3 ms·

I broadly agree with the author on Bitcoin, but I do not agree on what was said about the gold standard being bad. On August 15, 1971, Nixon removed the gold s

I broadly agree with the author on Bitcoin, but I do not agree on what was said about the gold standard being bad. On August 15, 1971, Nixon removed the gold standard from the US dollar. Using unilateral government power, he managed to stop the system from completely imploding from shock. But...then what were the long-term effects? One of my favorite websites (except for language) is "What the ** Happened in 1971?" [1] It's a series of charts showing how until 1971, economic growth for everyone was about the same, including the poorest of society. After 1971, only the richest were seeing gains. So what happened? I'll tell you what happened: our currency was changed from the gold standard to a free-floating currency. The rich were able to invest in other things, like land and capital, but the rest of us had our savings wiped out. We also did not continue see the income gains that we had been getting up to that point. [1]: https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/ Edit: Added a mention about income gains that I forgot.

pjc50 5y ago
That set of charts refers to income (a flow) not savings (a stock).
- ghoward 5y ago
  I forgot to also mention income, but the last charts I looked at were about inflation, which wipes out savings.
api 5y ago
I'm not saying you're wrong. The way new money is distributed (via banks) definitely favors the rich, as does inflation assuming there is not sufficient upward pressure on wages for them to keep up. But I also always have to point out that a lot of things happened in the early 1970s: - We opened a lot of avenues for labor outsourcing and starting importing more finished goods. - Factory and office automation started ramping up as the information revolution really began. - The 1970s saw the beginning of the trend toward "neoliberal" style economics with lower taxes on the rich and less investment in social and infrastructure programs. - The Kennedy assassination, many other somewhat suspicious assassinations, the Vietnam war, etc. all started a process of erosion of public trust in US institutions. - Women joined the work force in droves. I completely support womens' right to do this, but I also have to point out the completely amoral mathematical supply and demand implications for the cost of labor. More minorities joining the workforce also counts. You could say that prior to this era racism and sexism created a white male labor cartel and that this cartel was broken. - Unions really started to get broken in the 1970s and have never really come back. I could keep going... IMHO most large scale social and economic movements have more than one cause. Back to inflation though, it's possible that inflationary economics became more harmful to the middle class when combined with the things above as many of the factors I listed made it hard for wages to keep up with inflation.
- ghoward 5y ago
  I do broadly agree with you. However, all of those things are things that happen over time (except assasination, and Kennedy's assassination happened 8 years before), which does not explain the obvious inflection point in those graphs. I honestly think that some of those things may have been caused by the removal of the gold standard, especially neoliberal economics. (Obviously, things like minorities and women's rights probably not so much; those things were already happening.) So yes, you are right that those things also changed, but what caused what?
  - api 5y ago
    Thing is in a closed system that is steady in other ways, wages should keep up with inflation. It would be interesting to graph inflation adjusted wages per capita ignoring employment rates to test whether increased women or minority participation in the workforce explains the lag of wages behind inflation. Once again I have to point out that supply and demand economics are as amoral and apolitical as physics. Don't read any opinion commentary into that. There is talk of labor shortages now and employers are being forced to increase wages. If workforce equality is a major explanation then maybe the change in employment demographics has played itself out and now wages will start keeping up a little better. Maybe. Or maybe more jobs will get replaced by robots and industry in other countries. Any remaining gap is probably attributable to outsourcing. What I do wonder is whether the decoupling of the dollar from gold and consequent monetary inflation masked the effects of all the other things I mentioned enough that we could impoverish the middle class without people rioting in the streets. If we'd stayed on gold people would have seen their paychecks decline in both nominal and real terms.
- bko 5y ago
  > - The 1970s saw the beginning of the trend toward "neoliberal" style economics with lower taxes on the rich and less investment in social and infrastructure programs. Federal, state and local expenditures and tax receipts as a percentage of GDP has increased since 1970s [0] Public infrastructure spending is roughly flat as percentage of GDP [1] [0] https://en.wikipedia.org/wiki/Government_spending_in_the_United_States#/media/File:Government_Revenue_and_spending_GDP.png https://en.wikipedia.org/wiki/Government_spending_in_the_Uni... [1] https://www.hamiltonproject.org/charts/public_infrastructure_spending_1956_to_2014 https://www.hamiltonproject.org/charts/public_infrastructure...
BenoitEssiambre 5y ago
I want to offer an, hopefully intuitive enough, alternative to this line of reasoning. To me the aspects that make cryptocoins behave a bit like a gold standards is what makes them scary and dangerous: https://benoitessiambre.com/specter.html https://benoitessiambre.com/specter.html https://medium.com/@b.essiambre/the-world-deserves-a-pay-raise-302f25efd82a?source=friends_link&sk=cb180b2cf186b263b6c6c70ad29bc36e https://medium.com/@b.essiambre/the-world-deserves-a-pay-rai...
throw0101a 5y ago
> I broadly agree with the author on Bitcoin, but I do not agree on what was said about the gold standard being bad. The gold standard is/was bad. It could help turn economic downturns in things like the Great Depression: * https://www.nber.org/books-and-chapters/financial-markets-and-financial-crises/gold-standard-deflation-and-financial-crisis-great-depression-international-comparison https://www.nber.org/books-and-chapters/financial-markets-an... And it does little/nothing to help economic stability, as measured by things like the CPI: * https://www.theatlantic.com/business/archive/2012/08/why-the-gold-standard-is-the-worlds-worst-economic-idea-in-2-charts/261552/ https://www.theatlantic.com/business/archive/2012/08/why-the... * https://archive.md/FWKcL https://archive.md/FWKcL And when it's not doing much for stability, shortages can actually stunt economic growth: * https://en.wikipedia.org/wiki/Great_Bullion_Famine https://en.wikipedia.org/wiki/Great_Bullion_Famine Further, adherence to the gold standard also tends to lend itself to austerity which leads to economic suffering (e.g., deflation) which has often people to more extreme politics: * https://www.nber.org/papers/w24106 https://www.nber.org/papers/w24106 * https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Dangerous_Idea https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Da... For all of its problems, the current credit-based monetary system is better than past systems. For a (popular) history of money through the ages: * https://bookshop.org/books/money-the-true-story-of-a-made-up-thing/9780316417198 https://bookshop.org/books/money-the-true-story-of-a-made-up...
muddi900 5y ago
The gold standard was really abandoned by Rosevelt. He untethered the dollars value to a fix mass of gold.

