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> The petro dollar is enforced by might and invasions. Nixon created it when he decided to leave the gold standard after France demanded physical gold as paymen

> The petro dollar is enforced by might and invasions. Nixon created it when he decided to leave the gold standard after France demanded physical gold as payments. This aspect was not clear to me until I read The Bitcoin Standard by Saifedean Ammous, the first two thirds of which is more of a history of money than pro-Bitcoin propaganda. There he argues that moving off the gold standard was a bad idea in many ways apparently unrelated to money. And of course there's this famous website: https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/. For reference, 1971 was when Nixon decoupled the US dollar from gold.

throw0101a 5y ago
> There he argues that moving off the gold standard was a bad idea in many ways apparently unrelated to money. See Money: The True Story of a Made-Up Thing by Jacob Goldstein (of NPR's Planet Money): * https://bookshop.org/books/money-the-true-story-of-a-made-up-thing/9780316417198 https://bookshop.org/books/money-the-true-story-of-a-made-up... * https://en.wikipedia.org/wiki/Jacob_Goldstein https://en.wikipedia.org/wiki/Jacob_Goldstein From what I've read on the topic, gold (and 'hard money' in general) is generally not a good in most circumstances. Yes, if your mint/central bank takes orders from the government to create more money it can lead to bad things, but generally that disaster only needs to happen once before everyone realizes how bad an idea it is and probably never does it again. Recommend the book. Debt: The First 5,000 Years is also worth checking out: * https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years
- logicchains 5y ago
  Did you read the link the person you're replying to posted? The empirical evidence there suggests that moving away from hard money has been terrible for the average American, and the shrinking middle class is exactly what's predicted by proponents of sound money. >but generally that disaster only needs to happen once before everyone realizes how bad an idea it is and probably never does it again. That clearly isn't the case or else no country would have experienced hyperinflation after the fall of Rome.
  - chii 5y ago
    > moving away from hard money has been terrible for the average American i think outsourcing is the cause, not moving off the gold standard.
  - simias 5y ago
    It's one of these situations where the correlation seems obvious, but the causation seems very hard to establish. How world changed so drastically over the past century that it always seems a bit strange to pin our current woes on one single factor, "empirical evidence" be damned.
    - sleavey 5y ago
      It's good to keep an open mind, but just look at the sheer number of different metrics on that website that show some kind of change at or soon after 1971. With enough correlation you can make a hypothesis, hopefully a testable one. Unfortunately there are no countries that use a gold-backed currency left where you could perform an experiment.
  - throw0101a 5y ago
    > The empirical evidence there suggests that moving away from hard money has been terrible for the average American, and the shrinking middle class is exactly what's predicted by proponents of sound money. The shrinking middle class, especially in the US, has mostly occurred post-1980s (see Reagan and Thatcher). This can be stopped and probably reversed with redistributive tax policy. See Piketty: * https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce... > That clearly isn't the case or else no country would have experienced hyperinflation after the fall of Rome. How may countries have actually experienced this? > Re-arranging the Hanke-Krus list highlights something however: barring three outliers (France, 1795-1796, North Korea 2012, and Venezuela 2016-) there have actually been only five hyperinflation “events”, each associated with particular large, long-term global processes (involving war, decolonization, regime change, foreign denominated debt/currency pegs). The spatial and temporal clustering of these events is perhaps best expressed visually (Chile and Zimbabwe are temporal outliers within their cluster) * https://clintballinger.wordpress.com/2019/05/24/the-autocorrelation-of-hyperinflation-about-7-events-not-58/ https://clintballinger.wordpress.com/2019/05/24/the-autocorr... Hyperinflation is generally not caused by printing money, rather the printing of money is the effect of something else: > In this paper I will argue why the common misconception that “inflation is always and everywhere a monetary phenomenon” cannot be used to explain most historical hyperinflations. I will argue that “money printing” is often the response to exogenous and unusual events and not the direct cause of the hyperinflation. * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1799102 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1799102 * https://www.pragcap.com/hyperinflation-its-more-than-just-a-monetary-phenomenon/ https://www.pragcap.com/hyperinflation-its-more-than-just-a-... China ran on paper for a century or two without issues, and only went back to hard money because the Imperial Court wanted more centralized control; this is covered in a chapter of Goldstein's Money.
- inshadows 5y ago
  What's so great about Debt: The first 5000 Years? I've tried to read it but had to abandon it after first two chapters as it seemed way too emotionally pushy for my tastes. It gives many examples of poor indebted countries and demonizes money lenders, but nowhere in these lines does author elaborate how would those countries fare if they weren't offered credit in first place. OK, I get it that lenders impose harsh conditions, but why is it in any way OK to not repay the debt, and in turn not receive any credit offer in future as it becomes clear that you won't repay? People keeps recommending the book but I found its arguments overly populist and ignoring obvious counterarguments.
  - vlovich123 5y ago
