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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

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

> 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.