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

[editec]

A strict gold standard is a bad idea because it limits the ability of the Fed to control the money supply in a reparative fashion

if true why so afraid to explain why they cant control money supply????

I'll take a swipe at that, Ed.

ASSUMING that his idea of the GOLD STANDARD is a very strict one --one where the amount of paper dollars is strictly limited by the whatever the posted conversion rate is TIMES amount of gold?

Then when the society becomes productive, when the amount of good and services increases dramatically, the marekt will have absolutely no choice but to see prices drop.

Obviously that means that anybody who is in debt and paying at interest is totally hosed.

But note that this ALL DEPENDS on how the so called "Gold Standard" is designed.

Obviously if the Gold Standard means that the government can change the rate of dollar to gold conversion, then the government still does have a monetary policy they can use.

But that makes me ask if that is in fact a gold standard at all?

If the FED (or some other government body) can (BY FIAT!) change the rate of conversion then does the amount of gold matter AT ALL?

It didn't back in the 20-30's when nations all were on something they called a gold standard. (none of which worked the same way, of course)

They still manipulated their conversion rates.

They STILL spend far more money than they had, and they still went into debt, too.

 

[EdwardBaiamonte]

Then when the society becomes productive, when the amount of good and services increases dramatically, the marekt will have absolutely no choice but to see prices drop.

Actually, The Fed (The Federal Reserve System) was invented a long time ago to prevent price drops. A man named Bernanke is Chairman of it now. He's in the news all the time.

 

[EdwardBaiamonte]

--with the idea that the Fed had in fact been playing by the rules but the rules were wrong,

why not tell us what rules were wrong exactly??????????

--
and also that the rules had nothing to do with gold.

I'm afraid all agree we were on a gold standard then.

--
So we don't have a link showing where Friedman said the Fed that shrank the money supply between '29 and 33 by breaking the gold rules.

you have the quote above saying the Fed didn't play by the rules

--
Another made up quote? What I've found is when quotes are posted without sources they usually turn out to be fabricated.

If fabricated then why so afraid to win yourself an easy $10,000??

 

[EdwardBaiamonte]

outline what you think a gold standard should look like so that I can hear you state, in your own words, how you and Ron Paul and Ayn Rand are going to save our country....

.... unless you're afraid to.

Most conservative and libertarian intellectuals favor a standard that in effect makes inflation and deflation illegal through managing the money supply in a way that keeps the general price level constant.

Liberals like Keynes hold the opposite view. Keynes said "in the long term we are all dead" so lets not worry about inflation in the long term; lets inflate the money supply now to support various short term stimulative welfare programs. More sophisticated Keynesians like Ken Rogoff like to think Keynes would have supported deficit stimulative welfare programs but for only a year or two, and then get back to balancing the budget.

 

[samjones]

Most conservative and libertarian intellectuals favor a standard that in effect makes inflation and deflation illegal through managing the money supply in a way that keeps the general price level constant.

Here's one who doesn't

Granted, it's only one, but he's a pretty well known one, iinm.

A "law" that would make inflation illegal would be silly if the needs of the present economic situation would be met through inflation. If would be a law that would quckly become not a law.

 

[EdwardBaiamonte]

Granted, it's only one, but he's a pretty well known one, iinm.

why be so afraid to tell us exactly what he said and why it makes sense????

A "law" that would make inflation illegal would be silly if the needs of the present economic situation would be met through inflation. If would be a law that would quckly become not a law.

why be so afraid to tell us what legitimate needs would be met by inflation if you know??

 

[samjones]

why be so afraid to tell us what legitimate needs would be met by inflation if you know??

Spurs investment. There are really only 3 places to keep your money... in a metal box in a hole in your back yard or you can loan it to the federal government. Every place else you might put it will likely wind up financing private enterprise.

If the government buys back debt then the recipients of those dollars gotta do something with them..... They're unlikely to bury them in the backyard.

Glad I could overcome my fear of Economics 101 to explain that to you. I'm sure now that you're ready to personally flip the printing press on switch.

 

[EdwardBaiamonte]

Spurs investment.

what on earth?

 

[expat_panama]

--with the idea that the Fed had in fact been playing by the rules but the rules were wrong,

why not tell us what rules were wrong exactly??????????...

Huh, you nailed it in your post #313 when you told me about the multiplier, and then you gave me this link with this explanation:

The Federal Reserve Banking System (the Fed) was created to stabilize the financial system and control the money supply. The Fed however probably did not know the money supply was decreasing. The Fed saw only the statistics on the monetary base, the currency in circulation plus the funds held as reserves by the banks with the twelve Federal Reserve Banks. What the monetary base was showing was this.

Accepted theory held that the money supply was equal to a multiple of the monetary base. The multiple was known as the money multiplier. The money multiplier was determined by, among other things, the fraction of deposits the Fed required banks to hold as reserves. Other factors that determined the money multiplier were the proportion of savings which the general public held as currency rather than as bank deposits and the amount of excess reserves held by the banks.
.​

--and the rule of the day was that maintaining the money supply only required maintaining the monetary base. That was all well and good for 1929 but to put it in technical jargan from '30 to '33--

--the Fed screwed the pooch.

