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Please provide examples tying the gold standard to boom bust cycle frequency. Boom and bust in the 1800s was largely isolated to locations undergoing new devel

Please provide examples tying the gold standard to boom bust cycle frequency. Boom and bust in the 1800s was largely isolated to locations undergoing new development for resource utilization. People moved in to take advantage of plentiful resources. When the resources were depleted the town went bust. Because of westward expansion there were many new resources to take advantage of. The frequency of boom bust in the 1800s had nothing to do with the gold standard. We had a boom period with fracking recently. People and businesses rushed to get a piece of the action. The majority of those people are going to leave and take their money with them causing a localized bust. Boom bust cycles are not related to a gold standard existing or not. However, with fiat currency, boom bust cycles can apply to the entire national economy, not just one location.

dragontamer 5y ago
> Please provide examples tying the gold standard to boom bust cycle frequency. The Great Depression 1929 (Gold was so blamed for this depression, that Roosevelt made it illegal to hold more than a few ounces of gold to "solve" the depression). Moving further back: The Panic of 1873 (which eradicated the Silver standard). Panic of 1893 was also tied to a gold-panic. Black Friday (1869) was another gold-related panic, but luckily the US wasn't on the Gold Standard at that time.
- tastyfreeze 5y ago
  Thank you for the examples. But, none of those examples illustrate your point that boom bust cycles were more frequent with a gold standard or even related to a gold standard. All of those examples resulted from government meddling in the economy. Black Friday 1869 - This one is funny. A return to a gold standard to restore the economy and pay off Civil War debt combined with a conspiracy of a few individuals to corner the gold market. (https://en.wikipedia.org/wiki/Black_Friday_(1869)#History https://en.wikipedia.org/wiki/Black_Friday_(1869)#History) Panic of 1873 - result of government subsidizing railroad expansion that speculators jumped on to make a buck (https://en.wikipedia.org/wiki/Panic_of_1873#Factors https://en.wikipedia.org/wiki/Panic_of_1873#Factors) Panic of 1893 - The economic policies of President Benjamin Harrison have been characterized as a contributing factor to the depression. (https://en.wikipedia.org/wiki/Panic_of_1893#Causes https://en.wikipedia.org/wiki/Panic_of_1893#Causes) Great Depression 1929 - Many hypothesis of cause. One of which is the 1920s expansion of money supply and 1928 contraction of money supply. (https://en.wikipedia.org/wiki/Great_Depression#Causes https://en.wikipedia.org/wiki/Great_Depression#Causes) In all of these cases people were trying to get out of paper and into gold to protect their wealth. That is until Roosevelt used the 1929 Depression as an excuse to steal the wealth of Americans.
  - dragontamer 5y ago
    Yes. But all of them have a few common factors. Noticeably: the Bank Run, which simply doesn't happen anymore under our current standards of money. Practically speaking, we've solved the traditional bankrun problem. The issue with Gold is that it is inflexible. Banks will take it upon themselves to expand the monetary supply (see how Tether, USDC, and other cryptocoins are expanding the supply of cryptocoins in the BTC market). You don't need a government to inflate the money supply: the market actors will do that on their own. Remember that "Bank Notes" in the 1800s were non-centralized and issued by individual banks (ex: "Canal Bank 5 Dollars") For you to blame the government for what the market does naturally is... a mistake. Banks will be banks: they'll hold money, they will reserve some, and try to turn that money into more money by lending it out to other parties. When done with physical Gold, everything collapses during a crisis. When done with fiat, we have the ability to control the money supply as needed, to soften the blow of the crisis. --------- These bank-runs of the 1800s and early 1900s on the Gold Standard (or Bimetal standard: gold + silver) were both solved by the same mechanism. The modern fiat money system and fractional reserve banking (where banks are regulated to only do this re-lending thing to levels we can keep track of).
    - tastyfreeze 5y ago
      You are changing targets from a claim that a gold standard made boom bust cycles more frequent to a gold standard causes collapse during crisis. The benefit of gold is that it is inflexible. To expand the monetary supply more gold is required, or debt against the stock of gold is taken on. There is a limit to the amount of expansion that can happen with a gold standard. That is a good thing. It protects the wealth of people from inflationary policies of government. With fiat we have a dollar that purchases 1/21st of what it did in 1933. Banks will be banks but they also want to keep customers and stay in business. A single bank failing due to their bad practices is preferable to an entire nation failing for the same reasons. I maintain that government is the cause of these crisis. All businesses, including banks, operate in an environment created by government. When the government removes the risk of a market with subsidies or easy credit, businesses and banks make riskier investments. When those risky businesses and loans fail a bust happens. Can this happen without government? Sure, but the scope is limited. Fractional reserve banking causes collapse during a bank run crisis. When all depositors come to collect their money the bank just doesn't have it. It doesn't matter what the base money is. Had full reserve banking been practiced a bank run would not ever have been an issue.

