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> Since WWII started, I don't think it automatically followed that leaving the gold standard did the trick. War economics are bound to have had at least some im

> Since WWII started, I don't think it automatically followed that leaving the gold standard did the trick. War economics are bound to have had at least some impact. Banking panics and deflation ceased in 1933/1934 with FDRs gold-confiscating shenanigans, and at that point things started to recover, which was well before WWII. > Also isn't printing money equivalent to raising taxes? No, because creating money expands the money supply and raising taxes does not. > Ultimately, isn't the issue how to distribute and produce goods, not spending in itself? The Keynesian approach says that government spending is necessary to restore the confidence of businesses that demand will be high, so that private investment will resume, businesses will hire, and unemployment will fall. Once velocity is restored to the cycle of businesses earning money and using it to pay wages, the government can step out of the picture as the workers with their wages will take up the demand slack. Per this argument, what goods are being created and distributed doesn’t actually necessarily matter, which is why even government spending on economically worthless things like war equipment (much of which was abandoned in Europe as not worth bringing back after the war) will still work. > Also couldn't people still get into debt, no matter how high the monetary supply? Like if the government says "build this bridge for us, and we owe you 100000$", what does it matter if the 100000$ are backed in gold or not? Not if the government won’t deficit spend, and doesn’t have an institution to borrow from that can loan money by creating it rather than borrowing it.

kkjjkgjjgg 5y ago
"Banking panics and deflation ceased in 1933/1934 with FDRs gold-confiscating shenanigans, and at that point things started to recover, which was well before WWII." Maybe all the bad banks had been consolidated by then, after years of Depression? "No, because creating money expands the money supply and raising taxes does not." But why would money supply matter - you can simply raise the value of the existing supply to the same effect? What does "money supply" mean, the number of coins? "The Keynesian approach " yeah but that is "just" the Keynesian approach. I know he is popular, but that doesn't make it automatically correct. For starters, why does "economy" even depend on a government? It sounds like a special case where a meddling government is present. "Per this argument, what goods are being created and distributed doesn’t actually necessarily matter, which is why even government spending on economically worthless things like war equipment (much of which was abandoned in Europe as not worth bringing back after the war) will still work." You have to admit it does sound slightly crazy, though? Interesting point about the useless war equipment, but again it seems like that is not the only thing war does. Maybe it simply took millions of otherwise useless workers out of the picture by killing them, for example? There seem to be more aspects to war than useless spending. "Confidence" may have risen by winning the war, too, not just by government spending? After all, if the government spends too much, then trust in the money is also being eroded. "Not if the government won’t deficit spend" But then you can't say it is the gold standard, but the unwillingness to deficit spend?
- dodobirdlord 5y ago
  > Maybe all the bad banks had been consolidated by then, after years of Depression? Sure, maybe after 4 years of issues things just happened to naturally get better right when the federal government carried out a targeted intervention. > But why would money supply matter - you can simply raise the value of the existing supply to the same effect? This is called deflation, and tends to both cause and worsen economic contractions for reasons discussed previously. If all financial obligations happened to somehow be pegged to inflation, then the actual money supply wouldn’t matter. But the purpose of a currency is denominating prices and debts, so it does matter. > What does "money supply" mean, the number of coins? Literally the number of dollars that exist. At that point in time this would have been the sum of all cash and all bank accounts balances. > yeah but that is "just" the Keynesian approach. I know he is popular, but that doesn't make it automatically correct. Profound insights today in the HN comments section. > For starters, why does "economy" even depend on a government? Perhaps look into Locke or Hobbes for some background here. Economic activity is for the most part predicated on some concept of property rights, which are a legal construct and thus predicated on the existence of a government and its monopoly on the use of force. > You have to admit it does sound slightly crazy, though? Does it? The argument isn’t that paying people to dig holes and fill them back in (or build warships and sink them in the ocean) creates economic value, only that it creates demand, which is self-evidently true. Usually, demand from workers earning wages drives businesses to supply goods, so an economy generally sits at a supply/demand equilibrium. But a bunch of people who are unemployed and have no money do not contribute to demand. A negative demand shock can cause an economy to contract to a new lower equilibrium. A positive demand shock can drive it back to a higher equilibrium. > But then you can't say it is the gold standard, but the unwillingness to deficit spend? Deficit spending doesn’t expand the money supply if the government has to borrow to spend, it just draws money out of the private sector. Hence we’re back to the gold standard as the root of the problem.
  - kkjjkgjjgg 5y ago
    "Sure, maybe after 4 years of issues things just happened to naturally get better right when the federal government carried out a targeted intervention." It seems possible that the story is more complicated than that. "But the purpose of a currency is denominating prices and debts, so it does matter." I don't think currencies can change the value of things, so I am not convinced the denomination aspect is really the most important aspect of what currencies do. "Economic activity is for the most part predicated on some concept of property rights, which are a legal construct and thus predicated on the existence of a government and its monopoly on the use of force." That seems obviously false. Animals have territories, and they don't have governments. It requires use of force, but that doesn't require governments. Just because governments tend to monopolize use of force, doesn't imply they are required for enforcing property "rights". "The argument isn’t that paying people to dig holes and fill them back in (or build warships and sink them in the ocean) creates economic value, only that it creates demand, which is self-evidently true." What demand does the hole digging worker create - demand for shovels? "A negative demand shock can cause an economy to contract to a new lower equilibrium" I would agree that equilibriums are the right way to look at it, and "pushing to a higher equilibrium" would be what I called "kickstarting" like a motor. Still not convinced that simply distributing money does the trick, though. "Deficit spending doesn’t expand the money supply if the government has to borrow to spend, it just draws money out of the private sector. Hence we’re back to the gold standard as the root of the problem." If you assume money supply is the problem.

