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

[OohPooPahDoo]

Inflation is good for business.

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

Most all businesses, small and large, are not net creditors. Most businesses have debt and deflation effectively makes that debt larger. Generally when prices go down business suffers - look at what happened when home prices fell through the floor, it reverberated across the economy.

Higher wages are not necessarily an effect of higher prices, it can happen in reverse, and usually the two go hand in hand.

 

[EdwardBaiamonte]

Remember we were ON A GOLD STANDARD when the GREAT DEPRESSION happened, kiddies.

actually, it was, in effect, being off the gold standard that caused the Great Depression. No less than Friedman and Bernanke agree on this, but editec does not? What does that tell us, kiddies??

 

[samjones]

being off the gold standard that caused the Great Depression. No less than Friedman and Bernanke agree on this

I'm starting to understand Ed. Deflationary targets were a major cause of the Great Depression - certianly Ben Bernanke would believe this because it's a statement that goes hand in hand with the Bernanke Doctrine.

In Ed's "gold standard" you take your gold to the mint and they give you gold certificates. End of story. It doesn't happen in the real world (not lately any way), but this is Ed's contention. If you take your gold to the mint and they accept it but don't give you gold certificates and they squirrel the gold away in some vault somewhere doing nothing then that's theft and it deflates the currency which ultimately did "cause" the Great Depression.

Agreed. The solution (according to Ben Bernanke) was simply to abandon the Gold Standard and move to fiat currency. I agree with Ben.

 

[DSGE]

you said I misrepresented Friedman and then you stupidly bet me $10,000. Please quote the misrepresentation or prepare to pay me $10,000

Right here:

http://www.usmessageboard.com/econo...effect-on-a-gold-standard-14.html#post4640088

well, according to Milton Friedman( famous economist and Ben Bernanke( head of Federal Reserve system) we were not on a true gold standard in 1929, but what do they know?

According to them, and what do they know, there were tremendous bank runs back in the day such that about 1/3 of the money supply and 1/3 of the banks disappeared. On a true gold standard, they say, the Fed would have issued new money again to maintain a supply equal to the gold supply which had not disappeared, thus avoiding the liberal Great Depression.

As already discussed, it was the broad money supply that fell by 1/3. On a binding gold standard, the Fed would not be allowed to increase the monetary base to offset the fall in velocity. The Great Depression would not have been avoided had there been a binding gold standard.

You bet $10,000 that I misrepresented Friedman and twice you have been afraid to quote exactly where I misrepresented Friedman?
What does your fear tell you?

That's exactly what I just did you fucking retard. You claimed they said a binding gold standard would have avoided the "liberal great depression" (not sure how it's liberal. I thought your position was that liberals like inflation because it erodes the value of the debt poor people are in. Now you're saying a great deflation is also liberal. Make up your retard mind). They didn't say that, and if you think for half a second you'll realise why. A gold standard allows you to issue base money. But base money didn't fall 30%. Broad money did. To stop that fall you'd have to issue lots and lots of base money, which you're not allowed to do under a gold standard.

 

[DSGE]

...Deflation doesn't wreck profits, no...

The hell you say. Business find themselves fighting to pay back last years borrowed capital with this years deflated sales means zero profits, mass layoffs, and starvation on an enormous scale.

It's probably a good idea to instate scott sumner's ban on the words "inflation" and "deflation" because they just confuse things. Replace them with rising and falling NGDP. There's good and bad deflation. Good deflation happens when productivity increases and prices fall because we can produce more of stuff. In that case NGDP remains constant. Bad deflation happens when aggregate demand falls and wages and prices need to both fall to restore equilibrium. But that case is just falling NGDP.

So if there's falling nominal income, firm's real profits don't change. Wages and prices adjust downwards so that the firm's real profits remain the same. Their burden of debt however will increase if the debt is contracted in nominal terms (which most debt is). So in that case it's even intuitively easier to refer to falling nominal income rather than deflation, since nominal income is the resources you have to pay nominal debt.

... High inflation doesn't either. Money is superneutral. Volatile inflation does have real effects because wage and price setting requires forming an expectation of the future price level.

Before we get into how 'neutral' hyperinflation is, how about we agree that our pre-1929 gold standard came with plenty "inflation, deflation, Depressions recessions, bubbles, debts, deficits and trade imbalances" and that you miss spoke in your post #183.

I agree. What post? Can you quote it?

 

[EdwardBaiamonte]

You bet $10,000 that I misrepresented Friedman and twice you have been afraid to quote exactly where I misrepresented Friedman?
What does your fear tell you?

