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> Has it not occurred to you that it's precisely the modern economic knowledge, technology and techniques that have driven us away from gold backed dollars It

> Has it not occurred to you that it's precisely the modern economic knowledge, technology and techniques that have driven us away from gold backed dollars It hasn't because its patently false. Both the gold confiscation in 1931 and cutting the cord of gold-backing in 1971 were both done as desparately rushed moves to reneg on the governments promise to uphold the value of the dollar. These weren't thoughtful reasoned well discussed actions. It had nothing to do with technology or best practices. It was a purely a politically expedient way to prevent collapse of an insolvent dollar. > macroeconomists have spent the majority of the last century proposing and carrying out natural experiments You don't run experiments in macroeconomics. Controls are impossible. And studies have so many confounding variables that any conclusions we come to are many orders of magnitude less certain than anything in the hard sciences. > our post-gold standard economic crises have not been proportionally more devastating than the Great Depression You must have misunderstood me. I never said any such thing.

dnautics 5y ago
Iirc our post gold standard crises have been nominally at least near as bad as the great depression. Of course we have much,much better infrastructure, healthcare, communication, etc, which economists tend not to take into account for how there aren't a starving people dying in the streets. None of that matters, it's all the stewardship of the fed.
- billytetrud 5y ago
  I'd love to see that analysis if you can find the source.
notahacker 5y ago
> It hasn't because its patently false. Both the gold confiscation in 1931 and cutting the cord of gold-backing in 1971 were both done as desparately rushed moves to reneg on the governments promise to uphold the value of the dollar. These weren't thoughtful reasoned well discussed actions. It had nothing to do with technology or best practices. It was a purely a politically expedient way to prevent collapse of an insolvent dollar. I take it you haven't read any mainstream macroeconomic analysis written over the course of the past century, the theory, analytical techniques and predictions which informs modern central banking practices. I have. It is certainly not patently false to suggest that there has been plenty of discussion and implementation of newer ideas, an enormous amount of focus on the dynamic of inflation, and the result is very few economists seeing any sense in the notion that the optimum quantity of money to support the growth of the United States happens to coincide with fluctuations in world gold output. But even aside from the actual theory and techniques, part of the knowledge base is simply concluding that if it was necessary break a system to prevent the collapse of an insolvent dollar, it is probably best not to attempt to recreate that state of economic affairs. > You don't run experiments in macroeconomics. Controls are impossible. And studies have so many confounding variables that any conclusions we come to are many orders of magnitude less certain than anything in the hard sciences. We agree it's not a hard science, and that natural experiments are very difficult (they are especially difficult when a proposal like "maybe we should try to ensure a particular USD aggregate stays at a certain level, and raise interest rates as high as necessary to keep it at that level" results in mass unemployment. When "maybe we should fix the interest rates instead" turns out to result in inflation remaining within predictable ranges for the next three decades, it is even harder to recommend the former policy). Similarly, if the Gold Standard fails to deliver the stability it promises, and then its vociferous minority of advocates promise hyperinflation is around the corner every year for decades without ever being right, new theories which accurately predict inflation take over. > I never said any such thing. I may have misunderstood you. If we agree that the Great Depression and Long Depression were examples of significant economic crises in addition to periodic smaller financial panics and forced devaluations, we agree. I see that as a pretty good indication our current financial crises are less worse, especially given our current policy framework gives us tools other than "wait it out" to ameliorate the suffering.
- billytetrud 5y ago
  > It is certainly not patently false to suggest that there has been plenty of discussion and implementation of newer ideas, an enormous amount of focus on the dynamic of inflation... Ok. I agree with all of that. And none of it contracts what I said, which was that modern economic knowledge did not "drive us away from gold backed dollars". What drove us off the gold standard was rash actions by a federal government backed into a corner. > if it was necessary break a system to prevent the collapse of an insolvent dollar, it is probably best not to attempt to recreate that state of economic affairs Well, that conclusion conflates the solution with the problem. For example, if you're in an airplane and you recklessly burn all your fuel because you were having fun going fast and have to eject and abandon your plane to crash, the solution is not "bring more fuel next time" nor "don't use planes anymore". The answer is don't be an idiot and reckelessly burn all your fuel. > If we agree that the Great Depression and Long Depression were examples of significant economic crises in addition to periodic smaller financial panics and forced devaluation I think I agree with that. I just don't agree that either of those depressions were caused because gold-backed currency isn't sound. In fact, before the Long Depression, we used gold backed currency. What caused the Long Depression was stupidly removing silver from the monetary supply very suddenly. That was an enormous shock to the economy that happened without enough warning. It was a monetary cliff, and cliffs are bad. Engineering transitions like that to be smooth and slow is the way to avoid that. And the Great Depression was caused because banks lent out too much money and since the Federal Reserve had driven out all the private clearing houses and refused to act as lender of last resort. Bank runs contracted the money supply by 33%. Not sure how much that is in comparison to the Long Depression, but its a lot regardless.
  - notahacker 5y ago
    > What drove us off the gold standard was rash actions by a federal government backed into a corner. What drove us off the gold standard was that the gold standard backed the government into a corner, yes. What drove essentially all macroeconomists to conclude that this was the correct one was new theory about why this had happened, the economic possibilities of this new theory, the new theory turning out to allowing finer control over price stability than the Gold Standard had ever done and the woeful quality of the analysis of the few economists still defending the gold standard. > For example, if you're in an airplane and you recklessly burn all your fuel because you were having fun going fast and have to eject and abandon your plane to crash, the solution is not "bring more fuel next time" nor "don't use planes anymore". "Bring more fuel" sounds like a much better solution to fuel-shortage induced aircraft accidents than slowing down to me, and I'm confident that aircraft investigators agree with me. Assuming that the real problem with running out of fuel isn't the quantity of fuel but that jets aren't limited to early 1900s speeds and engine technologies sounds like a pretty apt analogy for calls to return to a Gold Standard, actually... > What caused the Long Depression was stupidly removing silver from the monetary supply very suddenly. That was an enormous shock to the economy that happened without enough warning. It was a monetary cliff, and cliffs are bad. Engineering transitions like that to be smooth and slow is the way to avoid that. I think we can agree on that (though the reason it was removed is because the bimetallic standards with dollars redeemed in fixed quantities for commodities whose actual value ratio fluctuated were absurd). For related reasons, we decided monetary cliffs generated by metallic standards were worse than having an elastic monetary supply. The Great Depression was caused because the Fed could not print enough money to act as the lender of last resort. Again, a situation we seek to avoid by having the actual quantity of money determined by the amount of credit supplied and demanded by the market, rather than simply hoping gold reserves would automagically align with it.

