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> 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 b

> 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

"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.