pjc50 5y ago

That set of charts refers to income (a flow) not savings (a stock).

ghoward 5y ago
I forgot to also mention income, but the last charts I looked at were about inflation, which wipes out savings.

api 5y ago

I'm not saying you're wrong. The way new money is distributed (via banks) definitely favors the rich, as does inflation assuming there is not sufficient upward pressure on wages for them to keep up. But I also always have to point out that a lot of things happened in the early 1970s: - We opened a lot of avenues for labor outsourcing and starting importing more finished goods. - Factory and office automation started ramping up as the information revolution really began. - The 1970s saw the beginning of the trend toward "neoliberal" style economics with lower taxes on the rich and less investment in social and infrastructure programs. - The Kennedy assassination, many other somewhat suspicious assassinations, the Vietnam war, etc. all started a process of erosion of public trust in US institutions. - Women joined the work force in droves. I completely support womens' right to do this, but I also have to point out the completely amoral mathematical supply and demand implications for the cost of labor. More minorities joining the workforce also counts. You could say that prior to this era racism and sexism created a white male labor cartel and that this cartel was broken. - Unions really started to get broken in the 1970s and have never really come back. I could keep going... IMHO most large scale social and economic movements have more than one cause. Back to inflation though, it's possible that inflationary economics became more harmful to the middle class when combined with the things above as many of the factors I listed made it hard for wages to keep up with inflation.