dnautics 5y ago

Iirc our post gold standard crises have been nominally at least near as bad as the great depression. Of course we have much,much better infrastructure, healthcare, communication, etc, which economists tend not to take into account for how there aren't a starving people dying in the streets. None of that matters, it's all the stewardship of the fed.

billytetrud 5y ago
I'd love to see that analysis if you can find the source.

notahacker 5y ago

> It hasn't because its patently false. Both the gold confiscation in 1931 and cutting the cord of gold-backing in 1971 were both done as desparately rushed moves to reneg on the governments promise to uphold the value of the dollar. These weren't thoughtful reasoned well discussed actions. It had nothing to do with technology or best practices. It was a purely a politically expedient way to prevent collapse of an insolvent dollar. I take it you haven't read any mainstream macroeconomic analysis written over the course of the past century, the theory, analytical techniques and predictions which informs modern central banking practices. I have. It is certainly not patently false to suggest that there has been plenty of discussion and implementation of newer ideas, an enormous amount of focus on the dynamic of inflation, and the result is very few economists seeing any sense in the notion that the optimum quantity of money to support the growth of the United States happens to coincide with fluctuations in world gold output. But even aside from the actual theory and techniques, part of the knowledge base is simply concluding that if it was necessary break a system to prevent the collapse of an insolvent dollar, it is probably best not to attempt to recreate that state of economic affairs. > You don't run experiments in macroeconomics. Controls are impossible. And studies have so many confounding variables that any conclusions we come to are many orders of magnitude less certain than anything in the hard sciences. We agree it's not a hard science, and that natural experiments are very difficult (they are especially difficult when a proposal like "maybe we should try to ensure a particular USD aggregate stays at a certain level, and raise interest rates as high as necessary to keep it at that level" results in mass unemployment. When "maybe we should fix the interest rates instead" turns out to result in inflation remaining within predictable ranges for the next three decades, it is even harder to recommend the former policy). Similarly, if the Gold Standard fails to deliver the stability it promises, and then its vociferous minority of advocates promise hyperinflation is around the corner every year for decades without ever being right, new theories which accurately predict inflation take over. > I never said any such thing. I may have misunderstood you. If we agree that the Great Depression and Long Depression were examples of significant economic crises in addition to periodic smaller financial panics and forced devaluations, we agree. I see that as a pretty good indication our current financial crises are less worse, especially given our current policy framework gives us tools other than "wait it out" to ameliorate the suffering.

