5 ms·

What you’re saying is flat out wrong, please don’t post things like this… you have a lot of HN karma so people wrongly assume you might have a source. You do no

What you’re saying is flat out wrong, please don’t post things like this… you have a lot of HN karma so people wrongly assume you might have a source. You do not. You’re making up a revisionists rendition of events to fit your narrative. Using the word “fiat” screams “I don’t know economics, but I have the confidence to say I do.” You certainly aren’t telling people with physics backgrounds that they’re wrong or pushing tachyons down their throats. HN, on both sides, left and right gets economics profoundly wrong as though it was being taught in the year 1850. Its a science, not a belief, you just have to like… you know, put effort into it and your intuition is probably wrong.

kkjjkgjjgg 5y ago
There certainly are a lot of beliefs in economics. It is not as easy to run experiments on economical theories as it is in physics, so saying "it is a science" may give people the wrong impression. I agree it is a science in a way, but not really a hard science like physics or medicine.
- WalterBright 5y ago
  Check out the history of pegged exchange rates, and what happens when the values of each side changes. https://en.wikipedia.org/wiki/Gresham%27s_law https://en.wikipedia.org/wiki/Gresham%27s_law
native_samples 5y ago
Not a very convincing reply. Are you claiming that the printing of money unbacked by gold in a gold standard system didn't matter at all?
- dodobirdlord 5y ago
  Printing of money unbacked by gold in the gold standard system doesn't appear to have been significant, if it happened at all - the amount of gold reserves that the US treasury held and the money supply look like they grew proportionally during the period 1913-1929 [1, 2]. It would be nice to see user WalterBright's citation for this. Meanwhile, if WalterBright's explanation is to be believed we'd expect it to have manifested as high inflation rates during the period 1913-1929, and spiking inflation during the 1929-1930 economic crisis as everyone realizes that the jig is up and their dollars aren't actually backed by gold and are worth less than expected. Instead, that's not at all what happens [2]. The inflation rate is all over the place between 1913 and 1929, dramatically positive from 1916 to 1920, dramatically negative from 1921 to 1923, and then relatively stable until the Great Depression, including being slightly negative for the 4 years leading up to the Great Depression. Then the Great Depression hits and inflation becomes dramatically negative. The Great Depression starts in 1929, but FDR doesn't suspend the gold standard until 1933 in the interest of being able to expand the money supply and cause inflation. Inflation finally goes above 0% in late 1933, but even then doesn't spike dramatically - it spends a couple months in the 5% range before falling back and spending the next several years in the 2%-4% range. So WalterBright's explanation just doesn't line up. Credit to user the_why_of_y for pulling up sources in a different thread. [1] https://www.swcs.com.au/goldreserves.htm#Table1 https://www.swcs.com.au/goldreserves.htm#Table1 [2] https://www.longtermtrends.net/m2-money-supply-vs-inflation/ https://www.longtermtrends.net/m2-money-supply-vs-inflation/
  - WalterBright 5y ago
    Net inflation from 1914-1929 nearly halved the value of the dollar w.r.t. the official exchange rate with gold. I cited this with references. There's no way you can talk your way out of that. Pegging a currency against something one has no control over, then inflating the heck out of the currency, always results in a crash. The banks continued to fail until FDR suspended convertibility to gold.
WalterBright 5y ago
Last time I checked, inflation from 1914 to 1929 had nearly halved the value of the dollar, but the exchange rate of dollars for gold was the same (by law). You can check inflation 1914-1929 for yourself: https://www.in2013dollars.com/us/inflation/1914?endYear=1929&amount=1 https://www.in2013dollars.com/us/inflation/1914?endYear=1929... Dollars were exchangeable for gold at $20.67 from 1914-1927: https://onlygold.com/gold-prices/historical-gold-prices/ https://onlygold.com/gold-prices/historical-gold-prices/ Anyone can see this will cause a collapse of the banks. Why do you think FDR suspended gold exchanging? This sort of thing happens every time a country pegs their currency to a fixed exchange rate and then inflates it.
- the_why_of_y 5y ago
  Apparently gold itself suffered quite the inflation in that timeframe, from 8097 tonnes in 1913 to 16469 tonnes in 1930. US reserves went from 2293 to 6358 tonnes. https://www.swcs.com.au/goldreserves.htm#Table1 https://www.swcs.com.au/goldreserves.htm#Table1 Scroll down to table 8, sum of the newly mined gold is ~8800 tonnes from 1915-1929.
  - WalterBright 5y ago
    Good try! But inflation is not the same thing as an increase in the supply. Inflation is the excess of an increase in supply vs the value in the economy it represents. I.e. you have to discount the increase in supply by the growth in the GDP. For more evidence, consider the gold bonds. The US government sold gold bonds and dollar bonds. The gold bonds offered a lower interest rate than the dollar bonds, because the buyers trusted the gold more than they trusted the fiat money. The buyers were right. But the buyers were wrong about trusting the government. FDR repudiated the gold bond contracts, paying the holders off in inflated dollars. They basically stole the money from the bond holders. This wouldn't have happened if gold had inflated along with the dollar.
    - the_why_of_y 5y ago
      Sorry for the sloppy language. The question I have is, what is the value of gold relative to other commodities (preferably the same ones that are used to measure inflation of the dollar) in 1914 vs. in 1929. Unfortunately I don't have an idea where to get the data to answer this question. I found that M2 in 1914 was 24.62, up to 66.61 in 1929. This is quite similar to the increase in gold reserves, not much of a surprise. Second graph here: https://www.longtermtrends.net/m2-money-supply-vs-inflation/ https://www.longtermtrends.net/m2-money-supply-vs-inflation/

kkjjkgjjgg 5y ago

There certainly are a lot of beliefs in economics. It is not as easy to run experiments on economical theories as it is in physics, so saying "it is a science" may give people the wrong impression. I agree it is a science in a way, but not really a hard science like physics or medicine.

