4 ms·

(X) doubt Any evidence for that?

by djbebs 4y ago

deleted 4y ago
[deleted]
Armisael16 4y ago
The US was on the gold standard from 1882 to 1933. Recessions from that time: * 1882-1885 recession (not totally fair; gold standard policies hadn’t had time to cause this) * 1887-1888 recession * 1890-1891 recession * Panic of 1893 * Panic of 1896 * 1899-1900 recession * 1902-1904 recession * Panic of 1907 * Panic of 1910-1911 * 1913-1914 recession * Post-WW1 recession (1918-1919) * Depression of 1920-1921 * 1923-1924 recession * 1926-1927 recession * The Great Depression We were on a mixed system from 1933 until the end of Bretton Woods. We’ve had seven recessions since then (vs 15 over a similar time span), and one of the big ones (1973-1975) was clearly driven by decisions made while operating on a gold standard. (It’s a different story if inflation is the only metric you about at all - while it was more volatile it was also lower on average)
- kragen 4y ago
  Just to clarify, the dollar was gold-backed from 01944 until the end of Bretton Woods in 01971; it wasn't a fiat currency. Also I think saying that inflation was "lower on average" is really a dramatic understatement. From independence up to the advent of the "mixed system" in 01933 (really a switch to fiat currency until 01944) inflation was probably zero on average. The same was observed over the 1300 years of the commodity-backed pound sterling (usually gold, sometimes silver or bimetallic). I think there are plausible arguments that fiat currencies are less prone to such crises, and even that they stimulate economic growth, but I don't think it's an open-and-shut case.
  - Retric 4y ago
    Average inflation rates over multiple lifetimes largely irrelevant. 24+% inflation for 2 years in 1863 was a huge issue. Short term deflation is often much worse than inflation. Averaging both to zero is wildly misleading. The vast devaluation of silver after the discovery of the new world was a massive issue in Europe even if it averages out to nothing over time.
    - notch656a 4y ago
      These kind of fluctuations that average out make the money useful on an immediate or long-term timeline, with the cost of medium-term fluctuations (think hold under a few months or over 5 years). Fiat as currently found in places like the US makes the money useful in the immediate or medium term timeline (think under 5 years). I think which you prefer depends on your station in life and your spending choices. Personally when fiat hits my bank account I want to shit-can it as soon as possible, eithre for equities or commodities. If I were paid in the kind of unstable but averaging out dollar of the 1800s I would very much prefer that, rather than losing money to middle men converting to some commodity like that (such as a commodities index, silver, whatever) and then converting back whenever I need to spend.
      - Retric 4y ago
        Being able to store value as currency for long periods is a bug not a feature as it does bad things to the economy. Lets’s say you want to store gold in your basement for bad times like a famine. Great you and everyone else has 1+ oz of gold when a famine hits, but society didn’t actually get any more food so everyone having gold is not just pointless but wasteful both to mine the stuff and to keep it protected from thieves. Alternatively, society can try and store value as productive assets like stocks. On a day to day basis it looks similar but rather than building ever larger vaults and digging ever deeper it’s a quest to create even the smallest income stream. You still hit diminishing returns but it’s stuck with diminishing positive returns. PS: > losing money to middle men converting to some commodity You end up losing even more money when the government is trying to get and store enough gold to keep a gold backed currency, it’s just less obvious. Great Britten sent many ships to Canada during WWII to keep it’s gold safe. They had much much useful things to do with those ships and men.
        kragen 4y ago
        This is a specious (ha!) argument because the total amount of effort required to safeguard precious metals is so small, because the metals themselves are so small. Gold currently costs US$55.92 per gram. Gross world product is US$80 trillion per year over 7.9 billion people; this works out to US$10.1k per person per year, or US$770k per person per 76-year lifetime. The lifetime earnings of an average person are thus 14 kg of gold, less than a liter. It does not require a significant fraction of your lifetime to dig enough of a vault to protect a liter of gold from thieves, nor to mine it. The impact on overall economic productivity is probably similar to that of spelling "through" as "through" rather than "thru". You can easily wear a year's wages as jewelry, or a lifetime's wages with more difficulty, which has historically often been useful when you're fleeing famine-stricken areas. Stocks have usually been less useful; protecting a stock portfolio from disaster requires active investment management and is generally infeasible during wars and famines. It is true that collectively we need to store food, not gold, to prepare for famines. It is a mistake to leap from this fact to the conclusion that everyday people should not be allowed to save money. You might or might not be aware that until roughly the transition to fiat currency in 01971 saving money was a canonical example of responsible adult behavior in the US, much like doing your tax returns, separating your recycling, or investing in an index fund today. I've presented a better argument for why being able to store value as currency is harmful in https://news.ycombinator.com/item?id=32258546 https://news.ycombinator.com/item?id=32258546. I'm not completely convinced by it but it's at least not completely specious.

