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Something tells me you hate the Gold Standard, and people generally hate what they cannot understand. The gold standard has no relation to any of those things. Although, plenty of these problems exist today in many countries around the world, under a fiat monetary system. All of the above, including hyperinflation, wage devaluation, massive asset bubbles, wealth disparity, zombie banks, stagnant economic growth in many economies around the world, wars, and commodity speculation.
See, I can do it too. It's really not that difficult.
The greatest economic growth and prosperity in America happened under a Gold Standard. The entity which has fared better under a fiat system is the Government. A few emerging economies in Asia have already started the process of reverting their fiat money standard into a Gold Legal Tender from the failed experiments involving a fiat monetary system. I think more countries will do the same. Not because of the failures of their own monetary system, but due to watching the train wreck that is the United States economy.
It's a race to the bottom, and I think the United States is going to win this one.
That's about all you can do under a fiat monetary system. And you've not very good at doing this to be honest.
There isn't any way around them. Period. Booms and bust are a natural part of the business cycle. These cycles are much more difficult to manage when the Government has a role in micro-managing the economy.
How exactly was this any different in any time before or after the Free Banking era. Financial institutions had the same banking life are were subjected to the same amount of failures. Bank runs were no more common or rare before or after this period.
Per capita GDP from after the Civil War to WWI was roughly the same as it was in the 20th century.
That doesn't tell you very much. Only that GDP increased at a relatively stable rate to the increasing size of the population. It doesn't change the fact that prosperity everyone believes was so great before the 1980's happened before the embrace of Fiat Money.
Also, economic volatility has been less under central banks and fiat currency than under the gold standard. Now, one could also argue that's a bad thing since it allows excesses to build.
Volatility is less now than ever before? Do tell...
Per capita GDP from after the Civil War to WWI was roughly the same as it was in the 20th century.
That doesn't tell you very much. Only that GDP increased at a relatively stable rate to the increasing size of the population. It doesn't change the fact that prosperity everyone believes was so great before the 1980's happened before the embrace of Fiat Money.
Also, economic volatility has been less under central banks and fiat currency than under the gold standard. Now, one could also argue that's a bad thing since it allows excesses to build.
Volatility is less now than ever before? Do tell...
GDP per capita is what matters because its what measures rising living standards. And there was little difference between the era of the gold standard and today.
Changes in the growth rate of the economy are less today than they were in the past.
And we've essentially had a fiat currency system since WWII, if not beforehand.
GDP per capita is what matters because its what measures rising living standards. .
The general supply of money is rising faster than the supply of goods and services.
What charity would that be? America doesn't offer much of anything economically to the world, and it doesn't export much of anything. The only thing America seems to export very well are it's bad economic ideas and inflation. The US Dollar has a hard time maintaining it's value, even against the weakest foreign currencies.
And I never pondered the thought that the United States would lose it's Reserve Status. I mentioned that it is the only reason it is allowed to get away with it's economic foolishness. I hardly doubt little would change if it ever lost this status.
That's nice, although I don't really see what relation this has to what I am saying. It doesn't take away from anything that I have said. Anytime anyone deposits their money inside of a bank, they become a creditor of that bank. And being a creditor of that bank does entitle anyone to their losses if their investments fly south. Loans creates deposits, but these new deposits also creates money from nothing with money being drawn from the future to the present to back up current money being used by other depositors. It's merely a game of musical chairs. As long as the music keeps playing, there are no losers.
The inflow of liquidity and the expansion of the money supply was the initial problem in the first place. The Federal Reserve tried to prop up the British Pound by devaluing the US Dollar. All the extra liquidity and mal-investment went straight into stocks. And the rest is a financial disaster.
Yes. This really wouldn't have made a difference at the time. The money supply is relatively much smaller compared to the money supply today. Even still, the Federal Reserve had billions of dollars of gold on reserves and could have used this gold at any time during the Great Depression. To say that the supply of gold prevented the Fed from creating new money is an erroneous statement. Nothing stopped the Federal Reserve from increasing the money supply during the 1920's to create a wealth effect in the economy. Perhaps this was the reason why it didn't use the extra liquidity in the first place. The Fed Chairman was spooked by the Stock Market boom it created during 1927 - 1929 and didn't want to repeat the same mistake.