WalterBright 5y ago
Check out the history of pegged exchange rates, and what happens when the values of each side changes. https://en.wikipedia.org/wiki/Gresham%27s_law https://en.wikipedia.org/wiki/Gresham%27s_law

native_samples 5y ago

Not a very convincing reply. Are you claiming that the printing of money unbacked by gold in a gold standard system didn't matter at all?

dodobirdlord 5y ago
Printing of money unbacked by gold in the gold standard system doesn't appear to have been significant, if it happened at all - the amount of gold reserves that the US treasury held and the money supply look like they grew proportionally during the period 1913-1929 [1, 2]. It would be nice to see user WalterBright's citation for this. Meanwhile, if WalterBright's explanation is to be believed we'd expect it to have manifested as high inflation rates during the period 1913-1929, and spiking inflation during the 1929-1930 economic crisis as everyone realizes that the jig is up and their dollars aren't actually backed by gold and are worth less than expected. Instead, that's not at all what happens [2]. The inflation rate is all over the place between 1913 and 1929, dramatically positive from 1916 to 1920, dramatically negative from 1921 to 1923, and then relatively stable until the Great Depression, including being slightly negative for the 4 years leading up to the Great Depression. Then the Great Depression hits and inflation becomes dramatically negative. The Great Depression starts in 1929, but FDR doesn't suspend the gold standard until 1933 in the interest of being able to expand the money supply and cause inflation. Inflation finally goes above 0% in late 1933, but even then doesn't spike dramatically - it spends a couple months in the 5% range before falling back and spending the next several years in the 2%-4% range. So WalterBright's explanation just doesn't line up. Credit to user the_why_of_y for pulling up sources in a different thread. [1] https://www.swcs.com.au/goldreserves.htm#Table1 https://www.swcs.com.au/goldreserves.htm#Table1 [2] https://www.longtermtrends.net/m2-money-supply-vs-inflation/ https://www.longtermtrends.net/m2-money-supply-vs-inflation/
- WalterBright 5y ago
  Net inflation from 1914-1929 nearly halved the value of the dollar w.r.t. the official exchange rate with gold. I cited this with references. There's no way you can talk your way out of that. Pegging a currency against something one has no control over, then inflating the heck out of the currency, always results in a crash. The banks continued to fail until FDR suspended convertibility to gold.

WalterBright 5y ago

Last time I checked, inflation from 1914 to 1929 had nearly halved the value of the dollar, but the exchange rate of dollars for gold was the same (by law). You can check inflation 1914-1929 for yourself: https://www.in2013dollars.com/us/inflation/1914?endYear=1929&amount=1 https://www.in2013dollars.com/us/inflation/1914?endYear=1929... Dollars were exchangeable for gold at $20.67 from 1914-1927: https://onlygold.com/gold-prices/historical-gold-prices/ https://onlygold.com/gold-prices/historical-gold-prices/ Anyone can see this will cause a collapse of the banks. Why do you think FDR suspended gold exchanging? This sort of thing happens every time a country pegs their currency to a fixed exchange rate and then inflates it.

the_why_of_y 5y ago
Apparently gold itself suffered quite the inflation in that timeframe, from 8097 tonnes in 1913 to 16469 tonnes in 1930. US reserves went from 2293 to 6358 tonnes. https://www.swcs.com.au/goldreserves.htm#Table1 https://www.swcs.com.au/goldreserves.htm#Table1 Scroll down to table 8, sum of the newly mined gold is ~8800 tonnes from 1915-1929.
- WalterBright 5y ago
  Good try! But inflation is not the same thing as an increase in the supply. Inflation is the excess of an increase in supply vs the value in the economy it represents. I.e. you have to discount the increase in supply by the growth in the GDP. For more evidence, consider the gold bonds. The US government sold gold bonds and dollar bonds. The gold bonds offered a lower interest rate than the dollar bonds, because the buyers trusted the gold more than they trusted the fiat money. The buyers were right. But the buyers were wrong about trusting the government. FDR repudiated the gold bond contracts, paying the holders off in inflated dollars. They basically stole the money from the bond holders. This wouldn't have happened if gold had inflated along with the dollar.
  - the_why_of_y 5y ago
    Sorry for the sloppy language. The question I have is, what is the value of gold relative to other commodities (preferably the same ones that are used to measure inflation of the dollar) in 1914 vs. in 1929. Unfortunately I don't have an idea where to get the data to answer this question. I found that M2 in 1914 was 24.62, up to 66.61 in 1929. This is quite similar to the increase in gold reserves, not much of a surprise. Second graph here: https://www.longtermtrends.net/m2-money-supply-vs-inflation/ https://www.longtermtrends.net/m2-money-supply-vs-inflation/