    My impression is that usury actually inhibits economic development because you’re stuck paying the interest instead of investing in your future. Lower interest rates encourages more risk taking economic activities. Sometimes those risks don’t pan out, but, if you believe that overall your economy will prosper, lower interest rates ensure that proceeds from risks stay more with those generating the activity rather than the lenders themselves. Liquidity is important but not as much value creating (if everyone loans the other person $5, there’s a lot of “economic activity”, but nothing of value has been created in that fake scenario). That’s simplistic of course and liquidity itself can be value-generating if there’s intention behind it (ie vetting that the liquidity generated is going to an enterprise that will likely yield net returns overall for some reason). That’s also why there’s bankruptcy protection. Sucks for the lenders that their gamble didn’t pay off but generally they’re able to take a loss and their other investments can balance them out. Plus bankruptcy protections apply to them to if they overextended themselves or didn’t manage the investments. The point is that anyone can suffer an economic hardship but that doesn’t mean society should strive to create punishing conditions if you are unlucky (or, in most payday scenarios, just start off poor). Of course some people will abuse the system. There are abuses happening by lenders too. Economic policies around this though can only work at the macro scale, so you find other ways to mitigate the problems through legal structures. I think there’s this unhealthy association between lendees not paying and it somehow being a moral failing on their part. No. It’s the fault of the lender for not vetting their investment properly. Sure they should be allowed some attempt at recollection but there need to be strong usury protections too (if you want to allow high interest rates in your economic region, then high usury rates should be pared with much easier ability to limit recovery after some limit is collected. If you think about it, in payday scenarios, the successful “investments” on the part of the lenders (ie the people actually making good on the payments) are subsidizing the lenders loans to those that can’t pay. It’s a vicious cycle frequently for those involved because the loans aren’t actually generating economic value and are really being used just to help people get by. High interest loans really need to be restricted to risky economic investments (starting a business of some kind) or those with the resources that they could pay it back and just have a short liquidity issue. This $500 @ 30% interest to fix your car that’s your only mode of transportation to/from work or $1000 to go to the doctor seems seems like not a useful application. It’s a non-economic need that person has and there’s not really any likely realistic scenario where those loans would have a net positive impact on the economy. Forcing the area to invest in useful public transportation solutions and safety net for medical care would return far more value to the economic prosperity and social stability/welfare of the area.
- PKop 5y ago
  What gold is good for is a neutral settlement asset between nations with imbalanced trade. But not at a fixed currency price by weight, rather floating in fiat price, which forces nations to re-balance to more consumption or more production depending on if they have large trade surpluses or large trade deficits. Thus the pitfalls of either extreme can be re-balanced by covering trade imbalances with gold reserves which also devalue currencies and force domestic production, or increase them and force consumption. Keynes's Bancor[1] was essentially this idea, but Bretton Woods conference rejected this proposal. Oil exporting and general surplus nations, like Russia and China, have been moving in this direction by reserving more gold in recent years (look up various European nation increasing gold purchases since 2008) likely to move towards a more multilateral system of settling trade imbalances with a neutral settlement asset, rather than stockpiling fiat currency or fiat currency debt "assets" created in unrestricted supply by one nation, who forces world to then use this inflating currency to purchase energy... which equals future inflation for these nations that can't print it themselves. It is also useful as a personal "store of value" to avoid "saving" in a depreciating fiat currency, along with other "hard" assets. But gold or hard money cannot be the unit of account or medium of exchange for national commerce. Credit/fiat is better for this. This is why some have argued that there's always been and probably always will be a need for "two monies". Bimetallism was an embodiment of this principle. Here is a very thorough discussion of this concept[0]. Ctrl+F "two monies" for specifics, but the whole article is insightful. This dynamic also presents itself in debates about crypto currencies purpose to function as a high throughput transaction currency or a more inert store of value. Because of the inefficiencies of blockchain and Bitcoin's finite quantity, it cannot function as a unit of account or high volume transactions currency; fiat and fiat derivative platforms (Cash App, Paypal, credit cards, etc) are much better at serving this function. Trying to shoe-horn hard money into soft money use cases (or vice versa, saving in fiat) doesn't work. One form of "money" can't satisfy these two distinct functions. [0] http://fofoa.blogspot.com/2011/05/return-to-honest-money.html http://fofoa.blogspot.com/2011/05/return-to-honest-money.htm... [1] https://en.wikipedia.org/wiki/Bancor https://en.wikipedia.org/wiki/Bancor
  - robk 5y ago
    This feels like how Cuba had their own two currency market with the CUP and CUC.
- ItsMonkk 5y ago
  Gold is not good because it is naturally deflationary. Our current system is not good because it is inflationary. What you want is for the increase in the money supply to match the increase in productivity. What we care about is a stable M2V.
lifty 5y ago
Indeed, the petro dollar has had all kinds of side effects, good and bad. Like any imperial rule, some get crushed by it, but peace and prosperity can be a direct outcome of it as well, and I think this was the case with the American "empire" after the WW2. You can google for "Pax Americana" for more info about the concept. ps: I say this as a non-American.
notduncansmith 5y ago
For reference, 1971 was when Nixon first coined the term “war on drugs” (after passing the Controlled Substances Act and related legislation a year prior). People love to bring up that website when the gold standard is mentioned, but it’s actually showing a broader trend of the government apparatus being weaponized against the middle and lower classes. Here’s a quote that summarizes the effect of the time period nicely: “The Nixon campaign in 1968, and the Nixon White House after that, had two enemies: the antiwar left and black people. You understand what I'm saying? We knew we couldn't make it illegal to be either against the war or black, but by getting the public to associate the hippies with marijuana and blacks with heroin, and then criminalizing both heavily, we could disrupt those communities. We could arrest their leaders, raid their homes, break up their meetings, and vilify them night after night on the evening news. Did we know we were lying about the drugs? Of course we did.” — John Ehrlichman, to Dan Baum for Harper's Magazine in 1994, about President Richard Nixon's war on drugs, declared in 1971. That’s what the fuck happened in 1971. Then, notice how many graphs actually show an inflection point around 1981 when Reagan started as president, employing Nixon’s Southern Strategy to get elected and then serving those voters with policies that attacked the lower and middle classes (slashing spending on federal aid programs, raising income taxes while lowering capital gains taxes, freezing the minimum wage, raising military spending which is essentially a cash transfer to rich arms dealers, etc). Then throw the Cold War in there, and you have a US government that is in an adversarial position with everyone but the 1%.

