs was granted the right to print US dollars, everybody'd be up in arms, yet when the Fed does it and gives it to Goldman Sachs suddenly nobody cares any more.

RC_ITR 6y ago
Uhhh, inflation lowers the real cost of debt (you put back in dollars worth less than you received) & is generally considered very progressive for that reason. Idk how you think Bezos is hedging for inflation, but being in nominal debt is literally the worlds best inflation hedge.
- nybble41 6y ago
  That works if inflation turns out to be higher than whatever the lender estimated when you took out the loan; otherwise the expected loss of purchasing power would be priced into the interest rate. Rest assured, the bank knows that you will be paying back the principle with less valuable money, and they're not going to take a loss as a result. A policy which continually ensured that inflation was higher than expected, however, would inevitably result in currency collapse via hyperinflation. Those with means can also generally get secured loans at preferential interest rates, borrowing against the value of their other assets, whereas those without assets are mainly borrowing via credit cards and the like where the interest is far higher than inflation. Penalizing saving and pushing them to borrow instead does them no favors.

josu 6y ago

Your first sentence seems to imply that losing the gold peg had no impact on the real economy, yet, your edit points to the contrary. Although establishing a clear causality isn't easy, intuitively it seems that leaving the gold standard did have an impact on prices. >Economics may well be the dismal science, but it is luminary enough to instruct us that restoring gold convertibility to the US dollar has zero chance of solving problems such inequality and government budget deficits. Your last sentence is pretty loaded. "Solving" those "problems" would imply that, first, they are indeed "problems" that need solving, and second, that there is actually a way to "solve" them. Some people just think that the world would be a better place if governments don't have control over the currency. No need to "solve" the world, just make it a little bit better (or less worse).

hyko 6y ago
That's the thing though, there was plenty of inflation while on the "gold peg", e.g. 4.19% in 1968 alone. You could make the argument that central banks have done a better job of controlling inflation since making it a specific target. They could probably reduce the target close to zero with better financial technology in the future. The wtf 1971 site presents national debt and growing inequality as problems created by coming off the gold standard, I'm saying that if you do think those things are problems, pegging your currency to gold won't resolve them. Something like a government budget deficit cannot effectively be solved with monetary policy; they have to borrow their money just like everyone else (apart from a few special emergency arrangements). Reducing wealth inequality requires a broad range of policies, from education to taxation. the world would be a better place if governments don't have control over the currency I have a lot of sympathy for anarcho-capitalist schemes, and of course private money predates central bank money so that would be nothing new. There's no economic reason why a country should necessarily form an optimum currency area. So I'd be happy with that, so as long as we don't just peg it to some arbitrary thing. The value of all money lies inside minds and not mines.
- josu 6y ago
  Thanks for your reply.
6y ago

RC_ITR 6y ago

It’s even worse. Nearly every single chart on that site is some riff on “cumulative inflation since 1971,” which just shows we had a lot of inflation in the 1970’s and ignores the fact we’ve had very little since.