kkjjkgjjgg 5y ago

"Banking panics and deflation ceased in 1933/1934 with FDRs gold-confiscating shenanigans, and at that point things started to recover, which was well before WWII." Maybe all the bad banks had been consolidated by then, after years of Depression? "No, because creating money expands the money supply and raising taxes does not." But why would money supply matter - you can simply raise the value of the existing supply to the same effect? What does "money supply" mean, the number of coins? "The Keynesian approach " yeah but that is "just" the Keynesian approach. I know he is popular, but that doesn't make it automatically correct. For starters, why does "economy" even depend on a government? It sounds like a special case where a meddling government is present. "Per this argument, what goods are being created and distributed doesn’t actually necessarily matter, which is why even government spending on economically worthless things like war equipment (much of which was abandoned in Europe as not worth bringing back after the war) will still work." You have to admit it does sound slightly crazy, though? Interesting point about the useless war equipment, but again it seems like that is not the only thing war does. Maybe it simply took millions of otherwise useless workers out of the picture by killing them, for example? There seem to be more aspects to war than useless spending. "Confidence" may have risen by winning the war, too, not just by government spending? After all, if the government spends too much, then trust in the money is also being eroded. "Not if the government won’t deficit spend" But then you can't say it is the gold standard, but the unwillingness to deficit spend?

dodobirdlord 5y ago
> Maybe all the bad banks had been consolidated by then, after years of Depression? Sure, maybe after 4 years of issues things just happened to naturally get better right when the federal government carried out a targeted intervention. > But why would money supply matter - you can simply raise the value of the existing supply to the same effect? This is called deflation, and tends to both cause and worsen economic contractions for reasons discussed previously. If all financial obligations happened to somehow be pegged to inflation, then the actual money supply wouldn’t matter. But the purpose of a currency is denominating prices and debts, so it does matter. > What does "money supply" mean, the number of coins? Literally the number of dollars that exist. At that point in time this would have been the sum of all cash and all bank accounts balances. > yeah but that is "just" the Keynesian approach. I know he is popular, but that doesn't make it automatically correct. Profound insights today in the HN comments section. > For starters, why does "economy" even depend on a government? Perhaps look into Locke or Hobbes for some background here. Economic activity is for the most part predicated on some concept of property rights, which are a legal construct and thus predicated on the existence of a government and its monopoly on the use of force. > You have to admit it does sound slightly crazy, though? Does it? The argument isn’t that paying people to dig holes and fill them back in (or build warships and sink them in the ocean) creates economic value, only that it creates demand, which is self-evidently true. Usually, demand from workers earning wages drives businesses to supply goods, so an economy generally sits at a supply/demand equilibrium. But a bunch of people who are unemployed and have no money do not contribute to demand. A negative demand shock can cause an economy to contract to a new lower equilibrium. A positive demand shock can drive it back to a higher equilibrium. > But then you can't say it is the gold standard, but the unwillingness to deficit spend? Deficit spending doesn’t expand the money supply if the government has to borrow to spend, it just draws money out of the private sector. Hence we’re back to the gold standard as the root of the problem.
- kkjjkgjjgg 5y ago
  "Sure, maybe after 4 years of issues things just happened to naturally get better right when the federal government carried out a targeted intervention." It seems possible that the story is more complicated than that. "But the purpose of a currency is denominating prices and debts, so it does matter." I don't think currencies can change the value of things, so I am not convinced the denomination aspect is really the most important aspect of what currencies do. "Economic activity is for the most part predicated on some concept of property rights, which are a legal construct and thus predicated on the existence of a government and its monopoly on the use of force." That seems obviously false. Animals have territories, and they don't have governments. It requires use of force, but that doesn't require governments. Just because governments tend to monopolize use of force, doesn't imply they are required for enforcing property "rights". "The argument isn’t that paying people to dig holes and fill them back in (or build warships and sink them in the ocean) creates economic value, only that it creates demand, which is self-evidently true." What demand does the hole digging worker create - demand for shovels? "A negative demand shock can cause an economy to contract to a new lower equilibrium" I would agree that equilibriums are the right way to look at it, and "pushing to a higher equilibrium" would be what I called "kickstarting" like a motor. Still not convinced that simply distributing money does the trick, though. "Deficit spending doesn’t expand the money supply if the government has to borrow to spend, it just draws money out of the private sector. Hence we’re back to the gold standard as the root of the problem." If you assume money supply is the problem.