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Since we're doing logical fallacies, every decade beats the every 7 years mark under the FR.banking panics and recessions/depressions every decade a resounding success
Correlation does not imply causation!
The Libertarians are extremely well funded and good at getting their propaganda out to those that would buy into it.
Correlation does not imply causation
The gold standard was a failure, unless you consider banking panics and recessions/depressions every decade a resounding success.
The FED has largely done a decent job, except for the Great Depression, which was a result of the gold standard.
And again, Correlation does not imply causation.
But this seems to be the MO around here regarding economics and history.
The Federal Reserve is not perfect but the ability to impact the money supply is one of the most powerful tools our economy has to maintain long term growth. If you are looking for causation then start with Milton Friedman's work concerning money supply.
The gold standard was a failure, unless you consider banking panics and recessions/depressions every decade a resounding success.
The FED has largely done a decent job, except for the Great Depression, which was a result of the gold standard.
And again, Correlation does not imply causation.
But this seems to be the MO around here regarding economics and history.
Embedded in your tit-for-tat with Kimura there is a useful point. I've always thought that economic reasoning rested on three legs: economic theory, economic data (econometrics), and economic history. In fact in graduate school you have to pass exams in each of these fields to become a degree candidate.
When anyone ignores any of the three, they risk some embarrassing results.
Tying the return to the gold standard in the Twenties to the Great Depression has been a well discussed episode in economic history. Keynes predicted the results in the "Economic Consequences of the Peace" (1919) and Milton Friedman's magna opus "Monetary History of the United States" devotes a lot of pages to it. In fact the connection is only minimally supported by the economic data, the real case is made by the historical record and economic theory. Our recent economic woes have lent new perspective on the effect of monetary policy in a financial crisis in a way not available since 1929 itself. This historical discussion and comparison to the "Lesser Depression" of today has been an immensely productive intellectual endeavor which I hope informs both theory and policy for the next century.
One reason I cannot take von mises and Rand Paulian people seriously is they ignore the historical reality of what it meant when a holder of dollars could demand payment in gold, and the EFFECT of that on monetary supply and the price (not value) of gold. And that what would have meant in 2008.
Right, and we know nobody planted a crop or built a factory in 1880 intending to sell the harvest or market the product thirty-four years later.Between 1880 and 1914, the period when the United States was on the classical gold standard, inflation averaged only 0.1 percent per year.
And again, Correlation does not imply causation.
But this seems to be the MO around here regarding economics and history.
Embedded in your tit-for-tat with Kimura there is a useful point. I've always thought that economic reasoning rested on three legs: economic theory, economic data (econometrics), and economic history. In fact in graduate school you have to pass exams in each of these fields to become a degree candidate.
When anyone ignores any of the three, they risk some embarrassing results.
Tying the return to the gold standard in the Twenties to the Great Depression has been a well discussed episode in economic history. Keynes predicted the results in the "Economic Consequences of the Peace" (1919) and Milton Friedman's magna opus "Monetary History of the United States" devotes a lot of pages to it. In fact the connection is only minimally supported by the economic data, the real case is made by the historical record and economic theory. Our recent economic woes have lent new perspective on the effect of monetary policy in a financial crisis in a way not available since 1929 itself. This historical discussion and comparison to the "Lesser Depression" of today has been an immensely productive intellectual endeavor which I hope informs both theory and policy for the next century.
One reason I cannot take von mises and Rand Paulian people seriously is they ignore the historical reality of what it meant when a holder of dollars could demand payment in gold, and the EFFECT of that on monetary supply and the price (not value) of gold. And that what would have meant in 2008.
And THAT should prove the op, even if one attempts to ignore Friedman.
Embedded in your tit-for-tat with Kimura there is a useful point. I've always thought that economic reasoning rested on three legs: economic theory, economic data (econometrics), and economic history. In fact in graduate school you have to pass exams in each of these fields to become a degree candidate.
When anyone ignores any of the three, they risk some embarrassing results.
Tying the return to the gold standard in the Twenties to the Great Depression has been a well discussed episode in economic history. Keynes predicted the results in the "Economic Consequences of the Peace" (1919) and Milton Friedman's magna opus "Monetary History of the United States" devotes a lot of pages to it. In fact the connection is only minimally supported by the economic data, the real case is made by the historical record and economic theory. Our recent economic woes have lent new perspective on the effect of monetary policy in a financial crisis in a way not available since 1929 itself. This historical discussion and comparison to the "Lesser Depression" of today has been an immensely productive intellectual endeavor which I hope informs both theory and policy for the next century.
