Comment by vkou
2 months ago
There were, of course, no economic disasters back when the world operated on gold-backed currencies.
The goldbugs won't be red in the face, though, because they are never wrong and are constitutionally incapable of feeling any shame.
I’m pretty sure no-one has argued that a gold standard would prevent economic disasters. That sounds like a straw man. My understanding is that there would be more of them but the individual and cumulative impact would be far less. You can still have fractional reserve banking with the gold standard so the gold standard alone is not sufficient to prevent that.
> I’m pretty sure no-one has argued that a gold standard would prevent economic disasters. That sounds like a straw man. My understanding is that there would be more of them but the individual and cumulative impact would be far less.
Contrary to popular opinion, the historical record shows that gold does not actually bring price stability; see "Why the Gold Standard Is the World's Worst Economic Idea, in 2 Charts":
* http://archive.is/https://www.theatlantic.com/business/archi...
Most of the claimed benefits of gold-backed currencies are myths:
* https://archive.is/https://www.vox.com/2014/7/16/5900297/cas...
Before what we call "The Great Depression" (of the 1930s), that label was applied to another years-long economic malaise, which was in part caused by using gold-backed currency (as was the 1930s Great Depression):
* https://en.wikipedia.org/wiki/Long_Depression
You'll find that US economic downturns became less frequent as the US went off the gold standard, and the Fed gained more and more independence:
* https://en.wikipedia.org/wiki/File:GDP_growth_1923-2009.jpg
* https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit...
Many things work just fine right until they stop working, our current strategy of blowing ever bigger economic bubbles has worked for a long time and I expect it will continue for long time. It has the very stable property of enriching the already wealthy.
But it will not last forever and I do expect to see the end of it within my lifetime. It is this calamity that I'm interested in diminishing and it is on this basis that I think a weaker federal reserve would be less damaging. Since the federal reserve obscures the true state of the economy uncovering the true state will coincide with a weakling of the federal reserve and will appear causal.
I'm not a gold bug, I don't own any of it, I do own some bitcoin but my main asset is my software company.
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Price stability is overrated. Prices must change according to scarcity. Letting the government print money any time prices start to fall is literally letting the government profit off your back. It makes accounting easier, but it destroys market information like "Supply of goods is catching up to demand, find something better to produce".
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