billytetrud 5y ago
> It is certainly not patently false to suggest that there has been plenty of discussion and implementation of newer ideas, an enormous amount of focus on the dynamic of inflation... Ok. I agree with all of that. And none of it contracts what I said, which was that modern economic knowledge did not "drive us away from gold backed dollars". What drove us off the gold standard was rash actions by a federal government backed into a corner. > if it was necessary break a system to prevent the collapse of an insolvent dollar, it is probably best not to attempt to recreate that state of economic affairs Well, that conclusion conflates the solution with the problem. For example, if you're in an airplane and you recklessly burn all your fuel because you were having fun going fast and have to eject and abandon your plane to crash, the solution is not "bring more fuel next time" nor "don't use planes anymore". The answer is don't be an idiot and reckelessly burn all your fuel. > If we agree that the Great Depression and Long Depression were examples of significant economic crises in addition to periodic smaller financial panics and forced devaluation I think I agree with that. I just don't agree that either of those depressions were caused because gold-backed currency isn't sound. In fact, before the Long Depression, we used gold backed currency. What caused the Long Depression was stupidly removing silver from the monetary supply very suddenly. That was an enormous shock to the economy that happened without enough warning. It was a monetary cliff, and cliffs are bad. Engineering transitions like that to be smooth and slow is the way to avoid that. And the Great Depression was caused because banks lent out too much money and since the Federal Reserve had driven out all the private clearing houses and refused to act as lender of last resort. Bank runs contracted the money supply by 33%. Not sure how much that is in comparison to the Long Depression, but its a lot regardless.
- notahacker 5y ago
  > What drove us off the gold standard was rash actions by a federal government backed into a corner. What drove us off the gold standard was that the gold standard backed the government into a corner, yes. What drove essentially all macroeconomists to conclude that this was the correct one was new theory about why this had happened, the economic possibilities of this new theory, the new theory turning out to allowing finer control over price stability than the Gold Standard had ever done and the woeful quality of the analysis of the few economists still defending the gold standard. > For example, if you're in an airplane and you recklessly burn all your fuel because you were having fun going fast and have to eject and abandon your plane to crash, the solution is not "bring more fuel next time" nor "don't use planes anymore". "Bring more fuel" sounds like a much better solution to fuel-shortage induced aircraft accidents than slowing down to me, and I'm confident that aircraft investigators agree with me. Assuming that the real problem with running out of fuel isn't the quantity of fuel but that jets aren't limited to early 1900s speeds and engine technologies sounds like a pretty apt analogy for calls to return to a Gold Standard, actually... > What caused the Long Depression was stupidly removing silver from the monetary supply very suddenly. That was an enormous shock to the economy that happened without enough warning. It was a monetary cliff, and cliffs are bad. Engineering transitions like that to be smooth and slow is the way to avoid that. I think we can agree on that (though the reason it was removed is because the bimetallic standards with dollars redeemed in fixed quantities for commodities whose actual value ratio fluctuated were absurd). For related reasons, we decided monetary cliffs generated by metallic standards were worse than having an elastic monetary supply. The Great Depression was caused because the Fed could not print enough money to act as the lender of last resort. Again, a situation we seek to avoid by having the actual quantity of money determined by the amount of credit supplied and demanded by the market, rather than simply hoping gold reserves would automagically align with it.