One reason I cannot take von mises and Rand Paulian people seriously is they ignore the historical reality of what it meant when a holder of dollars could demand payment in gold, and the EFFECT of that on monetary supply and the price (not value) of gold. And that what would have meant in 2008.
And THAT should prove the op, even if one attempts to ignore Friedman.
I think a certain segment of von Mises crowd wants a gold standard based on 100% reserves. I've read most of Rothbard's work on this subject, so I'm more than familiar with the literature, minus the intellectual circle jerk about the nature of the state.
... Central banks have been built on financial crises, with each major tremor expanding their role. And today's economic convulsions foreshadow more changes to come at the Fed.
If it wasn't for crises, central banks might not exist. In Britain, after years of civil war and the ouster of King James by William III in 1688, the country's public finances were in tatters, with tax collection falling short of what the government needed to pay its bills and lenders unsure about the stability of the government. The Bank of England, one of the first central banks and for centuries the most important one, was founded in 1694 to purchase government debt and curtail the funding crisis.
The establishment of the Bank of England came at the beginning of a great societal shift, when new ideas were challenging old doctrines, and rising world trade was giving new power to merchant classes. But the expansion in commerce and banking also made financial crises more prevalent. Speculative bubbles led to spectacular market crashes.
"The Bank of England received heavy criticism in many of the crises of the 19th century when it didn't act fast enough," says Rutgers University economic historian Michael Bordo. "It learned to be lender of last resort." ...
But for much of the 19th century and into the 20th, the U.S. had no central bank. Many Americans feared that nothing good could come from one bank wielding so much power. In 1816, a central bank to help fund government finances that had been badly depleted by the War of 1812 was established. In his 1832 veto of the extension of the bank's charter, President Andrew Jackson wrote that "Great evils...flow from such a concentration of power in the hands of a few men irresponsible to the people."
While financial crises in England diminished through the 19th century, they were a regular feature of American life.
"Crises are much more frequent when we don't have a central bank," says New York University Stern School economic historian Richard Sylla. With nobody willing to step into the fray when borrowers ran into trouble, small credit-market problems could easily spin into major ones.
The turning point came in 1907. The availability of credit was tight throughout the world that year, and that October, a speculative attempt to corner the stock of United Copper Co. failed. That sparked a run on the deposits of Knickerbocker Trust Co., which had helped fund the scheme, eventually leading to the firm's collapse. John Pierpont Morgan, the giant of American finance, took on the role of lender of last resort.
Struggling with a bad cold, sleep-deprived and sustaining himself with little more than cigars, Morgan put up millions of his firm's money to avert the crisis and cajoled other bankers into doing the same. In a famous incident, Morgan gathered a throng of bankers and trust executives in his library on the evening of Nov. 3, locking the doors and not opening them until 4:45 the next morning, after the men had agreed to take part in a $25 million loan.
The Panic of 1907 helped push aside longstanding worries over the economic power concentrated in an American central bank, and in 1913 the Federal Reserve Act was passed....
One reason I cannot take von mises and Rand Paulian people seriously is they ignore the historical reality of what it meant when a holder of dollars could demand payment in gold, and the EFFECT of that on monetary supply and the price (not value) of gold. And that what would have meant in 2008.
And THAT should prove the op, even if one attempts to ignore Friedman.
I think a certain segment of von Mises crowd wants a gold standard based on 100% reserves. I've read most of Rothbard's work on this subject, so I'm more than familiar with the literature, minus the intellectual circle jerk about the nature of the state.
You are correct. I should not have lumped all the von mises folks in one pile. But the problem remains the same: if the options are to peg financial liquidy to a commodity that's price fluctuates because of politics, market assumptions of the strengh of the domestic economy, and supplies of the commodity that have no connenction to liquidity .... and Friedman, go with Uncle Milton everytime.
The Depression was exceptional in its economic ferocity. As Liaquat Ahamed writes in his book "Lords of Finance": "During a three-year period, real GDP [gross domestic product] in the major economies fell by over 25 percent, a quarter of the adult male population was thrown out of work. . . . The economic turmoil created hardships in every corner of the globe, from the prairies of Canada to the teeming cities of Asia."