Gold prevents the government from excess spending and money printing in times when the Government thought, justifiably or wrongly (most often, wrongly) thought that these polices were a good idea. Under the Gold Standard, the money supply is determined by the value of Gold, not just the amount of Gold in reverses. During the 1920's, the US Dollar was worth 1/20th of an ounce. In other words one US Dollar was worth 20 ounces of Gold. The money supply can still generally increase relative to the spot price of Gold, but at a stable rate. Far more stable than today.
GDP per capita is what matters because its what measures rising living standards. .
well, its a crude crude measure at best. Today the poorest people have access to state of the art health care and Iphones because capitalism distributes wealth and technology so broadly. GDP may be stalled as it is today but huge new inventions are still rapidly spreading throughout our culture to raise our standard of living.
Japan is a great example, 2 lost decades in terms of GDP, but still great new inventions that have raised their standard of living a mile.
That doesn't tell you very much. Only that GDP increased at a relatively stable rate to the increasing size of the population. It doesn't change the fact that prosperity everyone believes was so great before the 1980's happened before the embrace of Fiat Money.
Volatility is less now than ever before? Do tell...
GDP per capita is what matters because its what measures rising living standards. And there was little difference between the era of the gold standard and today.
Changes in the growth rate of the economy are less today than they were in the past.
And we've essentially had a fiat currency system since WWII, if not beforehand.
Real Output from 1879 to 1913 was 3.5%, and only 1.5% between 1949 and 1990. The Bretton Woods System wasn't really a Gold Standard. The closest the United States has ever been to a pure Gold Standard was before the WWI.
We also learned that capitalism is susceptible is massive durations of unemployment without the ability to run deficits. This is was another critical thing we learned from the Great Depression.
The devil is always in the details, and things aren't always what they seem to those who are convinced that wealth inequality is a social sin.
We also learned that capitalism is susceptible is massive durations of unemployment without the ability to run deficits. This is was another critical thing we learned from the Great Depression.
too stupid for words as usual!! The Great Depression was a period when capitalism was reduced and reduced by a leftist president! HIs name was FDR. Why not look him up? If we learned anything it was that the less capitalism the more depression!!
Do you see why we are positive a liberal will be slow. What other explanation is possible?
I looked him up, and FDR was rated by historians as America's greatest president, and even in the area of handling the nations's economy FDR was also rated number one.
So if reduced capitalism is the cause of depression there must have been even less capitalism with Coolidge and Hoover than with FDR?
I looked him up, and FDR was rated by historians as America's greatest president, and even in the area of handling the nations's economy FDR was also rated number one.
well then I'm sure if Obama can keep U6 unemployment (14 %) at almost double what is was in the pre-recession years he too will be highly ranked by liberal historians.
So if reduced capitalism is the cause of depression there must have been even less capitalism with Coolidge and Hoover than with FDR?
too stupid by 1000%, as usual. Liberalism or socialism was the cause of the Great Depression and what kept it going long enough to cause World War 11.
Notice how a conservative will always be in the kindergarten teaching role when he encounters a lowly liberal.
I think maybe you're right with the kindergarten approach, so when did the Great Depression begin, and who was president when it began?
The general supply of money is rising faster than the supply of goods and services.
Where’s the inflation or hyperinflation? The bottom line is, as much as the inflationistas, gold bugs and Austrians (my personal favorites) say hyperinflation is right around the corner, they are simply wrong and don’t understand the mechanics which cause inflation. I also blame the very problems inherent in the Quantity Theory of Money (MV=PQ) for these misunderstandings.
