6 ms·

I honestly don't understand the obsession some people have with the gold standard. Even when the US had the gold standard, the US never had gold reserves that m

by cletus 5y ago

I honestly don't understand the obsession some people have with the gold standard. Even when the US had the gold standard, the US never had gold reserves that matched the dollars in circulation. Not once. Ever. Also, the gold standard doesn't stop sovereign devaluation as happened by FDR in the 30s. Historically gold existed as a currency because it had some useful properties: 1. Unusual appearance; 2. Relatively scarce; 3. Inert; 4. Fungible; and 5. (This is a big one) Density. Up until the modern times it was the densest material someone could be expected to have (eg Iridium, which is denser, wasn't common in the Middle Ages). Why does this matter? Counterfeit currency, as was a problem with anything based on silver. Currencies only have value because people give them value. There's a lot here but this jumped out at me: > The Germans fell into a policy of financial excess, ending in hyperinflation. Their experience was considered one of the object lessons proving the value of the gold standard. No mention of the Treaty of Versailles here. Germany was forced to pay war reparations. Those were denominated in deutschmarks. Hyperinflation actually "solved" Germany's reparation debt problem. In a way, Germany was incentivized for hyperinflation. The importance of that cannot be overstated.

1-6 5y ago
Question: Has anyone ever been to or seen the gold at Fort Knox?
dnautics 5y ago
you forgot verifiable. you don't need advanced technology (not much more than a black rock) to get a good estimate of the purity of gold which can be used as a neutral negotiating point in an exchange. Due to its relativistic quantum mechanical properties, gold lowers the activation barrier of creating trust between two parties.
- truculent 5y ago
  Isn’t this just the density point restated?
  - dnautics 5y ago
    I suppose you could use archimedes principle in its original form to verify density of gold, sure, but I think GP was referring to transportability. If anything it's to do with #1. But calling it "unusual" makes it seem like it's just a human whim and human subjective standards of desire that make it valuable, where it's very important to be explicit that there is an intrinsic property of gold that gives it subjective utility beyond mere preferences.
    - Kbelicius 5y ago
      > I suppose you could use archimedes principle in its original form to verify density of gold, sure, but I think GP was referring to transportability. Under 5. point, the one about density, GP wrote: "(This is a big one) Density[...] Why does this matter? Counterfeit currency, as was a problem with anything based on silver.". What made you think that he was talking about transportability there?
      - dnautics 5y ago
        ok fair. I didn't fully understand the point and wasn't aware that gold was, say, denser than lead. (not a metallurgist, just a biochemist), and I was fixated on the deficiency of point #1. Thanks for pointing it out. In either case, verifability of gold is thus a product of TWO easily assessed properties, not just one.
desine 5y ago
>Even when the US had the gold standard, the US never had gold reserves that matched the dollars in circulation. The US Dollar is/was originally defined as a measurement of silver, and based upon the Spanish Real - the same coin you hear in piratey accents as a "piece of eight" because it was usually cut into 8 pieces to make change. The US absolutely had metal to back every dollar in existence for about 100 years, though it wasn't gold. The real "gold standard" era was a stopover/band-aid effect of the growing disparity in value due to bimetallism, and came into effect after "The Crime of 1873".
rat87 5y ago
I believe German reparations were shielded/unaffected from inflation. The allies were smarter then that. Germany did get a pause in reparations payments when hyperinflation drove their economy to possible collapse which led to reparations being paused then cancelled. They paid 16% of the reparations agreed to. Then after WW2 they agreed to pay half of the rest. German hyperinflation was useful for getting rid of internal debts that the government of Germany had borrowed from it's citizens during the war. It also led to collapse of pensions
- imtringued 5y ago
  USD were gold backed. Paying USD debts is the same thing as letting gold flow out of the country. If you believe gold is everything, then simply by having less gold the German currency becomes worth less. If Germany has no gold then the currency becomes worthless (=$0).
- wahern 5y ago
  > I believe German reparations were shielded/unaffected from inflation It was all much more complicated than that. Hyperinflation wasn't intended as a simplistic way to repay reparations. It had a number of motivations. For one thing, Germany also had alot of private debt outstanding. And from the perspective of the exacerbated Allies, the most important motivation behind hyperinflation was to drive the Allies back to the negotiating table; which it did. Except the renegotiations proved a mixed bag for Germany, giving them enough breathing space to standup their economy (not long after hyperinflation, Germany had a surfeit of foreign investments), but nonetheless leaving the political albatross of reparations in place. The basic point is that Germany didn't naively step into hyperinflation. For the most part it was strategic and temporary--it only lasted a few years, after all.
- AniseAbyss 5y ago
  Except pensions for the SS. They payed those until well into the 1990s.
