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>Isn't that just quantitative easing/tightening by another name? During good times you're taking gold out of circulation to build reserves, and during bad times

>Isn't that just quantitative easing/tightening by another name? During good times you're taking gold out of circulation to build reserves, and during bad times you're releasing gold out of reserves to stimulate the economy. Yes, exactly. But in this scenario the gold's being taken out of circulation by taxation rather than by inflation, which makes it more visible and constrained. Similarly the release is constrained by the amount of physical gold reserves, so you couldn't realistically have e.g. a few years of 100%+ inflation rates. And the process of transferring the wealth is less lossy; 100% goes to the government, none to intermediaries in the financial system. >The above example involves US states, which can't print their own money. They can't, but they can try to get the federal government, which can, to bail them out.

gruez 3y ago
>which makes it more visible and constrained It comes at a heavy cost though: you need to keep tons of the yellow stuff around, rely on the past administrations being prudent to actually keep a sufficient reserve. In the end you're still relying on people to act prudently. >They can't, but they can try to get the federal government, which can, to bail them out. I mean if you're going to invoke extraordinary measures like this, then I can also invoke up extraordinary measures like the government debasing the currency, which was still done even when countries were on the gold standard.
- logicchains 3y ago
  >It comes at a heavy cost though: you need to keep tons of the yellow stuff around A cost to the government, but much less of a cost to the lower classes, who pay low taxes thanks to progressive taxation so inflation represents the biggest drain on their wealth (especially since most don't have access to financial instruments or the education to use them). >I mean if you're going to invoke extraordinary measures like this It's not necessarily extraordinary; we haven't seen the Federal government bail out a state yet but we also haven't yet seen a state undergo a complete financial collapse, so it's quite possible there'd be a bailout if things got bad enough. The WSJ predicts a bailout of the states is upcoming: https://www.wsj.com/articles/the-coming-biden-bailout-of-blue-states-and-cities-rhode-island-california-pension-liability-underwater-rates-svb-5033c1e5 https://www.wsj.com/articles/the-coming-biden-bailout-of-blu... >like the government debasing the currency, which was still done even when countries were on the gold standard They did that by essentially turning their currency into a fiat currency: saying it was worth X, when the actual precious metal it consisted of was only worth e.g. half of X. But yes you're right that in theory nothing prevents a government with 100% gold standard from debasing it like that, however doing so would be more visible to citizens than inflation since it'd require centralising how the currency was priced.

gruez 3y ago

>which makes it more visible and constrained It comes at a heavy cost though: you need to keep tons of the yellow stuff around, rely on the past administrations being prudent to actually keep a sufficient reserve. In the end you're still relying on people to act prudently. >They can't, but they can try to get the federal government, which can, to bail them out. I mean if you're going to invoke extraordinary measures like this, then I can also invoke up extraordinary measures like the government debasing the currency, which was still done even when countries were on the gold standard.

logicchains 3y ago
>It comes at a heavy cost though: you need to keep tons of the yellow stuff around A cost to the government, but much less of a cost to the lower classes, who pay low taxes thanks to progressive taxation so inflation represents the biggest drain on their wealth (especially since most don't have access to financial instruments or the education to use them). >I mean if you're going to invoke extraordinary measures like this It's not necessarily extraordinary; we haven't seen the Federal government bail out a state yet but we also haven't yet seen a state undergo a complete financial collapse, so it's quite possible there'd be a bailout if things got bad enough. The WSJ predicts a bailout of the states is upcoming: https://www.wsj.com/articles/the-coming-biden-bailout-of-blue-states-and-cities-rhode-island-california-pension-liability-underwater-rates-svb-5033c1e5 https://www.wsj.com/articles/the-coming-biden-bailout-of-blu... >like the government debasing the currency, which was still done even when countries were on the gold standard They did that by essentially turning their currency into a fiat currency: saying it was worth X, when the actual precious metal it consisted of was only worth e.g. half of X. But yes you're right that in theory nothing prevents a government with 100% gold standard from debasing it like that, however doing so would be more visible to citizens than inflation since it'd require centralising how the currency was priced.