The dollar has gone up since QE1, QE2 and Operation Twist:
They’ve added TRILLIONS in reserves, but bank reserves aren’t inflationary, nor can they expand credit. Literally, any type of over overspending can result in inflation, whether we're talking about exports, consumption, investments or government spending. Any component of aggregate demand could tip the economy towards inflation.
Here we have real money printing in the form of the federal deficit which has seen a 2000% increase since around 1980. Now have a look at the CPI. It’s actually decreased. Where’s the inflation?
We offer the ability for the foreign sector to save in US financial assets. Let’s use China as an example, since they’re always the culprit in some capacity. The Chinese hold dollars and desire to save in the form of US financial assets. Any type of domestic credit creation, such as a bank loan, for example, funds the ability of the Chinese to accrue and save US financial assets. They are dependent on US credit creation so they can accrue US financial assets. The US benefits, the Chinese benefit, everyone is happy with the current arrangement.
No, they’re not creditors. You mentioned fractional reserve banking, I tried to explained how it’s not really an accurate description of what occurs, nor is the money multiplier accurate.
There’s no such thing as mal-investment (Austrian Business Cycle). It’s not a sounds theory. I’m willing to extrapolate further after I eat dinner.
I’m hearing the same gold standard line: you seem to think it’s a benefit that it somehow prevents the government from issuing paper currency as way to stimulate the economy. However, under a gold standard, the government simply couldn’t expand base money if there was a trade deficit. I’m not the only person who realizes how problematic this is. This forced the US to make adjustments due to trade imbalances. Yes, having monetary policy held hostage by the amount of a gold a country has makes perfect sense, especially when said gold is obtained mainly from trade. < ------ sarcasm.
In the US, under the gold standard up until the Depression, the amount of gold reserves controlled the domestic supply of money. This isn’t open to debate. Since gold was a finite resource, and there hadn’t been any new discoveries in years, it was thought that it would somehow create a stable monetary system. For example, if there was a new discovery, and the overall supply changed, this would result in inflation.
Basically, the gold reserves prevented the expansion of bank reserves and base money. I hope you see the problems inherent in this scenario. The FED couldn’t expand their liabilities past their actual gold reserves. Operationally, this means once you reached this limit, you can’t purchase any more debt or issue loans to your member banks.
As a result, bank reserves became limited. If the public at large desired more currency, then the reserves would contract. If other expenditures needed to be financed, the government would have to issue debt or tax. The federal government simply couldn't just credit commercial bank accounts under the gold standard to increase its spending or finance expenditures.
We also learned that capitalism is susceptible is massive durations of unemployment without the ability to run deficits. This is was another critical thing we learned from the Great Depression.
I think maybe you're right with the kindergarten approach, so when did the Great Depression begin, and who was president when it began?
oh dear, thats such a tough question; at least to a liberal. See what I mean about being the teacher??
Even heard of the Hoover Dam???? A huge liberal stimulus among many that prolonged the depression until FDR took over and did more stupid liberal things to prolong it into the next decade and cause world war.
... the liberal Hoover interventions include: expanded public works( ever heard of Hoover dam), greater government control over agriculture, the Smoot-Hawley tariff, a virtual end to immigration, government loans for construction and other businesses ... Most important was Hoovers pressuring businesses to not cut wages even as the prices of their output fell. The result was higher real wages, which were responsible for the unemployment rate topping out at 25 percent, causing the greatest human toll of the Great Depression. [1]
Hoover, much like FDR, was skeptical about free markets. [2]
You used the words hyperinflation, not me. While you are still willing to put words in my mouth, you should know that Gold advocates generally do not believe hyperinflation is right around the corner. They really only see hyperinflation as a worse case scenario. The velocity of money isn't changing hands nearly fast enough to indicate signs of hyper-inflation. But that doesn't mean inflation isn't present.
You honestly call that 'up?' All that happened was that the Dollar increased from it's all time lows. If all you have is a penny to your name, and you've found a penny, then congratulations, you've just doubled your money. That's really not an improvement, and the increase had nothing to do with the policies the FED decided to pursue. If you really want to get a better grasp of how far the US Dollar has fallen, use my charts
Currency devaluation methods from QE and Operation Twist didn't increase the value of the dollar. Other countries are just competitively devaluing their currencies as well, to prop up the US Dollar. The Dollar hasn't returned to pre-crisis levels, and is still weaker relative to most major currencies and other exotic currency pairs.
