3 ms·

> aside from the fact that federal reserve notes can be printed at will in response to economic conditions, and yellow lumps of metal are extracted from the gro

> aside from the fact that federal reserve notes can be printed at will in response to economic conditions, and yellow lumps of metal are extracted from the ground at haphazard rates. That's a pretty key difference. The value is based on scarcity. When there's no scarcity constraint, we can all just collectively vote ourselves to be billionaires. What could go wrong?

renewedrebecca 3y ago
And yet, after all this time, we haven't voted ourselves to be billionaires.
gruez 3y ago
>What could go wrong? I could say the same for basing your money supply on the production of a yellow metal. What happens when there's a massive discovery of gold? Or there's a (trade) war between the top producers (eg. china, australia, and russia)? Or when there's a worldwide pandemic and you need to provide stimulus so the economy doesn't collapse?
- logicchains 3y ago
  >What happens when there's a massive discovery of gold? Or there's a (trade) war between the top producers (eg. china, australia, and russia)? Never in history has this situation caused a collapse like the hyperinflation seen in Weimar Germany or recently Zimbabwe. Because even a huge change in supply is only going to affect price by a double digit percent (check a chart of historical gold price volatility), while hyperinflation can reduce the value of currency by orders of magnitude. >Or when there's a worldwide pandemic and you need to provide stimulus so the economy doesn't collapse? The stimulus was only necessary because of the lockdowns, which in hindsight proved completely counter-productive, empirically producing no overall reduction in deaths (https://onlinelibrary.wiley.com/doi/full/10.1002/hec.4737 https://onlinelibrary.wiley.com/doi/full/10.1002/hec.4737 ). Without the ability to print money governments wouldn't have been able to get away with locking down their citizens so long, and the damage they inflicted on mental health and children's educational outcomes could have been reduced.
  - gruez 3y ago
    >The stimulus was only necessary because of the lockdowns The question of whether lockdowns were justified aside, pandemics aren't the only form of economic calamity that might occur. Financial crisis occur. Other supply shocks (eg. war in ukranie) exist as well.
    - logicchains 3y ago
      And printing money isn't the only way to deal with supply shocks; a government could also use its reserves, as e.g. Singapore did during covid.
      - gruez 3y ago
        1. Singapore is a city state that has a GDP around twice of other developed economies. What works for it does not necessarily work for every other country. 2. There's opportunity costs with keeping such high reserves around, rather than doing something productive like investing in infrastructure. 3. It's unclear how introducing massive amounts of gold (previously held in reserve) into the economy won't cause inflationary effects. Like I said earlier, you can't eat gold. Dumping a bunch of gold into the economy doesn't magically increase the amount of goods in existence, which would also lead to inflation that money printing would cause.
        logicchains 3y ago
        > 1. Singapore is a city state that has a GDP around twice of other developed economies. What works for it does not necessarily work for every other country. China as a country with relatively low GDP per capita also manages to maintain high foreign exchange reserves. >2. There's opportunity costs with keeping such high reserves around, rather than doing something productive like investing in infrastructure. Infrastructure spending is only a small fraction of the US budget compared to warfare; if the US hadn't gone to war in Iraq and Afghanistan it could have a few trillion dollars of reserves with no drop in productive spending. > It's unclear how introducing massive amounts of gold (previously held in reserve) into the economy won't cause inflationary effects. Like I said earlier, you can't eat gold. Dumping a bunch of gold into the economy doesn't magically increase the amount of goods in existence, which would also lead to inflation that money printing would cause. It would cause inflationary effects initially, but this would be a one-off thing, as the mining rate of gold is relatively steady.

renewedrebecca 3y ago

And yet, after all this time, we haven't voted ourselves to be billionaires.

gruez 3y ago

>What could go wrong? I could say the same for basing your money supply on the production of a yellow metal. What happens when there's a massive discovery of gold? Or there's a (trade) war between the top producers (eg. china, australia, and russia)? Or when there's a worldwide pandemic and you need to provide stimulus so the economy doesn't collapse?

logicchains 3y ago
>What happens when there's a massive discovery of gold? Or there's a (trade) war between the top producers (eg. china, australia, and russia)? Never in history has this situation caused a collapse like the hyperinflation seen in Weimar Germany or recently Zimbabwe. Because even a huge change in supply is only going to affect price by a double digit percent (check a chart of historical gold price volatility), while hyperinflation can reduce the value of currency by orders of magnitude. >Or when there's a worldwide pandemic and you need to provide stimulus so the economy doesn't collapse? The stimulus was only necessary because of the lockdowns, which in hindsight proved completely counter-productive, empirically producing no overall reduction in deaths (https://onlinelibrary.wiley.com/doi/full/10.1002/hec.4737 https://onlinelibrary.wiley.com/doi/full/10.1002/hec.4737 ). Without the ability to print money governments wouldn't have been able to get away with locking down their citizens so long, and the damage they inflicted on mental health and children's educational outcomes could have been reduced.
- gruez 3y ago
  >The stimulus was only necessary because of the lockdowns The question of whether lockdowns were justified aside, pandemics aren't the only form of economic calamity that might occur. Financial crisis occur. Other supply shocks (eg. war in ukranie) exist as well.
  - logicchains 3y ago
    And printing money isn't the only way to deal with supply shocks; a government could also use its reserves, as e.g. Singapore did during covid.
    - gruez 3y ago
      1. Singapore is a city state that has a GDP around twice of other developed economies. What works for it does not necessarily work for every other country. 2. There's opportunity costs with keeping such high reserves around, rather than doing something productive like investing in infrastructure. 3. It's unclear how introducing massive amounts of gold (previously held in reserve) into the economy won't cause inflationary effects. Like I said earlier, you can't eat gold. Dumping a bunch of gold into the economy doesn't magically increase the amount of goods in existence, which would also lead to inflation that money printing would cause.
      - logicchains 3y ago
        > 1. Singapore is a city state that has a GDP around twice of other developed economies. What works for it does not necessarily work for every other country. China as a country with relatively low GDP per capita also manages to maintain high foreign exchange reserves. >2. There's opportunity costs with keeping such high reserves around, rather than doing something productive like investing in infrastructure. Infrastructure spending is only a small fraction of the US budget compared to warfare; if the US hadn't gone to war in Iraq and Afghanistan it could have a few trillion dollars of reserves with no drop in productive spending. > It's unclear how introducing massive amounts of gold (previously held in reserve) into the economy won't cause inflationary effects. Like I said earlier, you can't eat gold. Dumping a bunch of gold into the economy doesn't magically increase the amount of goods in existence, which would also lead to inflation that money printing would cause. It would cause inflationary effects initially, but this would be a one-off thing, as the mining rate of gold is relatively steady.