That's exactly what I just did you fucking retard. You claimed they said a binding gold standard would have avoided the "liberal great depression" [/quote]
so far so good

(not sure how it's liberal.

liberals like fiat or liberal money

I thought your position was that liberals like inflation because it erodes the value of the debt poor people are in.

this is true

Now you're saying a great deflation is also liberal. Make up your retard mind).

fiat money based on liberal guessing as to quantity is liberal

They didn't say that, and if you think for half a second you'll realise why.

Friedman said allowing banks and money to contract by 33% was the proximate cause of the Great Depression.

A gold standard allows you to issue base money.

there are many gold standards: austrian, classical, bullion, etc etc. You need to go to college or at least read about it before you act as if you understand it and its ramifications.

But base money didn't fall 30%. Broad money did. To stop that fall you'd have to issue lots and lots of base money, which you're not allowed to do under a gold standard.

not allowed? by whom? when? under what gold standard, laws or rules or understandings or international agreements or treaties?

 

[DSGE]

A gold standard allows you to issue base money.

there are many gold standards: austrian, classical, bullion, etc etc. You need to go to college or at least read about it before you act as if you understand it and its ramifications.

I have a degree in economics. My name was your first hint.

But base money didn't fall 30%. Broad money did. To stop that fall you'd have to issue lots and lots of base money, which you're not allowed to do under a gold standard.

not allowed? by whom? when? under what gold standard, laws or rules or understandings or international agreements or treaties?

So... basically what you're saying is you don't understand how a gold standard works.

 

[EdwardBaiamonte]

I have a degree in economics.

so why not ask for your money back??

But base money didn't fall 30%. Broad money did. To stop that fall you'd have to issue lots and lots of base money, which you're not allowed to do under a gold standard.

not allowed? by whom? when? under what gold standard, laws or rules or understandings or international agreements or treaties?

So... basically what you're saying is you don't understand how a gold standard works.

do you mean an austrian standard, bullion standard, classical standard, the one in place in 1929, the Benjamin Strong standard, or the standard Friedman felt was in place in 1929.

 

[DSGE]

I have a degree in economics.

so why not ask for your money back??

Why not get one yourself before telling other people to?

do you mean an austrian standard, bullion standard, classical standard, the one in place in 1929, the Benjamin Strong standard, or the standard Friedman felt was in place in 1929.

Find me a reference to the "Benjamin Strong standard" or the "Austrian standard". Actually, explain to me what you think an Austrian standard is. You've just made up a bunch of terms.

Why don't you explain what standard you want, then we'll see if that would have prevented the depression.

 

[expat_panama]

...Deflation doesn't wreck profits, no...

The hell you say. Business find themselves fighting to pay back last years borrowed capital with this years deflated sales means zero profits, mass layoffs, and starvation on an enormous scale.

It's probably a good idea to instate scott sumner's ban on the words "inflation" and "deflation" because they just confuse things. Replace them with rising and falling NGDP. There's good and bad deflation. Good deflation happens when productivity increases and prices fall because we can produce more of stuff...

NGDP trends show changes in production and inflation/deflation show changes in prices. Production and prices are two different things. We were talking about prices. Deflation is a fall in prices in general. In real life there's never been a good deflation "when productivity increases and prices fall because we can produce more of stuff" because rising productivity as always come with a general increase in prices.

 

[editec]

Remember we were ON A GOLD STANDARD when the GREAT DEPRESSION happened, kiddies.

actually, it was, in effect, being off the gold standard that caused the Great Depression. No less than Friedman and Bernanke agree on this, but editec does not? What does that tell us, kiddies??

That informs us that when you read Friedman and Bernacke you didn't exactly understand what you were reading.

That or you read what somebody else credited those two with having said who didn't understand their point.

 

[expat_panama]

Remember we were ON A GOLD STANDARD when the GREAT DEPRESSION happened, kiddies.

actually, it was, in effect, being off the gold standard that caused the Great Depression...

US dollars were gold certificates until '33 when both unemployment and GDP contraction hit all time records. The Fed set up the Open Market Committee, FDR recalled gold certificates and ended gold payments for gov't contracts and we've never looked back.

 

[samjones]

Remember we were ON A GOLD STANDARD when the GREAT DEPRESSION happened, kiddies.

actually, it was, in effect, being off the gold standard that caused the Great Depression. No less than Friedman and Bernanke agree on this, but editec does not? What does that tell us, kiddies??

That informs us that when you read Friedman and Bernacke you didn't exactly understand what you were reading.

That or you read what somebody else credited those two with having said who didn't understand their point.

He thinks that a gold standard managed not to his liking="liberal fiat".