The CPI hasn't had a decrease since the 1952 or something. You are referring to percentage change regarding the CPI. Two different metrics entirely. As for where is the inflation, why it's right here:
It's Kewl.
The CPI methodology has changed numerous times throughout US history, from the beginning in the 1970's throughout the 1990's when the CPI was finally rendered useless. It is no longer an accurate measure of inflation. If you are looking through general prices in the economy over time, you will find all the evidence of inflation you need.
Ah, so the United States is Tom Sawyer and China are basically the children who are paying the US for the privileged of white washing our fences. That's really the only benefit I really see. The US accumulated trade deficits, it pay for it's exports with imports, but in exchange it exports worthless pieces of paper as financial assets. And in turn, the Chinese loan these assets back to the United States so it can continue maintain is phony lifestyle.
I generally only see one person benefiting here. The Chinese live way below their means so the United States can continue to live way above theirs. As China rapidly grows into a more consumer based economy, that is all going to change.
You deposit your money into a bank, the bank provides you interests of the for the use of that money and you store that money for safe keeping. This makes you an unsecured creditor whether you want to acknowledge this or not. And the key word is 'mentioned.' I only used the term once and never really referenced it to anything. If you'd like to discuss it, you can but wasn't planning on disusing much about it as I general point really doesn't relate to fractional reserve banking.
But thanks, I guess...
So there is no such thing as a waste of capital and resources? Hm, okay.
Again, trade deficits were never a problem until after the full abandonment of the Gold Standard. You had the basic concepts of trade imbalances correct the first time. Under a period where the Gold Standard existed, trade balances tended to be 0. Trade surpluses and deficits did occur, but there were corrected over time.
A country with a trade surplus receives an inflow of gold from importing countries. The decrease in gold makes the demonstration money supply loose, and in-turn increases employment and economic output. The rise in the money supply would eventually result in higher prices. This causes the price of exports to decrease and the cost of importing to increase. As a result, imports will increase relatively faster than exports or exports will decline all together.
So along the lines, the trade surplus becomes a deficit and so does the gold money stock. The trade deficit just follows a zero converting process.
Here is the relation between the current account and overall economic output. Since the adopting of the Gold Standard, the ratio was never less than 0.5%. I reiterate, the balance didn't get out of control until it's abandonment with a deficit ration of 5.5%.
You keep repeating the same conjures over and over again, but this isn't going to add much truth to what you are saying. The word finite is misleading. We have enough commodities to last generations, such as oil, copper and gold. As commodities become more scarce, prices increase forcing individuals to self ration. This also incentivises producers of goods and services to come up with more efficient ways of using the same resource, which also includes extracting that resources from the earth.
So even if you believe something is a 'finite resource,' that doesn't tell you very much. The general fear of resource depletion has been with us since the industrial age, but as we find more efficient ways of extracting resources, the cost of extracting decreases and the overall supply increases. This is how the world has gone from only a few Million barrels of proven oil reserves to over 1.2 Trillion Oil Reserves today, and how Gold Mining companies can maintain their relatively stable mining cost, despite the fact that Gold is making a correction.
Getting back to Gold, lets say that newer and more efficient was of extracting Gold was discovered over time. You would see a sudden decrease in cost of it's extraction. What does this mean? This means that you generally have an increase in the overall supply of gold. This brings more gold into the economy, and as a result, prices would rise. As the price of gold extraction dropped, this that an ounce of gold extract from the ground cost less than the capital used exploration. Basically, this means that gold mining because relatively cheap.