throw0101a 5y ago

> There he argues that moving off the gold standard was a bad idea in many ways apparently unrelated to money. See Money: The True Story of a Made-Up Thing by Jacob Goldstein (of NPR's Planet Money): * https://bookshop.org/books/money-the-true-story-of-a-made-up-thing/9780316417198 https://bookshop.org/books/money-the-true-story-of-a-made-up... * https://en.wikipedia.org/wiki/Jacob_Goldstein https://en.wikipedia.org/wiki/Jacob_Goldstein From what I've read on the topic, gold (and 'hard money' in general) is generally not a good in most circumstances. Yes, if your mint/central bank takes orders from the government to create more money it can lead to bad things, but generally that disaster only needs to happen once before everyone realizes how bad an idea it is and probably never does it again. Recommend the book. Debt: The First 5,000 Years is also worth checking out: * https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years

logicchains 5y ago
Did you read the link the person you're replying to posted? The empirical evidence there suggests that moving away from hard money has been terrible for the average American, and the shrinking middle class is exactly what's predicted by proponents of sound money. >but generally that disaster only needs to happen once before everyone realizes how bad an idea it is and probably never does it again. That clearly isn't the case or else no country would have experienced hyperinflation after the fall of Rome.
- chii 5y ago
  > moving away from hard money has been terrible for the average American i think outsourcing is the cause, not moving off the gold standard.
- simias 5y ago
  It's one of these situations where the correlation seems obvious, but the causation seems very hard to establish. How world changed so drastically over the past century that it always seems a bit strange to pin our current woes on one single factor, "empirical evidence" be damned.
  - sleavey 5y ago
    It's good to keep an open mind, but just look at the sheer number of different metrics on that website that show some kind of change at or soon after 1971. With enough correlation you can make a hypothesis, hopefully a testable one. Unfortunately there are no countries that use a gold-backed currency left where you could perform an experiment.
- throw0101a 5y ago
  > The empirical evidence there suggests that moving away from hard money has been terrible for the average American, and the shrinking middle class is exactly what's predicted by proponents of sound money. The shrinking middle class, especially in the US, has mostly occurred post-1980s (see Reagan and Thatcher). This can be stopped and probably reversed with redistributive tax policy. See Piketty: * https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce... > That clearly isn't the case or else no country would have experienced hyperinflation after the fall of Rome. How may countries have actually experienced this? > Re-arranging the Hanke-Krus list highlights something however: barring three outliers (France, 1795-1796, North Korea 2012, and Venezuela 2016-) there have actually been only five hyperinflation “events”, each associated with particular large, long-term global processes (involving war, decolonization, regime change, foreign denominated debt/currency pegs). The spatial and temporal clustering of these events is perhaps best expressed visually (Chile and Zimbabwe are temporal outliers within their cluster) * https://clintballinger.wordpress.com/2019/05/24/the-autocorrelation-of-hyperinflation-about-7-events-not-58/ https://clintballinger.wordpress.com/2019/05/24/the-autocorr... Hyperinflation is generally not caused by printing money, rather the printing of money is the effect of something else: > In this paper I will argue why the common misconception that “inflation is always and everywhere a monetary phenomenon” cannot be used to explain most historical hyperinflations. I will argue that “money printing” is often the response to exogenous and unusual events and not the direct cause of the hyperinflation. * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1799102 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1799102 * https://www.pragcap.com/hyperinflation-its-more-than-just-a-monetary-phenomenon/ https://www.pragcap.com/hyperinflation-its-more-than-just-a-... China ran on paper for a century or two without issues, and only went back to hard money because the Imperial Court wanted more centralized control; this is covered in a chapter of Goldstein's Money.
inshadows 5y ago
What's so great about Debt: The first 5000 Years? I've tried to read it but had to abandon it after first two chapters as it seemed way too emotionally pushy for my tastes. It gives many examples of poor indebted countries and demonizes money lenders, but nowhere in these lines does author elaborate how would those countries fare if they weren't offered credit in first place. OK, I get it that lenders impose harsh conditions, but why is it in any way OK to not repay the debt, and in turn not receive any credit offer in future as it becomes clear that you won't repay? People keeps recommending the book but I found its arguments overly populist and ignoring obvious counterarguments.
- vlovich123 5y ago
