4 ms·

It scares me a lot that modern economies don't understand yet the worst tax on citizens is the Inflation tax. Still can't understand why we're still trying to m

It scares me a lot that modern economies don't understand yet the worst tax on citizens is the Inflation tax. Still can't understand why we're still trying to make things work after centuries of failures. Obviously monetary base expansion to support non austerity policies is the biggest inflationary factor.

sofixa 3y ago
What is your solution against inflation? The gold standard was proven not work, and it still saw inflation.
- pi-e-sigma 3y ago
  Gold standard wasn't great but in hindsight it actually worked better what we have now.
  - AnimalMuppet 3y ago
    Well, it worked better at preventing inflation. It led to some really nasty financial collapses, though, and what we have now works better at preventing those.
    - pi-e-sigma 3y ago
      It never led to any financial collapse though. It just prevented ballooning the money supply that could be used as a temporary work around. "If only we could printed more money we would have been fine!". So the gold standard wasn't the cause of the issue at hand, it just prevented _some_ type of a fix. The deflationary nature of the gold standard is something working long-term only, it can't flair up all of sudden. Unlike inflation. Besides I have an issue with this mantra that "small inflation is good for the economy" but somehow _small_ deflation being the end of the world.
      - AnimalMuppet 3y ago
        > It never led to any financial collapse though. If the Panic of 1879, the Panic of 1897, and the Great Depression don't count as "financial collapse", sure. I don't think that I agree with your definitions, though.
        pi-e-sigma 3y ago
        None of these examples were solely caused by the gold standard though. Gold standard was only a factor and to this day it's not clear how much it mattered. If the gold standard was universally soo bad why would the US reinstate it after the Great Depression and kept it going all till the 70s? Why would a superpower knee cap itself on a purpose? And the other way around: how would the US become superpower while maintaining the gold standard? Clearly it gave the US _some_ advantage. Similarly withdrawal from the gold standard by the UK and France coincidence with the start of the decline of these countries.
        AnimalMuppet 3y ago
        Your initial claim was: > Gold standard wasn't great but in hindsight it actually worked better what we have now. You didn't specify what it worked better at, just asserted that overall it worked better. I replied that it was specifically worse at preventing crashes (implying that it therefore was reasonable to question whether it was overall better). You reply that the crashes were not specifically caused by the gold standard. Perhaps not, but they were part of the way things worked under the gold standard. You can't argue that things as a whole worked better, and then argue that all the parts that didn't work better weren't part of what you were talking about. Is there any particular reason to blame the crashes on the gold standard? Well, the gold standard prevented someone like the Fed from doing what the Fed does these days to keep them from being so severe. So, maybe the gold standard wasn't the cause, but it was part of the problem.
        pi-e-sigma 3y ago
        Well, now we have empirical experience that after abolishing gold standard we still have economic crashes so getting rid of it didn't help us. So you can't really claim that gold standard was actually worse at preventing crashes. But we also have undesired things that weren't possible before such as FED's ability to print unlimited amount of money. That was my initial point and I stand by it. The gold standard wasn't great but at least it kept the monetary policy anchored to the reality.
- Quindecillion 3y ago
  Why did the gold standard fail? Was the inflation observed with the gold standard ever as bad as what's seen with government/central bank-issued money i.e. fiat?
  - isilofi 3y ago
    The failing of the gold standard was that it never limited money in circulation. Gold standards in practically all economies allowed for unlimited amounts of money to be printed at the whim of the central banks. Just that the central banks had to guarantee to pay out the set value in gold (or sometimes silver). At some point ppl realized that there wasn't enough gold in the vaults, which is why trust in the value of money (which is the actual backing force) vanished and hyperinflation happened. So the gold standard failed because it was bound to fail. It was bound on the false illusion that every penny in circulation was backed up by a gold brick, which it wasn't.
    - bondarchuk 3y ago
      It seems like what you and sibling (hef19898) are calling "failing of the gold standard", others would already call "abolishment of the gold standard". So it's a question of what perspective you take on the question whether it's still a "gold standard" if it has already been departed from. At the very least, if a fixed ratio of coin:gold were actually maintained these failings wouldn't have happened (almost by definition). Whether that is actually achievable in practical politics is of course another question.
      - isilofi 3y ago
        > At the very least, if a fixed ratio of coin:gold were actually maintained these failings wouldn't have happened It could still have happened, the mechanism is basically the same as in a bank run. If there isn't enough gold and too much demand for gold payouts, the central bank will run out and the system will explode. The "other" "abolishment of the gold standard" is actually something different: The transition from commodity money to fiat money. Commodity money is when your money is something of intrinsic value such as gold. Stamping coins in commodity money only serves to assure the holder of weight and purity, but the value of a coin is 1:1 the metal value. In commodity money, it is pointless to mint any coins out of metals other than the precious ones, so that transition is marked by the abolition of actual gold coins. There you transit from intrinsic value to putative ("fiat" means "believe" in latin) value, usually through instilling some kind of trust into that coin by payout guarantees (you may still get some gold if you really want), force of law and guarantees of purchase power (a loaf of bread will always cost some fixed amout, or else...) or just plain trust that it will continue to work as it always has (which is the current state of things). So the actual abolishment of the gold standard was quite some time after the commodity to fiat money transition and just exchanged the "fiat base" of a promised gold payout by plain trust. However, that "plain trust" can only work if the amount of money in circulation doesn't increase too rapidly compared to the amount of goods and services available and provided. Which is why you really really need strict control of the amount of money in circulation, thus central bank interest rates, austerity and other limitations on "printing" of money.
- isilofi 3y ago
  Limiting the money supply plus price controls plus deregulation of imports and production.
hgomersall 3y ago
Inflation is never anywhere a monetary phenomenon. It's always a lack of competition that allows someone to put their prices up. We need to dump the Friedmanian nonsense before more people get hurt.

