Learning from Europe while it is , in effect, on a gold standard

[EdwardBaiamonte]

Hogwash.

so then it wasn't a fiat system?????????? Why so afraid to explain???? The Depression was caused because the supply or money was not tied to the supply of gold. True or false?

You could exchange your dollars for gold at a set price (if you were a foreign government). That's a gold standard. Hope that's explanation enough for ya, Chief. I would have thought you would have worked this out by now.

In "fiat" all you can change your dollars for are worthless goods and services and the discharge of pointless debt. No real "value" there are all.

Capice?

how can you change your dollars for gold if the government hasn't printed any dollars??

 

[samjones]

so then it wasn't a fiat system?????????? Why so afraid to explain???? The Depression was caused because the supply or money was not tied to the supply of gold. True or false?

You could exchange your dollars for gold at a set price (if you were a foreign government). That's a gold standard. Hope that's explanation enough for ya, Chief. I would have thought you would have worked this out by now.

In "fiat" all you can change your dollars for are worthless goods and services and the discharge of pointless debt. No real "value" there are all.

Capice?

how can you change your dollars for gold if the government hasn't printed any dollars??

There's no hard-and-fast rule that you have to print 35 dollars for every ounce of gold in the treasury. There's no hard-and-fast rule that you have to have an ounce of gold for every 35 dollars you print. If you agree to exchange a set amount of currency for a specific amount (standard) of a metal (gold) then you have what you might call a "gold standard"

No shit.

 

[EdwardBaiamonte]

In "fiat" all you can change your dollars for are worthless goods and services and the discharge of pointless debt. No real "value" there are all.

Capice?

how can you change your dollars for gold if the government hasn't printed any dollars??

 

[samjones]

In "fiat" all you can change your dollars for are worthless goods and services and the discharge of pointless debt. No real "value" there are all.

Capice?

how can you change your dollars for gold if the government hasn't printed any dollars??

There was never a situation where the US Government "hadn't printed any dollars". There simply weren't as many dollars in circulation as there was gold in the treasury. It's still a gold standard.

Here are 2 rules that don't exist in a gold standard and one law of economics that applies.

Rule 1 - you have to have as much gold on hand as you have gold certificates outstanding. No, that isn't true.

Rule 2 - you have to have as many gold certificates as you have gold on hand. No, that isn't true.

Why aren't those rules actual rules? Because they aren't.

Here's a relevant law - it's called Gresham's Law and you continually allude to it. Gresham's Law dictates that the exchange rate for gold printed on the gold certificate has to be below market, always. Otherwise some big thinker would use arbitrage to rob the US Treasury of all it's gold.

Once we conclude that the gold in the Treasury can only be exchanged for an amount well below market rate, it's a trivial matter for the Treasury to honor the gold certificates..... they simply buy the gold with the certificates you give them.

Imagine this....

Scenario 1: the Treasury will give you one ounce of gold for $35.00

The pawn shop will give you $45.00 for one ounce of gold.

You go back and forth between the treasury and the pawn shop making $10.00 per ounce in arbitrage with each trip.

Scenario 2: The Treasury will give you one ounce of gold for $35.00

The pawn shop will give you $25.00 for one ounce of gold.

You bring in 35,000,000 dollars and say give me 1 million ounces (t) of gold and not only does the treasury make that arrangement for you, but they wind up 10,000,000 richer for doing so.

So it matters little how much the Treasury actually has on hand. What matters is that there's a stable market for gold and they're offering you a price well above market rate. At that point they merely become an abitrageur for any foreign government foolish enough to demand gold for dollars.

If you feel a need to argue with anything I've just written I suggest you take a deep breath and re-read, carefully.... one sentence at a time.

I think we'll be able to put this topic to rest now.

Been nice chatting with you, Ed.

 

[OohPooPahDoo]

but it was certainly not fiat).

a fiat liberal mercantilist system is one in which the supply of money is not tied to the supply of gold. The Great Depression was caused by such a system.

The supply of money has never been "tied to the supply of gold" - at least, not in this nation and to the degree to which you desire.

Yet - amazingly - we were transformed from a lowly rebellious colony to the greatest power on Earth in just under 150 years.

 

[OohPooPahDoo]

Hogwash.

so then it wasn't a fiat system?????????? Why so afraid to explain???? The Depression was caused because the supply or money was not tied to the supply of gold. True or false?

False. 100% False. You are such a fucking moron. The Fed held over 1/3 of its assets in gold at the time. You're an ignorant fuck.

 

[OohPooPahDoo]

Hogwash.

so then it wasn't a fiat system?????????? Why so afraid to explain???? The Depression was caused because the supply or money was not tied to the supply of gold. True or false?

You could exchange your dollars for gold at a set price (if you were a foreign government). That's a gold standard. Hope that's explanation enough for ya, Chief. I would have thought you would have worked this out by now.

In "fiat" all you can change your dollars for are worthless goods and services and the discharge of pointless debt. No real "value" there are all.

Capice?

Its amazing how I can trade "worthless" dollars for milk, bread, and every single material thing I need to live on.

 

[editec]

You should learn about the history of the gold standard. Printing too many bills to cover the gold in the treasury isn't a problem. There was monetary inflation during the gold standard and after.

then of course it wasn't a gold standard was it???

?? It was. The U.S. was under some sort of specie standard until Nixon ended the convertibility of dollars till gold.

Not exactly.

Citizens could not own gold (except numismatic coins) but NATIONS still used GOLD and traded it when balancing international trade.

Most of that gold never left the vaults in NYC, but its theoretical ownership would change from nation to nation.

I think samjones and I are at a loss as to exactly what kind of banking system you favor. Has the U.S. EVER had a banking system up to your standards?