I don't see the inherent problems because that's has never been an inherent problem. In a true Gold Standard, the base money supply increases relative to the price of gold, and not just the supply. Under the Bretton Wood's system, this made the US Dollar and the Gold Price fixed. Even when the Central Bank was drastically expanding the money supply, $35 still only bought you one once of Gold. That is not how the money supply is generally suppose to world under a Gold Standard.
But essentially, it is good that the Government cannot issue new debt.
The demand for money has never been a problem either. Would you like to know how?
As if this was ever a good thing. All we have managed to do was magnify our past failures.
We both know idiots like Peter Schiff and Kyle Bass have said hyperinflation is around the corner. I know it's basically impossible, unless a country suffers a loss of its industrial capacity, has massive corruption, and basically has debts denominated in a currency other than its own. This is the historical trifeca for hyperinflation.
The Big Mac index isn't such a great metric. There's some PPP issues there, but I digress.
What software are you using? I don't play FOREX but I'm curious.
I've been trying to explain this to the hard currency crowd for YEARS: the dollar's purchasing power has increased SIGNIFICANTLY if we use the common denominator of hours of labor needed to purchase a basket of goods. Our ability to acquire more goods and services has increased over time as real incomes have risen.
All the problematic inflation Ive seen is a result of increasing energy prices. The is a relative value deal but filters through every sector of the economy and becomes an inflation deal. I think it stems from the government sector paying increased prices for the stuff (real goods and services) it purchases. This also includes indexing government sector wages to the CPI, which is how the country has decided to define inflation. Every time the government sector pays a higher price for something, it's basically changing goalposts and trending the currency downward. Our own leaders don't even understand how the monetary system functions, so I'm frankly not surprised.
Imports are real benefits and exports are real costs. The trade deficit improves our standard of living immensely. If any jobs a lost in the process, it's due to the fact taxes are way too high for the current level of government spending. The real wealth of a nation consists of everything it produces and keeps, including all net imports, minus what it must export.
If you think all those financial assets are worthless pieces of paper, I will gladly take that burden off your hands.
The Chinese don't loan us anything, including their assets. If you're referring to Treasuries, they're simply gloried savings' accounts which represent the total savings of the US economy. The foreign sector simply shifts funds between reserve accounts and Treasuries the same way you or I would shift funds back and forth between our checking and savings accounts. They're isn't going to be some Peter Schiff day of reckoning. Ever. Well, we might see him in a straight jacket if he keeps losing his clients massive wads of money.
I'll try again, just not tonight.
Sure there is....It's just that the Austrian Business Cycle is completely off the wall. We'll get into it if you want.
They were a HUGE problem. It's just that these myths stay alive and are pervasive.
Lets say an inflow of gold allowed the US government to increase the money supply (issue more notes) due to the fact they has more gold to back the currency. The monetary expansion was in a set proportion to the value of the US dollar in terms of gold. At some point, the increasing money supply with hit the inflation barrier, given no real increase in the overall capacity of the economy which would make exports significantly less attractive, thus reducing the external deficit so to speak.
From a practical standpoint, not theoretical, the adjustments to trade that were required to correct imbalances were very slow. At the same time, deficit counties had to deal with high unemployment and recession. A gold standard creates a bias in economies with a burden on the shoulders of countries with weaker currencies ( a result of trade deficits). This rigid structure prevented governments from creating monetary and fiscal policies which would benefit their domestic economies.
Are natural resources finite? Yes or no? We know there are finite amounts of oil, copper, gold, silver, nickel, etc. in the ground. Eventually, at some point, not today or tomorrow, we will run out, but I get your point. There's improved technology, better refining and extraction methods, but some day the spigot will run dry.
I own some gold, but as a commodity, it's subject to volatility, that's for sure. Gold has doesn't have an intrinsic value, it's a non-productive asset. When I own a stock, I own a piece of a business which produces real goods and services for consumers as well as generating profits.
Historically, gold has been a horrible investment against inflation. Stocks have performed much better with an average of seven percent inflation-adjusted dollars over the past two hundred years. For example, if we switched to rocks, paper, sticks, gold or silver as a currency, Google, Apple and Lockheed would still generate enormous surpluses as people exchange their money for real goods and services produced by these firms.
