Comment by kccqzy
7 hours ago
You seem to imply that Charles de Gaulle and his policy of converting dollars to gold caused the collapse of the Bretton Woods system. That was a myopic view. The whole Bretton Woods system was doomed from the beginning due to design defects.
The system was conceived with the primary goal of maintaining balance of payments equilibrium for all countries at the expense of economic growth and liquidity. It had become clear that if a country wanted its currency to be the world reserve currency it had to run a balance of payment deficit. And the United States clearly wanted its dollar to be the reserve currency unbridled by any balance of payment constraints.
If the United States had balance of payment surpluses as it had in the early years, the system lost liquidity (other countries wanted to buy U.S. exports but had neither gold nor dollars to do so), reducing the surplus. And if the United States had balance of payment deficits, well, gold would flow out of the United States, and the United States could not meaningfully increase public debt or spending.
Ok, bear with me for a moment - what if the US would use actual physical gold coins instead of dollars? Then your argument of "gold would flow out" would not hold - so the only reason for it to flow out was that the gold standard was fake - the lax money policy of the US was the issue, not the gold standard itself.
Gold is silly as a measure of value. It's just a piece of shiny metal. The amount of value in the world is increasing so you want to exchange medium to grow with it else you're pulling breaks on the actual economy.
Just because a social construct is silly when you think about it doesn't make it any less real or useful.
A national border is silly as a physical reality; it is just a cartographic whim. These invisible lines, drawn by long-dead men, pretend that the lithosphere is fundamentally different on one side of a coordinate than the other.
Fiat currency is silly as a store of value; it is just a digital ledger or a piece of cotton-linen blend. Its "worth" is derived entirely from the collective hallucination that a central bank’s promise is more substantial than the paper it is printed on.
Gold is actually really good at transferring and measuring value. Think about what a "good" measure of value would be have. It needs to last over time, not corrode or dissolve to the forces. It needs to be distributable, Divisible.. to be ubiquitous. Hard to create/refine, hard to find, so supply can't easily be inflated. It doesn't matter what the object that is being used for exchange of value or holding value, that's why you can trade and barter random objects. But if you condensate down the properties that make a GOOD money, then gold is more than just a shiny metal. "The amount of value in the world is increasing so you want to exchange medium to grow with it.." we find more gold every day, so there is an easing already happening naturally. And even if there wasn't, imagine having an exchange currency that literally never inflated... that's GOOD. We have been hoodwinked into thinking that we need inflation to keep up with goods and services, literal stockholm syndrome taught by the FED.
2 replies →
Yes, it's just a shiny piece of metal. However, it is a pure element and there is a limited amount of it, unlike pretty much anything else except maybe silver.
Otherwise this happens.
https://fred.stlouisfed.org/series/M2SL
This is the origin of the entire white collar world and all of its odd bedfellows, and it will die in our lifetime. All of our jobs will go with it, unfortunately.
Well it's also soft, bacteriostatic, and conductive.
1 reply →
That doesn't make any sense to me. Under Bretton Woods, a "dollar" was a contractual equivalent to a fixed amount of gold. There's no difference. When people are talking about "flow out" they're not talking about literally motion of currency[1], just who owns it.
[1] Which is backwards in your reasoning anyway. If you're a foreign power wanting to hold dollars, and dollars are physical gold coins, then you quite literally need to move them physically out of the country, right?
> Ok, bear with me for a moment - what if the US would use actual physical gold coins instead of dollars?
You'll get a bear economy, leading to the eventual deflation and collapse.
Fun fact: it was not hyperinflation in Weimar Germany that led Hitler to power but _deflation_ because of its insistence on sticking to the gold standard.
> Fun fact: it was not hyperinflation in Weimar Germany that led Hitler to power but _deflation_ because of its insistence on sticking to the gold standard.
Do you have a source for this? AFAIK https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_R...
All the facts are true here, but "design defect" is silly. The entire purpose was to keep a country like the US from exploiting its position, and becoming the "world's reserve currency" which is just a euphemism for running up massive debts to poorer states.
Bretton Woods was sabotaged by the US and the USSR through the single vehicle of https://en.wikipedia.org/wiki/Harry_Dexter_White. Without a Bancor, the entire system simply became a mechanism to exploit the poor.
I agree with you that Bretton Woods was doomed from the beginning, both Keynes and Friedman said so, and this should be a better known POV. Economists are not historians though, and historians write human-driven stories (i.e., it was Nixon who ended Bretton Woods, it's not that it was going to inevitably collapse as an econometric question).
All that said, Bretton Woods matters because people look at the gold standard as a time when wages in the United States rose. Like that's why Bernie Bros on HN care. It's the same reason they oppose globalization: me me me. So it's worth knowing why it was flawed. They don't comprehend that before and after Bretton Woods, hourly wage charts measured a fundamentally different thing.
I think it's better to attack the charts - I mean, you're responding to a Charts Guy, a guy who's like, look at this Gold Denominated Chart guy - because that's what their brains work on. Don't worry about economics. These guys are not economists. They are Charts. The real attack on their worldview is that, well, just because the year in the X axis is an increasing, doesn't mean that you can compare a bigger year to a smaller year. They would really like the world to be ordered that way, but it's not, and taking leadership on convincing them of that is very hard.
Perhaps you could expand on why you're convinced the entirety of neoliberal economic dogma isn't "me me me"?
The gold bugs are almost entirely on the right. The left are far more likely to be MMTers.
> The gold bugs are almost entirely on the right. The left are far more likely to be MMTers.
see, i don't want to generalize about left and right. it's much simpler than that. look at what this thread is actually about: "chart for $/GLD is going up and to the right, therefore, gold good." okay? it's not complicated. it's not left vs right as much as it is, for every 1 person who's like, "things are complicated, economics are interesting, let's talk about it" there are 19 who live day to day in a relentless grind, and get-rich-quick is literally their only apparent salvation. they want the world to be ordered where they are a Green Wojack, where some random bet or gamble makes them a ton of money. that's why we're talking about it, not to figure out economic policy. same reason we talk about cryptocurrencies and startups. to most regular people - and programmers are regular people - it's about, $$$.
it is a totally valid complaint to say, "floating exchange rates do not produce charts that go up and to the right." I mean, that's their problem! They made the wages per hour chart stop going up and to the right! It's not that they are bad policy!
Do people on HN care about joe schmoe hourly worker? No. You can certainly make tons of money trading currencies, but look, these people are not trading. They're gambling. This class of get-rich-quick person likes: real estate, cryptocurrency, gold, startup stock... are you getting it?
You are making it about, "neoliberal dogmas" and "gold bugs" or whatever. Trust me, those people are not the morons. The gamblers are 10x as stupid. They are the antagonists.
The Party told you to reject the evidence of your eyes and ears. It was their final, most essential command.
government policy definitely has the greatest power to create (or destroy) wealth, there are a lot of things wrong with economic policy in this country, but floating currency exchange is not one of those problems.
3 replies →