Anyone who wants to know why should read this engrossing book. Ahamed, a professional money manager, attributes the Depression to two central causes: the misguided restoration of the gold standard in the 1920s and the massive inter-governmental debts, including German reparations, resulting from World War I.
His story builds on the scholarship of economists Milton Friedman, Anna Schwartz, Charles Kindleberger, Barry Eichengreen and Peter Temin. But Ahamed excels in evoking the political and personal forces that led to disaster. His title refers to four men deeply implicated in the era's perverse policies: Montagu Norman, governor of the Bank of England; Benjamin Strong, head of the New York Federal Reserve Bank; Émile Moreau, head of the Banque de France; and Hjalmar Schacht, head of Germany's Reichsbank. Their determination to reinstate the gold standard -- seen as necessary for global prosperity -- brought ruin.
Under the gold standard, paper money was backed by gold reserves. If gold flowed into a country (normally from a trade surplus or a foreign loan), its money and credit supply were supposed to expand. If gold flowed out, money and credit were supposed to contract. During World War I, Europe's governments suspended the gold standard. They financed the war with paper money and loans from America. The appeal of restoring the gold standard was that it would instill confidence by making paper money trustworthy.
Unfortunately, the war damaged the system beyond repair. Britain, the key country, was left with only 7.5 percent of the world's gold reserves in 1925. Together, the United States and France held more than half the world's gold. The war had expanded U.S. reserves, and when France returned to gold, it did so with an undervalued exchange rate that boosted exports and gold reserves. Meanwhile, German reparations to Britain and France were massive, while those countries owed huge amounts to the United States. The global financial system was so debt-laden that it "cracked at the first pressure," writes Ahamed.
That came after a rise in American interest rates in 1928 forced other countries to follow (no one wanted to lose gold by having investors shift funds elsewhere) and ultimately led to the 1929 stock market crash. As economies weakened, debts went into default. Bank panics ensued. Credit and industrial production declined. Unemployment rose. Weakness fed on weakness.
Barry Eichengreen pointed out years ago that major economies went off gold in the following order: Japan, Britain, Germany, US, France. [... the correlation between going off gold and recovery is in fact perfect] And here’s what happened to their industrial output:
And one more, just for good measure.
As countries abandoned the gold standard during the Depression, they began to grow again. The longer countries waited to leave the gold standard, the longer they waited for growth to resume.
Barry Eichengreen pointed out years ago that major economies went off gold in the following order: Japan, Britain, Germany, US, France. [... the correlation between going off gold and recovery is in fact perfect] And here’s what happened to their industrial output:
Modified goldbugism at the WSJ - Paul Krugman Blog - NYTimes.com
Correlation does not imply causation
The gold standard was a failure, unless you consider banking panics and recessions/depressions every decade a resounding success.
The FED has largely done a decent job, except for the Great Depression, which was a result of the gold standard.
I own this book but haven't read it. I think I will soon.
The Depression was exceptional in its economic ferocity. As Liaquat Ahamed writes in his book "Lords of Finance": "During a three-year period, real GDP [gross domestic product] in the major economies fell by over 25 percent, a quarter of the adult male population was thrown out of work. . . . The economic turmoil created hardships in every corner of the globe, from the prairies of Canada to the teeming cities of Asia."
Anyone who wants to know why should read this engrossing book. Ahamed, a professional money manager, attributes the Depression to two central causes: the misguided restoration of the gold standard in the 1920s and the massive inter-governmental debts, including German reparations, resulting from World War I.
His story builds on the scholarship of economists Milton Friedman, Anna Schwartz, Charles Kindleberger, Barry Eichengreen and Peter Temin. But Ahamed excels in evoking the political and personal forces that led to disaster. His title refers to four men deeply implicated in the era's perverse policies: Montagu Norman, governor of the Bank of England; Benjamin Strong, head of the New York Federal Reserve Bank; Émile Moreau, head of the Banque de France; and Hjalmar Schacht, head of Germany's Reichsbank. Their determination to reinstate the gold standard -- seen as necessary for global prosperity -- brought ruin.
