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Economically the US left the gold standard which meant currency could be created by the central bank. This caused inflation to rise but also meant that more cap

by vondur 2y ago

Economically the US left the gold standard which meant currency could be created by the central bank. This caused inflation to rise but also meant that more capital could be raised in the economy, which wasn't as easy to do when the amount of dollars were fixed. Double edged sword kind of thing.

thehumanmeat 2y ago
The US left the gold standard well before 1971. Central banks do not create currency, they create bank reserves. There is no indication that it drives money creation. Let me know where I can spend bank reserves to buy goods and services. Money is created from banks, and mostly done so off-shore away from the purview of the central bank. https://en.wikipedia.org/wiki/Eurodollar https://en.wikipedia.org/wiki/Eurodollar
- choxi 2y ago
  What do you mean? I thought the US dollar was fixed to gold between WWII and 1971: > On 15 August 1971, the United States ended the convertibility of the US dollar to gold, effectively bringing the Bretton Woods system to an end and rendering the dollar a fiat currency https://en.wikipedia.org/wiki/Bretton_Woods_system https://en.wikipedia.org/wiki/Bretton_Woods_system
  - JumpCrisscross 2y ago
    > thought the US dollar was fixed to gold between WWII and 1971 The dollar was convertible into gold at a fixed rate. We still printed more dollars than there was gold.
blased 2y ago
The gold standard disincentivizes consumption, and incentivizes savings. Plain and simple. Of course corporations love consumerism, and that's what the central bank fiat regime has enabled: wanton consumption and dwindling away the wealth of society. If you're wondering why everything in society outside of technology is getting worse and being replaced with cheap substitutes, you need to look at the money itself.
- JumpCrisscross 2y ago
  > gold standard disincentivizes consumption, and incentivizes savings. Plain and simple Read Walter Bagehot's Lombard Street, published in 1873 [1]. It's the treatise by arguably the world's first modern central banker. What makes it neat is it's entirely on the gold standard. Britain, on the gold standard, still faced each of inflation, bank runs and credit crises. It was an imperial military power almost constantly at war. And yes, its contemporaries lamented its industrial consumerism and rising inequality. (And that's Victorian Britain, mind you!) [1] https://en.wikipedia.org/wiki/Lombard_Street:_A_Description_of_the_Money_Market https://en.wikipedia.org/wiki/Lombard_Street:_A_Description_...
  - blased 2y ago
    Thanks I came across Walter Bagehot in the book Price of Time which looks at interest rates and money throughout history. It turns out that interest rates are still manipulated by banks and governments whether it's gold or something else. The difference is that at least under gold there's constraints and a price to be paid for debasing.
JumpCrisscross 2y ago
> the US left the gold standard which meant currency could be created by the central bank You have the causality backwards. We left the gold standard because we created too much currency and were facing a run [1]. [1] https://history.state.gov/milestones/1969-1976/nixon-shock https://history.state.gov/milestones/1969-1976/nixon-shock
- knightfall21 2y ago
  Yes, and breaking that final gold-dollar link to fix the overspending issue caused productivity to be disconnected from the money supply, thus allowing more of the value capture to happen to those who could create equity or be loaned money.
  - JumpCrisscross 2y ago
    > breaking that final gold-dollar link to fix the overspending issue caused productivity to be disconnected from the money supply The point is it was always broken. I wrote a comment in response to someone describing the 19th century as some panacea of monetary stability. It wasn't [1]. The anomaly isn't the 70s or 80s. It's the post-War era of the 1950s and early 60s. [1] https://news.ycombinator.com/item?id=42715153 https://news.ycombinator.com/item?id=42715153
einpoklum 2y ago
> which meant currency could be created by the central bank ... but note that most money was already at that time created by commercial banks through loans (a fractional reserve system).

by vondur 2y ago

thehumanmeat 2y ago

The US left the gold standard well before 1971. Central banks do not create currency, they create bank reserves. There is no indication that it drives money creation. Let me know where I can spend bank reserves to buy goods and services. Money is created from banks, and mostly done so off-shore away from the purview of the central bank. https://en.wikipedia.org/wiki/Eurodollar https://en.wikipedia.org/wiki/Eurodollar

choxi 2y ago
What do you mean? I thought the US dollar was fixed to gold between WWII and 1971: > On 15 August 1971, the United States ended the convertibility of the US dollar to gold, effectively bringing the Bretton Woods system to an end and rendering the dollar a fiat currency https://en.wikipedia.org/wiki/Bretton_Woods_system https://en.wikipedia.org/wiki/Bretton_Woods_system
- JumpCrisscross 2y ago
  > thought the US dollar was fixed to gold between WWII and 1971 The dollar was convertible into gold at a fixed rate. We still printed more dollars than there was gold.

blased 2y ago

The gold standard disincentivizes consumption, and incentivizes savings. Plain and simple. Of course corporations love consumerism, and that's what the central bank fiat regime has enabled: wanton consumption and dwindling away the wealth of society. If you're wondering why everything in society outside of technology is getting worse and being replaced with cheap substitutes, you need to look at the money itself.

JumpCrisscross 2y ago
> gold standard disincentivizes consumption, and incentivizes savings. Plain and simple Read Walter Bagehot's Lombard Street, published in 1873 [1]. It's the treatise by arguably the world's first modern central banker. What makes it neat is it's entirely on the gold standard. Britain, on the gold standard, still faced each of inflation, bank runs and credit crises. It was an imperial military power almost constantly at war. And yes, its contemporaries lamented its industrial consumerism and rising inequality. (And that's Victorian Britain, mind you!) [1] https://en.wikipedia.org/wiki/Lombard_Street:_A_Description_of_the_Money_Market https://en.wikipedia.org/wiki/Lombard_Street:_A_Description_...
- blased 2y ago
  Thanks I came across Walter Bagehot in the book Price of Time which looks at interest rates and money throughout history. It turns out that interest rates are still manipulated by banks and governments whether it's gold or something else. The difference is that at least under gold there's constraints and a price to be paid for debasing.

JumpCrisscross 2y ago

> the US left the gold standard which meant currency could be created by the central bank You have the causality backwards. We left the gold standard because we created too much currency and were facing a run [1]. [1] https://history.state.gov/milestones/1969-1976/nixon-shock https://history.state.gov/milestones/1969-1976/nixon-shock

knightfall21 2y ago
Yes, and breaking that final gold-dollar link to fix the overspending issue caused productivity to be disconnected from the money supply, thus allowing more of the value capture to happen to those who could create equity or be loaned money.
- JumpCrisscross 2y ago
  > breaking that final gold-dollar link to fix the overspending issue caused productivity to be disconnected from the money supply The point is it was always broken. I wrote a comment in response to someone describing the 19th century as some panacea of monetary stability. It wasn't [1]. The anomaly isn't the 70s or 80s. It's the post-War era of the 1950s and early 60s. [1] https://news.ycombinator.com/item?id=42715153 https://news.ycombinator.com/item?id=42715153

einpoklum 2y ago

> which meant currency could be created by the central bank ... but note that most money was already at that time created by commercial banks through loans (a fractional reserve system).