andrewla 5y ago
> the US never had gold reserves that matched the dollars in circulation. Not once. Ever. This cuts both ways. Proponents of "sound money" and the gold standard ignore this unwinding of the relationship. So pointing to the roaring 20s or the economic booms of the late 19th century as evidence of the power of sound money really say nothing of the sort. Proponents of the "gold standard caused the Great Depression" also ignore that this relationship was tenuous at best. This article is typical of that mindset -- it wasn't the gold standard per se, but it was gold-standard-era-thinking that caused the Great Depression. The only people who are offering a coherent story here are the MMTers who really take a look at the role of the state (and, probably more importantly, the law) in the story of money. While I disagree with many of the policy proposals from MMT proponents, I think that view is descriptively accurate for the most part. Where I think they fall short (and I am working hard to challenge my own views here) is in their picture of inflation, which I feel is very incomplete.
- tehjoker 5y ago
  It's worth noting that MMT is related to chartalism. I found Debt: The First 5000 Years very persuasive, though I only got about 1/4 the way though so far. https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years
  - andrepd 5y ago
    Thanks, you have reminded me I need to finish that book ahaha.
    - spiralx 5y ago
      Oh good I'm glad I'm not the only one who has started it and not managed to get through the whole thing in one go. It's very good, but very dense. I should also finish reading it at some point...
- imtringued 5y ago
  > I think that view is descriptively accurate for the most part. Where I think they fall short (and I am working hard to challenge my own views here) is in their picture of inflation, which I feel is very incomplete. The real economy has a surplus of X amount of real resources. You use the resources and are better off than not using the resources.
brazzy 5y ago
> Germany was forced to pay war reparations. Those were denominated in deutschmarks. This is not true. Reparations had to be paid in Goldmarks, foreign currencies, and commodities. But inflation was used to meet the state's other expenses, including paper mark-denominated war bonds.
throw0101a 5y ago
> In a way, Germany was incentivized for hyperinflation. The importance of that cannot be overstated. If you look at the major examples of hyperinflation, the majority fall into three buckets: * Losing a war that results in money printing to fund the effort. * Large foreign denominated debts that require domestic money printing. * Regime changes generally coinciding with civil war or social upheaval. See Roche (2011): * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1799102 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1799102
- imtringued 5y ago
  Add economic sanctions (Venezuela) and intentional destruction of food production (Zimbabwe) to that list.
  - throw0101a 5y ago
    > Zimbabwe A quick history: * https://clintballinger.com/2020/04/30/airplane-crashes-arent-hyperlandings-notes-on-zimbabwe/ https://clintballinger.com/2020/04/30/airplane-crashes-arent... Another example of not bothering with the context of the situation: > I am dismayed by the way writers insist on reporting the collapse of a currency as a “monthly inflation rate” with some ridiculous figure associated that helps a normal person not-at-all understand anything (e.g., Yugoslavia in 1992-94: highest monthly inflation rate = 313,000,000%!!!!) > They had a war. Their government collapsed. They couldn’t tax. They couldn’t produce. Their currency collapsed. The idea that “313,000,000%” tells us anything of interest is ridiculous. A few newspaper headlines on peace treaties, troop movements, famine, reconstruction—literally anything— would be infinitely more informing. * https://clintballinger.com/2021/01/12/the-myth-of-hyperinflation/ https://clintballinger.com/2021/01/12/the-myth-of-hyperinfla...
deleted 5y ago
[deleted]
caeril 5y ago
You forgot the most important one, which is, has been, and always will be: 6. The inability for a central bank to print gold. I understand the various arguments for fiat money in advanced economies, and many of them make sense, but the one thing that should stop everyone from advocacy of CB-printed fiat is the Cantillion Effect [1]. Any system in which the first-at-the trough benefit exclusively to the detriment of those last-at-the-trough is prima-facie wrong. It causes MORE inequality than any tax structure, redistribution plan, or Elysium-style Capitalist dystopia you could ever dream of. If you advocate for management of money supply by printing of fiat, that's not necessarily bad. But there are no Bernanke-style helicopters coming to distribute it fairly or evenly. It's always: Blackrock and Citadel first, you twenty-third. And that's not a system of money supply management that's even remotely just. Until the Federal Reserve stops handing free money to Larry Fink that may eventually get to me, much too late, at money velocity cycle #18, whilst publishing press releases bemoaning THE VERY INEQUALITY THEY CREATE, I'm going to stack gold and cryptocurrencies. I have no interest in their lies, and you shouldn't either. [1] https://en.wikipedia.org/wiki/Richard_Cantillon#Monetary_theory https://en.wikipedia.org/wiki/Richard_Cantillon#Monetary_the...
- imtringued 5y ago
  Okay but have you wondered about what will happen if Blackrock buys more Bitcoin than you do?
  - razius 5y ago
    And from where do they get the money to buy the bitcoin?