Under the gold standard, paper money was backed by gold reserves. If gold flowed into a country (normally from a trade surplus or a foreign loan), its money and credit supply were supposed to expand. If gold flowed out, money and credit were supposed to contract. During World War I, Europe's governments suspended the gold standard. They financed the war with paper money and loans from America. The appeal of restoring the gold standard was that it would instill confidence by making paper money trustworthy.
Unfortunately, the war damaged the system beyond repair. Britain, the key country, was left with only 7.5 percent of the world's gold reserves in 1925. Together, the United States and France held more than half the world's gold. The war had expanded U.S. reserves, and when France returned to gold, it did so with an undervalued exchange rate that boosted exports and gold reserves. Meanwhile, German reparations to Britain and France were massive, while those countries owed huge amounts to the United States. The global financial system was so debt-laden that it "cracked at the first pressure," writes Ahamed.
That came after a rise in American interest rates in 1928 forced other countries to follow (no one wanted to lose gold by having investors shift funds elsewhere) and ultimately led to the 1929 stock market crash. As economies weakened, debts went into default. Bank panics ensued. Credit and industrial production declined. Unemployment rose. Weakness fed on weakness.
washingtonpost.com
There is nothing wrong with Depressions or recessions.
There is a problem when a nation obtains incredible debt and claims success despite a never ending stimulus. A recession in a less regulated non stimulated market clears it's debts and comes out stronger than before, an economy that is based on bubble building by the Government is doomed in the long term. All predictions of what the FED-R would do to destroy the nation have come true.
17 trillion in debt and no end in sight. People can claim success but it has taken 100 years to dig a hole so big no one even wants to pretend to try and get out of it.
I own this book but haven't read it. I think I will soon.
The Depression was exceptional in its economic ferocity. As Liaquat Ahamed writes in his book "Lords of Finance": "During a three-year period, real GDP [gross domestic product] in the major economies fell by over 25 percent, a quarter of the adult male population was thrown out of work. . . . The economic turmoil created hardships in every corner of the globe, from the prairies of Canada to the teeming cities of Asia."
Anyone who wants to know why should read this engrossing book. Ahamed, a professional money manager, attributes the Depression to two central causes: the misguided restoration of the gold standard in the 1920s and the massive inter-governmental debts, including German reparations, resulting from World War I.
His story builds on the scholarship of economists Milton Friedman, Anna Schwartz, Charles Kindleberger, Barry Eichengreen and Peter Temin. But Ahamed excels in evoking the political and personal forces that led to disaster. His title refers to four men deeply implicated in the era's perverse policies: Montagu Norman, governor of the Bank of England; Benjamin Strong, head of the New York Federal Reserve Bank; Émile Moreau, head of the Banque de France; and Hjalmar Schacht, head of Germany's Reichsbank. Their determination to reinstate the gold standard -- seen as necessary for global prosperity -- brought ruin.
Under the gold standard, paper money was backed by gold reserves. If gold flowed into a country (normally from a trade surplus or a foreign loan), its money and credit supply were supposed to expand. If gold flowed out, money and credit were supposed to contract. During World War I, Europe's governments suspended the gold standard. They financed the war with paper money and loans from America. The appeal of restoring the gold standard was that it would instill confidence by making paper money trustworthy.
Unfortunately, the war damaged the system beyond repair. Britain, the key country, was left with only 7.5 percent of the world's gold reserves in 1925. Together, the United States and France held more than half the world's gold. The war had expanded U.S. reserves, and when France returned to gold, it did so with an undervalued exchange rate that boosted exports and gold reserves. Meanwhile, German reparations to Britain and France were massive, while those countries owed huge amounts to the United States. The global financial system was so debt-laden that it "cracked at the first pressure," writes Ahamed.
That came after a rise in American interest rates in 1928 forced other countries to follow (no one wanted to lose gold by having investors shift funds elsewhere) and ultimately led to the 1929 stock market crash. As economies weakened, debts went into default. Bank panics ensued. Credit and industrial production declined. Unemployment rose. Weakness fed on weakness.
washingtonpost.com
I'm sorry... If I understand your quote the debt was created due to fake money, then the blame was shifted to gold when a country spent more than they could re pay?
Basically it sounds like someone wanted a limitless CC, got it.... lived far outside of what they could afford, grew (invested) into projects they would never be able to repay then blamed Gold.
if they were forced to live within their means by money backed by something real, the depression could have been avoided or dramatically reduced in time.