  My impression is that usury actually inhibits economic development because you’re stuck paying the interest instead of investing in your future. Lower interest rates encourages more risk taking economic activities. Sometimes those risks don’t pan out, but, if you believe that overall your economy will prosper, lower interest rates ensure that proceeds from risks stay more with those generating the activity rather than the lenders themselves. Liquidity is important but not as much value creating (if everyone loans the other person $5, there’s a lot of “economic activity”, but nothing of value has been created in that fake scenario). That’s simplistic of course and liquidity itself can be value-generating if there’s intention behind it (ie vetting that the liquidity generated is going to an enterprise that will likely yield net returns overall for some reason). That’s also why there’s bankruptcy protection. Sucks for the lenders that their gamble didn’t pay off but generally they’re able to take a loss and their other investments can balance them out. Plus bankruptcy protections apply to them to if they overextended themselves or didn’t manage the investments. The point is that anyone can suffer an economic hardship but that doesn’t mean society should strive to create punishing conditions if you are unlucky (or, in most payday scenarios, just start off poor). Of course some people will abuse the system. There are abuses happening by lenders too. Economic policies around this though can only work at the macro scale, so you find other ways to mitigate the problems through legal structures. I think there’s this unhealthy association between lendees not paying and it somehow being a moral failing on their part. No. It’s the fault of the lender for not vetting their investment properly. Sure they should be allowed some attempt at recollection but there need to be strong usury protections too (if you want to allow high interest rates in your economic region, then high usury rates should be pared with much easier ability to limit recovery after some limit is collected. If you think about it, in payday scenarios, the successful “investments” on the part of the lenders (ie the people actually making good on the payments) are subsidizing the lenders loans to those that can’t pay. It’s a vicious cycle frequently for those involved because the loans aren’t actually generating economic value and are really being used just to help people get by. High interest loans really need to be restricted to risky economic investments (starting a business of some kind) or those with the resources that they could pay it back and just have a short liquidity issue. This $500 @ 30% interest to fix your car that’s your only mode of transportation to/from work or $1000 to go to the doctor seems seems like not a useful application. It’s a non-economic need that person has and there’s not really any likely realistic scenario where those loans would have a net positive impact on the economy. Forcing the area to invest in useful public transportation solutions and safety net for medical care would return far more value to the economic prosperity and social stability/welfare of the area.
PKop 5y ago
What gold is good for is a neutral settlement asset between nations with imbalanced trade. But not at a fixed currency price by weight, rather floating in fiat price, which forces nations to re-balance to more consumption or more production depending on if they have large trade surpluses or large trade deficits. Thus the pitfalls of either extreme can be re-balanced by covering trade imbalances with gold reserves which also devalue currencies and force domestic production, or increase them and force consumption. Keynes's Bancor[1] was essentially this idea, but Bretton Woods conference rejected this proposal. Oil exporting and general surplus nations, like Russia and China, have been moving in this direction by reserving more gold in recent years (look up various European nation increasing gold purchases since 2008) likely to move towards a more multilateral system of settling trade imbalances with a neutral settlement asset, rather than stockpiling fiat currency or fiat currency debt "assets" created in unrestricted supply by one nation, who forces world to then use this inflating currency to purchase energy... which equals future inflation for these nations that can't print it themselves. It is also useful as a personal "store of value" to avoid "saving" in a depreciating fiat currency, along with other "hard" assets. But gold or hard money cannot be the unit of account or medium of exchange for national commerce. Credit/fiat is better for this. This is why some have argued that there's always been and probably always will be a need for "two monies". Bimetallism was an embodiment of this principle. Here is a very thorough discussion of this concept[0]. Ctrl+F "two monies" for specifics, but the whole article is insightful. This dynamic also presents itself in debates about crypto currencies purpose to function as a high throughput transaction currency or a more inert store of value. Because of the inefficiencies of blockchain and Bitcoin's finite quantity, it cannot function as a unit of account or high volume transactions currency; fiat and fiat derivative platforms (Cash App, Paypal, credit cards, etc) are much better at serving this function. Trying to shoe-horn hard money into soft money use cases (or vice versa, saving in fiat) doesn't work. One form of "money" can't satisfy these two distinct functions. [0] http://fofoa.blogspot.com/2011/05/return-to-honest-money.html http://fofoa.blogspot.com/2011/05/return-to-honest-money.htm... [1] https://en.wikipedia.org/wiki/Bancor https://en.wikipedia.org/wiki/Bancor
- robk 5y ago
  This feels like how Cuba had their own two currency market with the CUP and CUC.
ItsMonkk 5y ago
Gold is not good because it is naturally deflationary. Our current system is not good because it is inflationary. What you want is for the increase in the money supply to match the increase in productivity. What we care about is a stable M2V.