ghoward 5y ago
I do broadly agree with you. However, all of those things are things that happen over time (except assasination, and Kennedy's assassination happened 8 years before), which does not explain the obvious inflection point in those graphs. I honestly think that some of those things may have been caused by the removal of the gold standard, especially neoliberal economics. (Obviously, things like minorities and women's rights probably not so much; those things were already happening.) So yes, you are right that those things also changed, but what caused what?
- api 5y ago
  Thing is in a closed system that is steady in other ways, wages should keep up with inflation. It would be interesting to graph inflation adjusted wages per capita ignoring employment rates to test whether increased women or minority participation in the workforce explains the lag of wages behind inflation. Once again I have to point out that supply and demand economics are as amoral and apolitical as physics. Don't read any opinion commentary into that. There is talk of labor shortages now and employers are being forced to increase wages. If workforce equality is a major explanation then maybe the change in employment demographics has played itself out and now wages will start keeping up a little better. Maybe. Or maybe more jobs will get replaced by robots and industry in other countries. Any remaining gap is probably attributable to outsourcing. What I do wonder is whether the decoupling of the dollar from gold and consequent monetary inflation masked the effects of all the other things I mentioned enough that we could impoverish the middle class without people rioting in the streets. If we'd stayed on gold people would have seen their paychecks decline in both nominal and real terms.
bko 5y ago
> - The 1970s saw the beginning of the trend toward "neoliberal" style economics with lower taxes on the rich and less investment in social and infrastructure programs. Federal, state and local expenditures and tax receipts as a percentage of GDP has increased since 1970s [0] Public infrastructure spending is roughly flat as percentage of GDP [1] [0] https://en.wikipedia.org/wiki/Government_spending_in_the_United_States#/media/File:Government_Revenue_and_spending_GDP.png https://en.wikipedia.org/wiki/Government_spending_in_the_Uni... [1] https://www.hamiltonproject.org/charts/public_infrastructure_spending_1956_to_2014 https://www.hamiltonproject.org/charts/public_infrastructure...

BenoitEssiambre 5y ago

I want to offer an, hopefully intuitive enough, alternative to this line of reasoning. To me the aspects that make cryptocoins behave a bit like a gold standards is what makes them scary and dangerous: https://benoitessiambre.com/specter.html https://benoitessiambre.com/specter.html https://medium.com/@b.essiambre/the-world-deserves-a-pay-raise-302f25efd82a?source=friends_link&sk=cb180b2cf186b263b6c6c70ad29bc36e https://medium.com/@b.essiambre/the-world-deserves-a-pay-rai...

throw0101a 5y ago

> I broadly agree with the author on Bitcoin, but I do not agree on what was said about the gold standard being bad. The gold standard is/was bad. It could help turn economic downturns in things like the Great Depression: * https://www.nber.org/books-and-chapters/financial-markets-and-financial-crises/gold-standard-deflation-and-financial-crisis-great-depression-international-comparison https://www.nber.org/books-and-chapters/financial-markets-an... And it does little/nothing to help economic stability, as measured by things like the CPI: * https://www.theatlantic.com/business/archive/2012/08/why-the-gold-standard-is-the-worlds-worst-economic-idea-in-2-charts/261552/ https://www.theatlantic.com/business/archive/2012/08/why-the... * https://archive.md/FWKcL https://archive.md/FWKcL And when it's not doing much for stability, shortages can actually stunt economic growth: * https://en.wikipedia.org/wiki/Great_Bullion_Famine https://en.wikipedia.org/wiki/Great_Bullion_Famine Further, adherence to the gold standard also tends to lend itself to austerity which leads to economic suffering (e.g., deflation) which has often people to more extreme politics: * https://www.nber.org/papers/w24106 https://www.nber.org/papers/w24106 * https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Dangerous_Idea https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Da... For all of its problems, the current credit-based monetary system is better than past systems. For a (popular) history of money through the ages: * https://bookshop.org/books/money-the-true-story-of-a-made-up-thing/9780316417198 https://bookshop.org/books/money-the-true-story-of-a-made-up...

muddi900 5y ago

The gold standard was really abandoned by Rosevelt. He untethered the dollars value to a fix mass of gold.