2 ms·

> Source? From what I understand, the gold standard felt apart in WW1. Yes, and everyone went back to it in the 1920s: * https://www.theatlantic.com/magazine/

> Source? From what I understand, the gold standard felt apart in WW1. Yes, and everyone went back to it in the 1920s: * https://www.theatlantic.com/magazine/archive/1922/07/shall-we-abandon-the-gold-standard/647394/ https://www.theatlantic.com/magazine/archive/1922/07/shall-w... And then started abandoning it in the 1930s during the Great Depression. And the sooner a country (re-)abandoned it the sooner it started to recover in the 1930s. France was the last country to leave it: > In the end, recovery from the Great Depression does not begin until countries give up on the combination of the Bagehot Rule and of commitment to sound gold-standard finance. Those countries that have central banks willing to print up enough money so that people are willing to spend it--it is when you adopt such policies that your economy begins to recover. If you don’t, you become France, which sticks to the gold standard all the way up to 1937, and never gets a recovery. When World War II begins, Nazi Germany’s production--equal to France's in 1933--had doubled between 1933 and 1939. French production had fallen by 15%. * https://delong.typepad.com/delong_long_form/2013/10/the-great-depression-from-the-perspective-of-today-and-today-from-the-perspective-of-the-great-depression.html https://delong.typepad.com/delong_long_form/2013/10/the-grea...

sph 3y ago
But of course. Economy is a zero-sum game. You can't get massive amounts of money on "loan" by abandoning it, and expect that the economy keeps chugging along if you readopt it. The war has to be paid somehow, and abandoning the standard was the only way of each country giving themselves a loan to participate in WW1. This is exactly what we are seeing today: we pulled money out of thin air to pay for the COVID disruption to the economy, and now we have massive inflation. And you can't blame the gold standard for it this time. I have yet to hear someone argue why the fiat system is preferable to the gold standard without parroting Keynes or using history as proof of the validity of the choice. Macroeconomy is complex but also very simple: either you can pay for something with money you have today, or you create debt, which you will eventually have to pay, somehow.
- throw0101c 3y ago
  > This is exactly what we are seeing today: we pulled money out of thin air to pay for the COVID disruption to the economy, and now we have massive inflation. And you can't blame the gold standard for it this time. There was deflation in 2020 for a while (due to the pandemic). The 'high inflation' in 2021 was because of base effects: * https://en.wikipedia.org/wiki/Base_effect https://en.wikipedia.org/wiki/Base_effect Inflation went high in 2022 partly because of energy costs, specifically fossil fuel energy (thanks Russia), at least according to Canadian CPI data (where I live): * https://twitter.com/trevortombe/status/1559524236745576448 https://twitter.com/trevortombe/status/1559524236745576448 * https://twitter.com/trevortombe/status/1555662571021029376 https://twitter.com/trevortombe/status/1555662571021029376 High food prices (esp. grain/wheat) could also be traced to geopolitics (thanks Russia). Then there's supply chain issues: * https://www.frbsf.org/economic-research/publications/economic-letter/2022/june/how-much-do-supply-and-demand-drive-inflation/ https://www.frbsf.org/economic-research/publications/economi... * https://www.frbsf.org/economic-research/publications/economic-letter/2023/june/global-supply-chain-pressures-and-us-inflation/ https://www.frbsf.org/economic-research/publications/economi... > I have yet to hear someone argue why the fiat system is preferable to the gold standard without parroting Keynes or using history as proof of the validity of the choice. Because the gold standard does nothing to produce stable prices: * 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.li/FWKcL https://archive.li/FWKcL > The price of milk is way more stable over the last 18 years [up to 2012] when priced in dollars. In gold, we'd have gone from major inflation in the 90s, to deflation throughout the 2000s. > So gold doesn't work for global purposes, and it doesn't even make the economy more stable. * https://www.businessinsider.com/why-the-gold-standard-is-the-worst-idea-in-the-world-in-one-chart-2012-9 https://www.businessinsider.com/why-the-gold-standard-is-the... While reducing flexibility to deal with economic cycles: > In the end, recovery from the Great Depression does not begin until countries give up on the combination of the Bagehot Rule and of commitment to sound gold-standard finance. Those countries that have central banks willing to print up enough money so that people are willing to spend it--it is when you adopt such policies that your economy begins to recover. If you don’t, you become France, which sticks to the gold standard all the way up to 1937, and never gets a recovery. When World War II begins, Nazi Germany’s production--equal to France's in 1933--had doubled between 1933 and 1939. French production had fallen by 15%. * https://delong.typepad.com/delong_long_form/2013/10/the-great-depression-from-the-perspective-of-today-and-today-from-the-perspective-of-the-great-depression.html https://delong.typepad.com/delong_long_form/2013/10/the-grea... And why shouldn't people "parrot" Keynes? He was right after all. And why shouldn't the historical record be used as proof / evidence? It shows various economic policy experiments and what works (stimulus spending) and what doesn't (expansionary austerity; cutting taxes pays for itself, cf. "Kansas experiment"). Would you complain about people "parroting" Einstein and his General Theory?