by cletus 5y ago

1-6 5y ago

Question: Has anyone ever been to or seen the gold at Fort Knox?

dnautics 5y ago

you forgot verifiable. you don't need advanced technology (not much more than a black rock) to get a good estimate of the purity of gold which can be used as a neutral negotiating point in an exchange. Due to its relativistic quantum mechanical properties, gold lowers the activation barrier of creating trust between two parties.

truculent 5y ago
Isn’t this just the density point restated?
- dnautics 5y ago
  I suppose you could use archimedes principle in its original form to verify density of gold, sure, but I think GP was referring to transportability. If anything it's to do with #1. But calling it "unusual" makes it seem like it's just a human whim and human subjective standards of desire that make it valuable, where it's very important to be explicit that there is an intrinsic property of gold that gives it subjective utility beyond mere preferences.
  - Kbelicius 5y ago
    > I suppose you could use archimedes principle in its original form to verify density of gold, sure, but I think GP was referring to transportability. Under 5. point, the one about density, GP wrote: "(This is a big one) Density[...] Why does this matter? Counterfeit currency, as was a problem with anything based on silver.". What made you think that he was talking about transportability there?
    - dnautics 5y ago
      ok fair. I didn't fully understand the point and wasn't aware that gold was, say, denser than lead. (not a metallurgist, just a biochemist), and I was fixated on the deficiency of point #1. Thanks for pointing it out. In either case, verifability of gold is thus a product of TWO easily assessed properties, not just one.

desine 5y ago

>Even when the US had the gold standard, the US never had gold reserves that matched the dollars in circulation. The US Dollar is/was originally defined as a measurement of silver, and based upon the Spanish Real - the same coin you hear in piratey accents as a "piece of eight" because it was usually cut into 8 pieces to make change. The US absolutely had metal to back every dollar in existence for about 100 years, though it wasn't gold. The real "gold standard" era was a stopover/band-aid effect of the growing disparity in value due to bimetallism, and came into effect after "The Crime of 1873".

rat87 5y ago

I believe German reparations were shielded/unaffected from inflation. The allies were smarter then that. Germany did get a pause in reparations payments when hyperinflation drove their economy to possible collapse which led to reparations being paused then cancelled. They paid 16% of the reparations agreed to. Then after WW2 they agreed to pay half of the rest. German hyperinflation was useful for getting rid of internal debts that the government of Germany had borrowed from it's citizens during the war. It also led to collapse of pensions

imtringued 5y ago
USD were gold backed. Paying USD debts is the same thing as letting gold flow out of the country. If you believe gold is everything, then simply by having less gold the German currency becomes worth less. If Germany has no gold then the currency becomes worthless (=$0).
wahern 5y ago
> I believe German reparations were shielded/unaffected from inflation It was all much more complicated than that. Hyperinflation wasn't intended as a simplistic way to repay reparations. It had a number of motivations. For one thing, Germany also had alot of private debt outstanding. And from the perspective of the exacerbated Allies, the most important motivation behind hyperinflation was to drive the Allies back to the negotiating table; which it did. Except the renegotiations proved a mixed bag for Germany, giving them enough breathing space to standup their economy (not long after hyperinflation, Germany had a surfeit of foreign investments), but nonetheless leaving the political albatross of reparations in place. The basic point is that Germany didn't naively step into hyperinflation. For the most part it was strategic and temporary--it only lasted a few years, after all.
AniseAbyss 5y ago
Except pensions for the SS. They payed those until well into the 1990s.