(X) doubt Any evidence for that?

by djbebs 4y ago

(X) doubt Any evidence for that?

deleted 4y ago

[deleted]

Armisael16 4y ago

The US was on the gold standard from 1882 to 1933. Recessions from that time: * 1882-1885 recession (not totally fair; gold standard policies hadn’t had time to cause this) * 1887-1888 recession * 1890-1891 recession * Panic of 1893 * Panic of 1896 * 1899-1900 recession * 1902-1904 recession * Panic of 1907 * Panic of 1910-1911 * 1913-1914 recession * Post-WW1 recession (1918-1919) * Depression of 1920-1921 * 1923-1924 recession * 1926-1927 recession * The Great Depression We were on a mixed system from 1933 until the end of Bretton Woods. We’ve had seven recessions since then (vs 15 over a similar time span), and one of the big ones (1973-1975) was clearly driven by decisions made while operating on a gold standard. (It’s a different story if inflation is the only metric you about at all - while it was more volatile it was also lower on average)

kragen 4y ago
Just to clarify, the dollar was gold-backed from 01944 until the end of Bretton Woods in 01971; it wasn't a fiat currency. Also I think saying that inflation was "lower on average" is really a dramatic understatement. From independence up to the advent of the "mixed system" in 01933 (really a switch to fiat currency until 01944) inflation was probably zero on average. The same was observed over the 1300 years of the commodity-backed pound sterling (usually gold, sometimes silver or bimetallic). I think there are plausible arguments that fiat currencies are less prone to such crises, and even that they stimulate economic growth, but I don't think it's an open-and-shut case.
- Retric 4y ago
  Average inflation rates over multiple lifetimes largely irrelevant. 24+% inflation for 2 years in 1863 was a huge issue. Short term deflation is often much worse than inflation. Averaging both to zero is wildly misleading. The vast devaluation of silver after the discovery of the new world was a massive issue in Europe even if it averages out to nothing over time.
  - notch656a 4y ago
    These kind of fluctuations that average out make the money useful on an immediate or long-term timeline, with the cost of medium-term fluctuations (think hold under a few months or over 5 years). Fiat as currently found in places like the US makes the money useful in the immediate or medium term timeline (think under 5 years). I think which you prefer depends on your station in life and your spending choices. Personally when fiat hits my bank account I want to shit-can it as soon as possible, eithre for equities or commodities. If I were paid in the kind of unstable but averaging out dollar of the 1800s I would very much prefer that, rather than losing money to middle men converting to some commodity like that (such as a commodities index, silver, whatever) and then converting back whenever I need to spend.
    - Retric 4y ago
      Being able to store value as currency for long periods is a bug not a feature as it does bad things to the economy. Lets’s say you want to store gold in your basement for bad times like a famine. Great you and everyone else has 1+ oz of gold when a famine hits, but society didn’t actually get any more food so everyone having gold is not just pointless but wasteful both to mine the stuff and to keep it protected from thieves. Alternatively, society can try and store value as productive assets like stocks. On a day to day basis it looks similar but rather than building ever larger vaults and digging ever deeper it’s a quest to create even the smallest income stream. You still hit diminishing returns but it’s stuck with diminishing positive returns. PS: > losing money to middle men converting to some commodity You end up losing even more money when the government is trying to get and store enough gold to keep a gold backed currency, it’s just less obvious. Great Britten sent many ships to Canada during WWII to keep it’s gold safe. They had much much useful things to do with those ships and men.
      - kragen 4y ago
        This is a specious (ha!) argument because the total amount of effort required to safeguard precious metals is so small, because the metals themselves are so small. Gold currently costs US$55.92 per gram. Gross world product is US$80 trillion per year over 7.9 billion people; this works out to US$10.1k per person per year, or US$770k per person per 76-year lifetime. The lifetime earnings of an average person are thus 14 kg of gold, less than a liter. It does not require a significant fraction of your lifetime to dig enough of a vault to protect a liter of gold from thieves, nor to mine it. The impact on overall economic productivity is probably similar to that of spelling "through" as "through" rather than "thru". You can easily wear a year's wages as jewelry, or a lifetime's wages with more difficulty, which has historically often been useful when you're fleeing famine-stricken areas. Stocks have usually been less useful; protecting a stock portfolio from disaster requires active investment management and is generally infeasible during wars and famines. It is true that collectively we need to store food, not gold, to prepare for famines. It is a mistake to leap from this fact to the conclusion that everyday people should not be allowed to save money. You might or might not be aware that until roughly the transition to fiat currency in 01971 saving money was a canonical example of responsible adult behavior in the US, much like doing your tax returns, separating your recycling, or investing in an index fund today. I've presented a better argument for why being able to store value as currency is harmful in https://news.ycombinator.com/item?id=32258546 https://news.ycombinator.com/item?id=32258546. I'm not completely convinced by it but it's at least not completely specious.