dragontamer 5y ago

> Please provide examples tying the gold standard to boom bust cycle frequency. The Great Depression 1929 (Gold was so blamed for this depression, that Roosevelt made it illegal to hold more than a few ounces of gold to "solve" the depression). Moving further back: The Panic of 1873 (which eradicated the Silver standard). Panic of 1893 was also tied to a gold-panic. Black Friday (1869) was another gold-related panic, but luckily the US wasn't on the Gold Standard at that time.

tastyfreeze 5y ago
Thank you for the examples. But, none of those examples illustrate your point that boom bust cycles were more frequent with a gold standard or even related to a gold standard. All of those examples resulted from government meddling in the economy. Black Friday 1869 - This one is funny. A return to a gold standard to restore the economy and pay off Civil War debt combined with a conspiracy of a few individuals to corner the gold market. (https://en.wikipedia.org/wiki/Black_Friday_(1869)#History https://en.wikipedia.org/wiki/Black_Friday_(1869)#History) Panic of 1873 - result of government subsidizing railroad expansion that speculators jumped on to make a buck (https://en.wikipedia.org/wiki/Panic_of_1873#Factors https://en.wikipedia.org/wiki/Panic_of_1873#Factors) Panic of 1893 - The economic policies of President Benjamin Harrison have been characterized as a contributing factor to the depression. (https://en.wikipedia.org/wiki/Panic_of_1893#Causes https://en.wikipedia.org/wiki/Panic_of_1893#Causes) Great Depression 1929 - Many hypothesis of cause. One of which is the 1920s expansion of money supply and 1928 contraction of money supply. (https://en.wikipedia.org/wiki/Great_Depression#Causes https://en.wikipedia.org/wiki/Great_Depression#Causes) In all of these cases people were trying to get out of paper and into gold to protect their wealth. That is until Roosevelt used the 1929 Depression as an excuse to steal the wealth of Americans.
- dragontamer 5y ago
  Yes. But all of them have a few common factors. Noticeably: the Bank Run, which simply doesn't happen anymore under our current standards of money. Practically speaking, we've solved the traditional bankrun problem. The issue with Gold is that it is inflexible. Banks will take it upon themselves to expand the monetary supply (see how Tether, USDC, and other cryptocoins are expanding the supply of cryptocoins in the BTC market). You don't need a government to inflate the money supply: the market actors will do that on their own. Remember that "Bank Notes" in the 1800s were non-centralized and issued by individual banks (ex: "Canal Bank 5 Dollars") For you to blame the government for what the market does naturally is... a mistake. Banks will be banks: they'll hold money, they will reserve some, and try to turn that money into more money by lending it out to other parties. When done with physical Gold, everything collapses during a crisis. When done with fiat, we have the ability to control the money supply as needed, to soften the blow of the crisis. --------- These bank-runs of the 1800s and early 1900s on the Gold Standard (or Bimetal standard: gold + silver) were both solved by the same mechanism. The modern fiat money system and fractional reserve banking (where banks are regulated to only do this re-lending thing to levels we can keep track of).
  - tastyfreeze 5y ago
    You are changing targets from a claim that a gold standard made boom bust cycles more frequent to a gold standard causes collapse during crisis. The benefit of gold is that it is inflexible. To expand the monetary supply more gold is required, or debt against the stock of gold is taken on. There is a limit to the amount of expansion that can happen with a gold standard. That is a good thing. It protects the wealth of people from inflationary policies of government. With fiat we have a dollar that purchases 1/21st of what it did in 1933. Banks will be banks but they also want to keep customers and stay in business. A single bank failing due to their bad practices is preferable to an entire nation failing for the same reasons. I maintain that government is the cause of these crisis. All businesses, including banks, operate in an environment created by government. When the government removes the risk of a market with subsidies or easy credit, businesses and banks make riskier investments. When those risky businesses and loans fail a bust happens. Can this happen without government? Sure, but the scope is limited. Fractional reserve banking causes collapse during a bank run crisis. When all depositors come to collect their money the bank just doesn't have it. It doesn't matter what the base money is. Had full reserve banking been practiced a bank run would not ever have been an issue.