andrewla 5y ago

> the US never had gold reserves that matched the dollars in circulation. Not once. Ever. This cuts both ways. Proponents of "sound money" and the gold standard ignore this unwinding of the relationship. So pointing to the roaring 20s or the economic booms of the late 19th century as evidence of the power of sound money really say nothing of the sort. Proponents of the "gold standard caused the Great Depression" also ignore that this relationship was tenuous at best. This article is typical of that mindset -- it wasn't the gold standard per se, but it was gold-standard-era-thinking that caused the Great Depression. The only people who are offering a coherent story here are the MMTers who really take a look at the role of the state (and, probably more importantly, the law) in the story of money. While I disagree with many of the policy proposals from MMT proponents, I think that view is descriptively accurate for the most part. Where I think they fall short (and I am working hard to challenge my own views here) is in their picture of inflation, which I feel is very incomplete.

tehjoker 5y ago
It's worth noting that MMT is related to chartalism. I found Debt: The First 5000 Years very persuasive, though I only got about 1/4 the way though so far. https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years
- andrepd 5y ago
  Thanks, you have reminded me I need to finish that book ahaha.
  - spiralx 5y ago
    Oh good I'm glad I'm not the only one who has started it and not managed to get through the whole thing in one go. It's very good, but very dense. I should also finish reading it at some point...
imtringued 5y ago
> I think that view is descriptively accurate for the most part. Where I think they fall short (and I am working hard to challenge my own views here) is in their picture of inflation, which I feel is very incomplete. The real economy has a surplus of X amount of real resources. You use the resources and are better off than not using the resources.

brazzy 5y ago

> Germany was forced to pay war reparations. Those were denominated in deutschmarks. This is not true. Reparations had to be paid in Goldmarks, foreign currencies, and commodities. But inflation was used to meet the state's other expenses, including paper mark-denominated war bonds.

throw0101a 5y ago

> In a way, Germany was incentivized for hyperinflation. The importance of that cannot be overstated. If you look at the major examples of hyperinflation, the majority fall into three buckets: * Losing a war that results in money printing to fund the effort. * Large foreign denominated debts that require domestic money printing. * Regime changes generally coinciding with civil war or social upheaval. See Roche (2011): * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1799102 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1799102

imtringued 5y ago
Add economic sanctions (Venezuela) and intentional destruction of food production (Zimbabwe) to that list.
- throw0101a 5y ago
  > Zimbabwe A quick history: * https://clintballinger.com/2020/04/30/airplane-crashes-arent-hyperlandings-notes-on-zimbabwe/ https://clintballinger.com/2020/04/30/airplane-crashes-arent... Another example of not bothering with the context of the situation: > I am dismayed by the way writers insist on reporting the collapse of a currency as a “monthly inflation rate” with some ridiculous figure associated that helps a normal person not-at-all understand anything (e.g., Yugoslavia in 1992-94: highest monthly inflation rate = 313,000,000%!!!!) > They had a war. Their government collapsed. They couldn’t tax. They couldn’t produce. Their currency collapsed. The idea that “313,000,000%” tells us anything of interest is ridiculous. A few newspaper headlines on peace treaties, troop movements, famine, reconstruction—literally anything— would be infinitely more informing. * https://clintballinger.com/2021/01/12/the-myth-of-hyperinflation/ https://clintballinger.com/2021/01/12/the-myth-of-hyperinfla...

deleted 5y ago

[deleted]

caeril 5y ago

You forgot the most important one, which is, has been, and always will be: 6. The inability for a central bank to print gold. I understand the various arguments for fiat money in advanced economies, and many of them make sense, but the one thing that should stop everyone from advocacy of CB-printed fiat is the Cantillion Effect [1]. Any system in which the first-at-the trough benefit exclusively to the detriment of those last-at-the-trough is prima-facie wrong. It causes MORE inequality than any tax structure, redistribution plan, or Elysium-style Capitalist dystopia you could ever dream of. If you advocate for management of money supply by printing of fiat, that's not necessarily bad. But there are no Bernanke-style helicopters coming to distribute it fairly or evenly. It's always: Blackrock and Citadel first, you twenty-third. And that's not a system of money supply management that's even remotely just. Until the Federal Reserve stops handing free money to Larry Fink that may eventually get to me, much too late, at money velocity cycle #18, whilst publishing press releases bemoaning THE VERY INEQUALITY THEY CREATE, I'm going to stack gold and cryptocurrencies. I have no interest in their lies, and you shouldn't either. [1] https://en.wikipedia.org/wiki/Richard_Cantillon#Monetary_theory https://en.wikipedia.org/wiki/Richard_Cantillon#Monetary_the...

imtringued 5y ago
Okay but have you wondered about what will happen if Blackrock buys more Bitcoin than you do?
- razius 5y ago
  And from where do they get the money to buy the bitcoin?