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Keynesian economics got us out of the actual Great Depression as well, if you consider FDR's decision to get off the gold standard and start trading dollars as

by icyfox 5y ago

Keynesian economics got us out of the actual Great Depression as well, if you consider FDR's decision to get off the gold standard and start trading dollars as a floating currency on the market. Fixed monetary supply might be one thing in theory, but fixed credit supply is the death knell to an economy. And the two are usually complimentary. Monetary supply can fill in the potholes of weakening credit supply when the latter contracts - and it inevitably will when the private issuers that generate those debt contracts pull back in a recession. If you have your hands tied to some constrained supply like gold or bitcoin, like what happened to the central banks after World War I and into the Great Depression, you end up backed up against a wall. That said there is certainly something that's personally appealing about an asset that's guaranteed to maintain the supply side of the equilibrium. As an investor you only have to consider demand. But for any kind of widely used currency that backs an economy it's going to be problematic.

imtringued 5y ago
>That said there is certainly something that's personally appealing about an asset that's guaranteed to maintain the supply side of the equilibrium. It's appealing because it keeps politicians honest, but if you have honest politicians it is just a thought experiment.
- icyfox 5y ago
  Blessing and a curse. With a flexible monetary supply, politicians can help ease the pains of boom bust cycles. They also can print currency and inflate their debt away. With a static monetary supply, they can't dampen the pain. But they also can't leverage the financial system for their short-term gains. The last 60 years on a macro level have largely proved the Keynesian model. I think we're right to put faith in politicians in general. The solution might just be holding currency from another nation instead of your own.
- joshuahaglund 5y ago
  Please explain how exactly a constrained monetary supply keeps politicians honest? Seems to me that is pretty much entirely dependent on an informed and participatory electorate. I think a constrained monetary supply just means the politicians we elect have less influence over the economy than the people with the most wealth. In either scenario, there will be untrustworthy politicians who need to be out voted or voted out.
wallacoloo 5y ago
2008 is remembered by most through phrases like “trickle down economics” and “bailouts” to the irresponsible men who built the house of cards, including “golden parachutes”. In other words, whether reasonable or not, a very large number of people don’t feel great about how our flexible monetary supply was made use of. Bitcoin is literally a direct reaction to that (e.g. view the coinbase for the Bitcoin genesis block). Newer cryptocurrencies have more sophisticated governance structures than Bitcoin (see: Tezos). Some of them could allow for an elastic monetary supply. The downside of these systems is that it takes a lot of work to properly encode the specific set of rules which decide when to increase the supply, and how to distribute the new supply. The upside is that these rules actually exist and are unambiguous.

by icyfox 5y ago

imtringued 5y ago

>That said there is certainly something that's personally appealing about an asset that's guaranteed to maintain the supply side of the equilibrium. It's appealing because it keeps politicians honest, but if you have honest politicians it is just a thought experiment.

icyfox 5y ago
Blessing and a curse. With a flexible monetary supply, politicians can help ease the pains of boom bust cycles. They also can print currency and inflate their debt away. With a static monetary supply, they can't dampen the pain. But they also can't leverage the financial system for their short-term gains. The last 60 years on a macro level have largely proved the Keynesian model. I think we're right to put faith in politicians in general. The solution might just be holding currency from another nation instead of your own.
joshuahaglund 5y ago
Please explain how exactly a constrained monetary supply keeps politicians honest? Seems to me that is pretty much entirely dependent on an informed and participatory electorate. I think a constrained monetary supply just means the politicians we elect have less influence over the economy than the people with the most wealth. In either scenario, there will be untrustworthy politicians who need to be out voted or voted out.

wallacoloo 5y ago

2008 is remembered by most through phrases like “trickle down economics” and “bailouts” to the irresponsible men who built the house of cards, including “golden parachutes”. In other words, whether reasonable or not, a very large number of people don’t feel great about how our flexible monetary supply was made use of. Bitcoin is literally a direct reaction to that (e.g. view the coinbase for the Bitcoin genesis block). Newer cryptocurrencies have more sophisticated governance structures than Bitcoin (see: Tezos). Some of them could allow for an elastic monetary supply. The downside of these systems is that it takes a lot of work to properly encode the specific set of rules which decide when to increase the supply, and how to distribute the new supply. The upside is that these rules actually exist and are unambiguous.