sph 3y ago

But of course. Economy is a zero-sum game. You can't get massive amounts of money on "loan" by abandoning it, and expect that the economy keeps chugging along if you readopt it. The war has to be paid somehow, and abandoning the standard was the only way of each country giving themselves a loan to participate in WW1. This is exactly what we are seeing today: we pulled money out of thin air to pay for the COVID disruption to the economy, and now we have massive inflation. And you can't blame the gold standard for it this time. I have yet to hear someone argue why the fiat system is preferable to the gold standard without parroting Keynes or using history as proof of the validity of the choice. Macroeconomy is complex but also very simple: either you can pay for something with money you have today, or you create debt, which you will eventually have to pay, somehow.

throw0101c 3y ago
> This is exactly what we are seeing today: we pulled money out of thin air to pay for the COVID disruption to the economy, and now we have massive inflation. And you can't blame the gold standard for it this time. There was deflation in 2020 for a while (due to the pandemic). The 'high inflation' in 2021 was because of base effects: * https://en.wikipedia.org/wiki/Base_effect https://en.wikipedia.org/wiki/Base_effect Inflation went high in 2022 partly because of energy costs, specifically fossil fuel energy (thanks Russia), at least according to Canadian CPI data (where I live): * https://twitter.com/trevortombe/status/1559524236745576448 https://twitter.com/trevortombe/status/1559524236745576448 * https://twitter.com/trevortombe/status/1555662571021029376 https://twitter.com/trevortombe/status/1555662571021029376 High food prices (esp. grain/wheat) could also be traced to geopolitics (thanks Russia). Then there's supply chain issues: * https://www.frbsf.org/economic-research/publications/economic-letter/2022/june/how-much-do-supply-and-demand-drive-inflation/ https://www.frbsf.org/economic-research/publications/economi... * https://www.frbsf.org/economic-research/publications/economic-letter/2023/june/global-supply-chain-pressures-and-us-inflation/ https://www.frbsf.org/economic-research/publications/economi... > I have yet to hear someone argue why the fiat system is preferable to the gold standard without parroting Keynes or using history as proof of the validity of the choice. Because the gold standard does nothing to produce stable prices: * 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.li/FWKcL https://archive.li/FWKcL > The price of milk is way more stable over the last 18 years [up to 2012] when priced in dollars. In gold, we'd have gone from major inflation in the 90s, to deflation throughout the 2000s. > So gold doesn't work for global purposes, and it doesn't even make the economy more stable. * https://www.businessinsider.com/why-the-gold-standard-is-the-worst-idea-in-the-world-in-one-chart-2012-9 https://www.businessinsider.com/why-the-gold-standard-is-the... While reducing flexibility to deal with economic cycles: > In the end, recovery from the Great Depression does not begin until countries give up on the combination of the Bagehot Rule and of commitment to sound gold-standard finance. Those countries that have central banks willing to print up enough money so that people are willing to spend it--it is when you adopt such policies that your economy begins to recover. If you don’t, you become France, which sticks to the gold standard all the way up to 1937, and never gets a recovery. When World War II begins, Nazi Germany’s production--equal to France's in 1933--had doubled between 1933 and 1939. French production had fallen by 15%. * https://delong.typepad.com/delong_long_form/2013/10/the-great-depression-from-the-perspective-of-today-and-today-from-the-perspective-of-the-great-depression.html https://delong.typepad.com/delong_long_form/2013/10/the-grea... And why shouldn't people "parrot" Keynes? He was right after all. And why shouldn't the historical record be used as proof / evidence? It shows various economic policy experiments and what works (stimulus spending) and what doesn't (expansionary austerity; cutting taxes pays for itself, cf. "Kansas experiment"). Would you complain about people "parroting" Einstein and his General Theory?