So even though you still need to fix that "?" key (lose that Chinese keyboard) I owe you for the info on the base multiplier. That nugget by itself was worth a week of pouring through these threads.

More later but I just got back from the dentist & I'm going to bed. Thanks again.

 

[samjones]

Spurs investment.

what on earth?

It can be used as a verb.... it means "incite in an encouraging fashion".

It's a good thing.

 

[EdwardBaiamonte]

Spurs investment.

what on earth?

It can be used as a verb.... it means "incite in an encouraging fashion".

It's a good thing.

exactly what makes a silly liberal think inflation spurs investment?

 

[samjones]

what on earth?

It can be used as a verb.... it means "incite in an encouraging fashion".

It's a good thing.

exactly what makes a silly liberal think inflation spurs investment?

History... conventional monetary theory.... what we know to be true. The Fed loosens the purse strings and people lend, buy, and invest. We know that. It only makes sense - lower interest rates make borrowing more attractive. Buying back bonds pumps more dollars into the economy - they have to land somewhere.

By the way - while it may be true that increasing the money supply can cause inflation, it doesn't necessarily have to.

 

[editec]

Then when the society becomes productive, when the amount of good and services increases dramatically, the marekt will have absolutely no choice but to see prices drop.

Actually, The Fed (The Federal Reserve System) was invented a long time ago to prevent price drops. A man named Bernanke is Chairman of it now. He's in the news all the time.

That was my point, too, Ed.

I'm contasting the REALITY of various historical "gold Standards" to the fantasy GOLD STANDARD that some of this boards clueless gold bugs imagine existed.

In their FANTASY gold standard, the amont of species is limited by the amount of gold.

I cant think of any nation ever having such a type of Gold standard as that, can you?

EVen during the POPULIST movement to add silver to the mix (pre the FED), the Treasury could have changed the gold to dollar conversion rate if they'd chosen to do so.


And if they can change the conversion rates (by fiat) when there is no increase in the amount of gold (or reduction of greenbacks), then the GOLD STANDARD really doesn't prevent the infusion of FIAT dollars into the system, does it?

 

[samjones]

In their FANTASY gold standard, the amont of species is limited by the amount of gold.

I cant think of any nation
ever having such a type of Gold standard as that, can you?

No - they did. It was the norm for millenia.

We just haven't had it for the last 75 - 150 years.

 

[EdwardBaiamonte]

then the GOLD STANDARD really doesn't prevent the infusion of FIAT dollars into the system, does it?

if it doesn't prevent fiat then its not really a gold standard is it? When we say we want a gold standard we obviously mean we want one that is adhered to such that money supply is tied to gold supply rather than to a fool liberal's whim. Is this really over your head?

 

[EdwardBaiamonte]

The Fed loosens the purse strings and people lend, buy, and invest. We know that. It only makes sense -

you mean it only makes sense to an absurd naive liberal. If true then we'd have perpetual growth and no recessions or depressions. We'd have perpetual inflation, investment, and growth. What a great liberal free lunch idea: print money!

In reality, printing money create bubbles or mal-investment that recess the economy. The housing bubble is the current example. Its been in all the papers.

 

[samjones]

The Fed loosens the purse strings and people lend, buy, and invest. We know that. It only makes sense -

you mean it only makes sense to an absurd naive liberal. If true then we'd have perpetual growth and no recessions or depressions. We'd have perpetual inflation, investment, and growth.

Yes. We'll have perpetual inflation, investment and growth. Why does that sound strange to you? That's the whole point. Yes, we should never have another "depression" - we haven't had one yet under fiat and "recessions" should be managed to make them as short and painless as possible.

Call me utopian, but "yes" a properly managed economy should be able to grow and prosper in perpetuity.

That's the whole <bleeping> point, isn't it? Hopefully this isn't actually all some pyramid scheme destined to collapse at some date in the future dependent on it's growth.

 

[EdwardBaiamonte]

Yes. We'll have perpetual inflation, investment and growth.

perpetual inflation produces perpetual bubbles depressions and recessions! There is no free lunch, liberal.

 

[samjones]

Yes. We'll have perpetual inflation, investment and growth.

perpetual inflation produces perpetual bubbles depressions and recessions! There is no free lunch, liberal.

The Great Depression was the result of deflation and at least the last couple of bubbles I can think of (tech, housing) certainly had nothing to do with inflation at all.

Your preconceived notions are not supported by the facts.

 

[editec]

In their FANTASY gold standard, the amont of species is limited by the amount of gold.

I cant think of any nation
ever having such a type of Gold standard as that, can you?

No - they did. It was the norm for millenia.

We just haven't had it for the last 75 - 150 years.

Well there was a time where there was NO paper money. But that's not a gold standard, that just GOLD!

We're talking about having a monetary system called the GOLD STANDARD.

I can't think of any nation that imposed a gold standard on itself that it could not change by fiat. (that is change the greenback to gold ratios at will)

If you know of a nationin modern times that had a gold standard it could NOT change at will, please tell us which nation did that to itself.

And for additional credit, tell us what happened to that nation and why it changed its monetary system, too.