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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

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
    > There is a limit to the amount of expansion that can happen with a gold standard. This is wrong. Banks can issue bank notes that on paper say that they're worth gold, but are in actually just banknotes. This expands the monetary supply (or shrinks it, when the reverse happens like in 1929). I don't see how there's any limit what so ever (today: this still happens with stocks like AMC: who are continuing to print AMC stocks and raise money as much as they want) > 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. Not for the town that Bank was part of. And when many small banks fail at the same time (such as in these historical "panics" from the 1800s or early 1900s), you have a nationwide depression. Just because they're small doesn't remove the fact that they're correlated. Indeed, greater economic trends continue to affect small banks: causing all of them to surprisingly panic simultaneously across large sections of the country. Again: 1929 disproves your thesis entirely. The US banking system wasn't a single entity back then. Lots and lots of little banks failed simultaneously. That's why we invented FDIC insurance. https://en.wikipedia.org/wiki/Bank_of_United_States https://en.wikipedia.org/wiki/Bank_of_United_States Note: Bank of United States was a private bank / company. Its collapse was one of the biggest, kicking off the Great Depression.

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
  > There is a limit to the amount of expansion that can happen with a gold standard. This is wrong. Banks can issue bank notes that on paper say that they're worth gold, but are in actually just banknotes. This expands the monetary supply (or shrinks it, when the reverse happens like in 1929). I don't see how there's any limit what so ever (today: this still happens with stocks like AMC: who are continuing to print AMC stocks and raise money as much as they want) > 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. Not for the town that Bank was part of. And when many small banks fail at the same time (such as in these historical "panics" from the 1800s or early 1900s), you have a nationwide depression. Just because they're small doesn't remove the fact that they're correlated. Indeed, greater economic trends continue to affect small banks: causing all of them to surprisingly panic simultaneously across large sections of the country. Again: 1929 disproves your thesis entirely. The US banking system wasn't a single entity back then. Lots and lots of little banks failed simultaneously. That's why we invented FDIC insurance. https://en.wikipedia.org/wiki/Bank_of_United_States https://en.wikipedia.org/wiki/Bank_of_United_States Note: Bank of United States was a private bank / company. Its collapse was one of the biggest, kicking off the Great Depression.