What do you define as a 'true gold standard'? I'm more than familiar with the gold standard, fixed exchange rates, etc. I didn't like Bretton Woods, either. I'm venturing not for the same reason you probably disliked it.
By the way, I wasn't attempting to repeat myself. The gold standard - and its history - is pretty linear and easy to understand. I just don't think mentioning the ten or so booms and busts of the 19th century is a good way to sell the gold standard. Getting back to Peter Schiff (yes, I hate this guy in an irrational way), he somehow lauds the 19th as some golden era (no pun intended).
Sure, I'm all ears.
How so?
Laissez faire is a direction for how an economy can be run. It is not a state of being of an economy.
I am happy to read that you are reasonably in touch with reality and do understand that markets demand rules to work.
Free Markets doesn't necessarily means of absent of rules. Free, in the essence of a Free Market, just means in absence of force. In an ideal Free Market, there would be no force or fraud at all. Everyone would engage in voluntary transactions that increase wealth for all parties involved.
Behind EVERY law or regulation is the IMPLIED THREAT of force, amigo. The ideal free market does not exist because the IDEAL FREE MARKETEER does not exist. Libertopia is as unlike an event as MARXITOPIA because human being do NOT play by the rules IF the rules tell them: "You lost...now go die, quitely and allow we the winners to enjoy our success"
But most are not so naive to believe this will actually happen all the time on it's own. Acknowledging that people will seek profits means acknowledging that greedy people will engage in force or fraud to obtain them, regardless of the economic system. The Free Market has a few ways of dealing with this.
I think its really time to stop calling it the FREE market, don't you? It's the market, and its the economy. Adding happy sounding words to it to make it more pallitable is just propaganda.
What makes them FREEr than the USA?
We are speaking in terms of economic freedom. Hong Kong, for starters, it's the worlds most competitive market with a zero percent tariff rate and a very transparent investment framework. The tax rate are much lower with 15% being the highest marginal tax rate, 16% corporate tax and 0% on capital gains and investments. It's considered one of the easiest place to start a business, very straight forward, quick and easy registration with little to no licensing required. Despite the fact that Government owns all land, people are free to lease and maintain ownership of their property.
You'll excuse me if I laugh, right?
One of the most regulated societies on earth and you're telling me its a freer market rhan ours?!
What you mean is they have lower taxes on businesses...that'd how you're dfining something as FREE?
There are a few setbacks. It was one of the very few countries not dumb enough to institute a minimum wage law, until 2011 but I suppose this was due to the high cost of living. Despite everything, Hong Kong still maintains a strict policy of non-interventionism embedded in their constitution.
I believe, and I think you might too if you consider it, that comparing an ISLAND nation's economic system like HONG KONG to the economic system of the USA is kind of silly.
Compare the nature resoures of HK to the USA. Of course HK is going to be all about unrestricted trade...that's ALL HK has is TRADE.
Well in this case you need to preach to those idiots on the right who IM<AGINE they know what Keynesian economic theory means because those notwits DO imagine that there are a single set of rules that will make economy run smoothly.
YOu happen not to be so ignorant but you are ascribing beliefs to Keynes that he NEVER held as IN
I like to keep my economic reading material as balanced as I can possibly stand.
When YOU see centrally planned policies?!
Give me an example of what you mean please.
Isn't the entire system CENTRALLY PLANNED?
If not what the fuck is the FEDERAL RESERVE?
The Federal Reserve is just one explain I've already given. It's enacted in response to market crisis and recessions, but in essence when given an active role in the market place, it can make inherent problems bigger. There is really no reason why the American economy shouldn't be able to operate without the Federal Reserve.
I ponder the question of whether this nation would thrive or not sans some kind of central bank.
I am still unsure how I feel about that.
I know that the current model central bank doesn't impress me though.
the 2007-2008 meltdown was, in my opinion, the smoking gun that shows us how guilty and classist this institutiuon has become.