sofixa 3y ago

What is your solution against inflation? The gold standard was proven not work, and it still saw inflation.

pi-e-sigma 3y ago
Gold standard wasn't great but in hindsight it actually worked better what we have now.
- AnimalMuppet 3y ago
  Well, it worked better at preventing inflation. It led to some really nasty financial collapses, though, and what we have now works better at preventing those.
  - pi-e-sigma 3y ago
    It never led to any financial collapse though. It just prevented ballooning the money supply that could be used as a temporary work around. "If only we could printed more money we would have been fine!". So the gold standard wasn't the cause of the issue at hand, it just prevented _some_ type of a fix. The deflationary nature of the gold standard is something working long-term only, it can't flair up all of sudden. Unlike inflation. Besides I have an issue with this mantra that "small inflation is good for the economy" but somehow _small_ deflation being the end of the world.
    - AnimalMuppet 3y ago
      > It never led to any financial collapse though. If the Panic of 1879, the Panic of 1897, and the Great Depression don't count as "financial collapse", sure. I don't think that I agree with your definitions, though.
      - pi-e-sigma 3y ago
        None of these examples were solely caused by the gold standard though. Gold standard was only a factor and to this day it's not clear how much it mattered. If the gold standard was universally soo bad why would the US reinstate it after the Great Depression and kept it going all till the 70s? Why would a superpower knee cap itself on a purpose? And the other way around: how would the US become superpower while maintaining the gold standard? Clearly it gave the US _some_ advantage. Similarly withdrawal from the gold standard by the UK and France coincidence with the start of the decline of these countries.
        AnimalMuppet 3y ago
        Your initial claim was: > Gold standard wasn't great but in hindsight it actually worked better what we have now. You didn't specify what it worked better at, just asserted that overall it worked better. I replied that it was specifically worse at preventing crashes (implying that it therefore was reasonable to question whether it was overall better). You reply that the crashes were not specifically caused by the gold standard. Perhaps not, but they were part of the way things worked under the gold standard. You can't argue that things as a whole worked better, and then argue that all the parts that didn't work better weren't part of what you were talking about. Is there any particular reason to blame the crashes on the gold standard? Well, the gold standard prevented someone like the Fed from doing what the Fed does these days to keep them from being so severe. So, maybe the gold standard wasn't the cause, but it was part of the problem.
        pi-e-sigma 3y ago
        Well, now we have empirical experience that after abolishing gold standard we still have economic crashes so getting rid of it didn't help us. So you can't really claim that gold standard was actually worse at preventing crashes. But we also have undesired things that weren't possible before such as FED's ability to print unlimited amount of money. That was my initial point and I stand by it. The gold standard wasn't great but at least it kept the monetary policy anchored to the reality.
Quindecillion 3y ago
Why did the gold standard fail? Was the inflation observed with the gold standard ever as bad as what's seen with government/central bank-issued money i.e. fiat?
- isilofi 3y ago
  The failing of the gold standard was that it never limited money in circulation. Gold standards in practically all economies allowed for unlimited amounts of money to be printed at the whim of the central banks. Just that the central banks had to guarantee to pay out the set value in gold (or sometimes silver). At some point ppl realized that there wasn't enough gold in the vaults, which is why trust in the value of money (which is the actual backing force) vanished and hyperinflation happened. So the gold standard failed because it was bound to fail. It was bound on the false illusion that every penny in circulation was backed up by a gold brick, which it wasn't.
  - bondarchuk 3y ago
    It seems like what you and sibling (hef19898) are calling "failing of the gold standard", others would already call "abolishment of the gold standard". So it's a question of what perspective you take on the question whether it's still a "gold standard" if it has already been departed from. At the very least, if a fixed ratio of coin:gold were actually maintained these failings wouldn't have happened (almost by definition). Whether that is actually achievable in practical politics is of course another question.
    - isilofi 3y ago
      > At the very least, if a fixed ratio of coin:gold were actually maintained these failings wouldn't have happened It could still have happened, the mechanism is basically the same as in a bank run. If there isn't enough gold and too much demand for gold payouts, the central bank will run out and the system will explode. The "other" "abolishment of the gold standard" is actually something different: The transition from commodity money to fiat money. Commodity money is when your money is something of intrinsic value such as gold. Stamping coins in commodity money only serves to assure the holder of weight and purity, but the value of a coin is 1:1 the metal value. In commodity money, it is pointless to mint any coins out of metals other than the precious ones, so that transition is marked by the abolition of actual gold coins. There you transit from intrinsic value to putative ("fiat" means "believe" in latin) value, usually through instilling some kind of trust into that coin by payout guarantees (you may still get some gold if you really want), force of law and guarantees of purchase power (a loaf of bread will always cost some fixed amout, or else...) or just plain trust that it will continue to work as it always has (which is the current state of things). So the actual abolishment of the gold standard was quite some time after the commodity to fiat money transition and just exchanged the "fiat base" of a promised gold payout by plain trust. However, that "plain trust" can only work if the amount of money in circulation doesn't increase too rapidly compared to the amount of goods and services available and provided. Which is why you really really need strict control of the amount of money in circulation, thus central bank interest rates, austerity and other limitations on "printing" of money.
isilofi 3y ago
Limiting the money supply plus price controls plus deregulation of imports and production.

hgomersall 3y ago

Inflation is never anywhere a monetary phenomenon. It's always a lack of competition that allows someone to put their prices up. We need to dump the Friedmanian nonsense before more people get hurt.