No monetary system however cleverly devised (be it gold standard or fiat money) can prevent a corrupt government from over spending, kids.

If you doubt that claim, you ought to start reading some economic history.

Governments on the gold standard have been going broke for thousands of years.

Inflation has plagued mankind ever since civilization has existed.

 

[OohPooPahDoo]

then of course it wasn't a gold standard was it???

Not exactly.

Citizens could not own gold (except numismatic coins) but NATIONS still used GOLD and traded it when balancing international trade.

Most of that gold never left the vaults in NYC, but its theoretical ownership would change from nation to nation.

I think samjones and I are at a loss as to exactly what kind of banking system you favor. Has the U.S. EVER had a banking system up to your standards?

No monetary system however cleverly devised (be it gold standard or fiat money) can prevent a corrupt government from over spending, kids.

If you doubt that claim, you ought to start reading some economic history.

Governments on the gold standard have been going broke for thousands of years.

Inflation has plagued mankind ever since civilization has existed.

Inflation is good for business.

 

[DSGE]

Inflation is good for business.

Only temporarily until wages adjust upwards, and not if your business is a net creditor.

 

[expat_panama]

Inflation is good for business.

Only temporarily until wages adjust upwards, and not if your business is a net creditor.

The fed's unofficial target is 1-2% inflation because that's what most business people want. The reason they want it is because they want inflation as low as possible without going into deflation --something no sane person DON'T wants. Something else is that a slight gradual inflation tends encourage spending over the long run, but that's secondary.

 

[expat_panama]

...a true gold standard has been very rare in history...

--and that's because it's never satisfied anyone who's tried it. Say what you want about how those of us in the overwhelming majority chose to trade our goods and services, but it's our choice and we'll stick with it until someone can sell us on something better.

 

[DSGE]

Inflation is good for business.

Only temporarily until wages adjust upwards, and not if your business is a net creditor.

The fed's unofficial target is 1-2% inflation because that's what most business people want.

How does it matter to most business people?

Most central banks choose a non-zero inflation target for two reasons: 1) it increases nominal interest rates by that much so that they have more room to drop them following a large shock before hitting the zero lower bound. 2) People have a degree of money illusion. They'll resist taking a cut to their nominal wage, even if their real wage is higher. Having a small amount of inflation means that it's less likely that nominal wages will have to fall following a negative shock.

Something else is that a slight gradual inflation tends encourage spending over the long run, but that's secondary.

Inflation doesn't increase real output in the long run.

 

[EdwardBaiamonte]

In "fiat" all you can change your dollars for are worthless goods and services and the discharge of pointless debt. No real "value" there are all.

Capice?

how can you change your dollars for gold if the government hasn't printed any dollars??

There was never a situation where the US Government "hadn't printed any dollars".

actually, according to Milton Friedman (famous economist of 20th Century) and Ben Bernanke (current Chairman of Federal Reserve system and Princeton economist) , you are perfectly exactly 100% wrong. They say that printing to few dollars (33% less) is exactly what caused the Great Depression. And now even you know it too.

 

[EdwardBaiamonte]

Inflation doesn't increase real output in the long run.

it actually decreases it by creating mini-bubbles as price signals are distorted while the liberal money unevenly works it way through the economy

 

[EdwardBaiamonte]

and that's because it's never satisfied anyone who's tried it. .

it satisfied America perfectly until the Fed panicked in 1929 and abandoned it causing the Great Depression.

So, the Gold standard satisfied everyone, while getting off it satisfied no one unless they liked the Great Depression.

 

[DSGE]

how can you change your dollars for gold if the government hasn't printed any dollars??

There was never a situation where the US Government "hadn't printed any dollars".

actually, according to Milton Friedman (famous economist of 20th Century) and Ben Bernanke (current Chairman of Federal Reserve system and Princeton economist) , you are perfectly exactly 100% wrong. They say that printing to few dollars (33% less) is exactly what caused the Great Depression. And now even you know it too.

It was broad money that fell 30%. The monetary base (currency in circulation + bank reserves) didn't fall considerably and actually started to rise pretty quickly around '31.

Great Depression blogging - NYTimes.com

The criticism is that they should have increased the monetary base considerably to offset the fall in velocity. Maybe actually pick up and read A Monetary History of the United States?

If there's a binding gold standard then such an expansion of the monetary base to offset a fall in velocity would not be possible since you can only issue more money if you have gold to back it. A "real" gold standard would have actually made the depression worse.

 

[DSGE]

Inflation doesn't increase real output in the long run.

it actually decreases it by creating mini-bubbles as price signals are distorted while the liberal money unevenly works it way through the economy

Completely untrue. Constant expected inflation doesn't have any real impact on the economy. Even unexpected inflation is unlikely to cause bubbles. It just causes inflation. This "money working its way through the system" argument is a fundamental misunderstanding of monetary transmission mechanisms.

 

[EdwardBaiamonte]

There was never a situation where the US Government "hadn't printed any dollars".

actually, according to Milton Friedman (famous economist of 20th Century) and Ben Bernanke (current Chairman of Federal Reserve system and Princeton economist) , you are perfectly exactly 100% wrong. They say that printing to few dollars (33% less) is exactly what caused the Great Depression. And now even you know it too.

It was broad money that fell 30%. .

as long as you agree that you were 100% wrong about there never being a situation when they didn't print enough money.

Why not learn about the gold standard before you write arrogantly about it?? Do you like looking silly all the time?

 

[DSGE]

and that's because it's never satisfied anyone who's tried it. .

it satisfied America perfectly until the Fed panicked in 1929 and abandoned it causing the Great Depression.

So, the Gold standard satisfied everyone, while getting off it satisfied no one unless they liked the Great Depression.

The Gold Standard and the Great Depression, Eichengreen