Mistakes were made in managing the gold standard in '29, '30 means that liberal fiat money caused the Great Depression. It's a Ron Paul mentality.

 

[editec]

One thing is obvious...that GOLD STARDARD that some of your believe is a consistent set of behaviors by every government isn't.

Post WWII every European nation was on a gold standard but the way they oversaw their national economies and their gold standards was wildly different.

Perhaps it would behoove some of you gold bugs to explain how YOU THINK that GS ought to be managed.

Or for that matter NOT managed.

Explain to us what YOU MEAN when you say a Gold standard.

Do you mean that there will be no paper money, or that only as much paper ussued as the GOLD exists to back it?

And if that is what you mean, then what happens to the exchange rate of that paper money when the price of gold fluxuates on the open market?

Does that money then ALSO change exchange values, and if it does, who decides what the new value on the GOLD CERTIFICATES will be worth?

Illuminate us with your brilliance, boys.

Show us you have a clue what the fuck your're talking about.

Some of you here, DO have a fairly good grasp of this enormously confusing issue of money, metal and VALUE.

Most of you clearly do NOT.

 

[samjones]

Perhaps it would behoove some of you gold bugs to explain how YOU THINK that GS ought to be managed.

Or for that matter NOT managed.

Explain to us what YOU MEAN when you say a Gold standard.

He means you take your ounce of gold to the treasury, they give you a twenty, a ten and a five.

End of story.

You put your twenty, your ten and your five in the bank. They put it in the vault.

End of story.

 

[EdwardBaiamonte]

Perhaps it would behoove some of you gold bugs to explain how YOU THINK that GS ought to be managed.

Or for that matter NOT managed.

Explain to us what YOU MEAN when you say a Gold standard.

He means you take your ounce of gold to the treasury, they give you a twenty, a ten and a five.

End of story.

You put your twenty, your ten and your five in the bank. They put it in the vault.

End of story.

of course thats perfectly idiotic. There are many kinds of gold standards: Austrian, classical, bullion, Benjam Strong standard, and the Roy Young standard, and the Bretton Woods standard. Moreover, when a crisis hits governments often forget the gold standard rules and do what seems best at the moment. This seems always to happen when massive quantities of gold are flowing out of your country. This seems to always cause panic.

 

[expat_panama]

Explain to us what YOU MEAN when you say a Gold standard.

He means you take your ounce of gold to the treasury, they give you a twenty, a ten and a five...

You can do that now, in fact I'll buy all the gold you got @ $35/oz. OK, you meant pegging the dollar to 1/35oz. AU.

...put your twenty, your ten and your five in the bank. They put it in the vault. End of story.

You understand the minute you put it in the bank that they'll create more dollars out of thin air and loan them out. That's what banks do, and it means the quantity of dollars is no longer fixed on the quantity of gold deposits. It also means higher inflation and deflation than anything we've ever had with FRN's because that's how it worked before '33 with gold certificates.

 

[editec]

Yeah, okay.

Pretty much as I thought.

I ask people how the Gold Standard works and one person seems to understand that there is no such single policy known as a Gold Standard.

So what we have here is this: a lot of Gold Bugs who really don't even know what a Gold standard means.

Hey that's okay, really.

Want to know why?

Because NOBODY knows what a gold standard is because it can be many different things.

Post WWI Germany, England, France, Italy and the USA were all on a system that they called the gold standard.

Yet each of them played out their gold standards rather differently.

And probably not suprisingly (given tht each of their economies were unique) each nation experiences wilding different outcomes, too.

 

[expat_panama]

Ye...a lot of Gold Bugs who really don't even know what a Gold standard means.Hey that's okay, really. Want to know why? Because NOBODY knows what a gold standard is ...

--and the hope is that they won't do anything. My concern is that they'll they'll decide some particular goofy scheme is 'true' enough, and then get someone like Ron Paul to push though.

What, Ron Paul is too weird and gold standard is too stupid? How about Obama and Obamacare?

 

[editec]

Ye...a lot of Gold Bugs who really don't even know what a Gold standard means.Hey that's okay, really. Want to know why? Because NOBODY knows what a gold standard is ...

--and the hope is that they won't do anything. My concern is that they'll they'll decide some particular goofy scheme is 'true' enough, and then get someone like Ron Paul to push though.

What, Ron Paul is too weird and gold standard is too stupid? How about Obama and Obamacare?

As though my questioning the GOLD standard somehow make me supportive of Obama care?


Consider the possiblity that one can fault the idea of a gold standard and NOT be a democratic supporter.

I know that must be hard for a partisan like you, but I can assure you that people who think for themselves DO EXIST.