lifty 5y ago

Indeed, the petro dollar has had all kinds of side effects, good and bad. Like any imperial rule, some get crushed by it, but peace and prosperity can be a direct outcome of it as well, and I think this was the case with the American "empire" after the WW2. You can google for "Pax Americana" for more info about the concept. ps: I say this as a non-American.

notduncansmith 5y ago

For reference, 1971 was when Nixon first coined the term “war on drugs” (after passing the Controlled Substances Act and related legislation a year prior). People love to bring up that website when the gold standard is mentioned, but it’s actually showing a broader trend of the government apparatus being weaponized against the middle and lower classes. Here’s a quote that summarizes the effect of the time period nicely: “The Nixon campaign in 1968, and the Nixon White House after that, had two enemies: the antiwar left and black people. You understand what I'm saying? We knew we couldn't make it illegal to be either against the war or black, but by getting the public to associate the hippies with marijuana and blacks with heroin, and then criminalizing both heavily, we could disrupt those communities. We could arrest their leaders, raid their homes, break up their meetings, and vilify them night after night on the evening news. Did we know we were lying about the drugs? Of course we did.” — John Ehrlichman, to Dan Baum for Harper's Magazine in 1994, about President Richard Nixon's war on drugs, declared in 1971. That’s what the fuck happened in 1971. Then, notice how many graphs actually show an inflection point around 1981 when Reagan started as president, employing Nixon’s Southern Strategy to get elected and then serving those voters with policies that attacked the lower and middle classes (slashing spending on federal aid programs, raising income taxes while lowering capital gains taxes, freezing the minimum wage, raising military spending which is essentially a cash transfer to rich arms dealers, etc). Then throw the Cold War in there, and you have a US government that is in an adversarial position with everyone but the 1%.