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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.
        AnimalMuppet 3y ago
        If you have empirical evidence that, after abolishing the gold standard, economic crashes were still as frequent and as severe as they were under the gold standard, I'd love to see it. Until I do, I'm skeptical that any such evidence exists, because I'm pretty sure that they have not been as frequent or as severe. > The gold standard wasn't great but at least it kept the monetary policy anchored to the reality. I will agree with you that the Fed policy is less constrained by reality than it would be under the gold standard. I think the new actually works better, but I admit that the lack of constraint is a serious concern.

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.
        AnimalMuppet 3y ago
        If you have empirical evidence that, after abolishing the gold standard, economic crashes were still as frequent and as severe as they were under the gold standard, I'd love to see it. Until I do, I'm skeptical that any such evidence exists, because I'm pretty sure that they have not been as frequent or as severe. > The gold standard wasn't great but at least it kept the monetary policy anchored to the reality. I will agree with you that the Fed policy is less constrained by reality than it would be under the gold standard. I think the new actually works better, but I admit that the lack of constraint is a serious concern.