Comment by throw0101d
4 hours ago
I am aware of today's inequality (e.g., I read Piketty back when he was making a splash). But the critique is that Greenspan argued gold standard = less inequality and that fails on the historical record.
If we want to talk about the causes of the 'New Gilded Age' that's something else. As a general starting point I'd begin with:
* https://en.wikipedia.org/wiki/Friedman_doctrine
Gold Standard is probably a force that acts against inequality but the forces pushing inequality today are just much stronger. Technology that creates winner take all markets and incredible leverage with few people being one.
> Gold Standard is probably a force that acts against inequality […]
Is there evidence for this?
During the Gold Standard era there were many periods of deflation, which is bad for people with debt: back in the day this was often farmers, nowadays it'd be anyone with student loans or a mortgage.
Two points I'd hit on:
1) Deflation causes debt to become more expensive. Inflation causes your money to become worth less. There's a simple solution to debt becoming more expensive, but no practical solution to you getting a pay-cut every year, especially when a sizable chunk of people don't even realize they're getting a pay-cut and don't want to be unthankful for a "raise." That issue alone already causally explains much of the rise in inequality. Cut people's wages in a stable or deflationary system and there will be hell to pay. Cut them in an inflationary system and they say thank you.
2) Changes in the past are exaggerated. The Fed did a study some time back estimating CPI levels since 1800. [1] They found that from 1800 to 1950 the CPI never shifted more than 25 points from the starting base of 51, so it always stayed within +/- ~50% of that baseline. That's through the Civil War, both World Wars, Spanish Flu, and much more.
It's even more interesting to contrast this from 1971 onward. 1971 is when Bretton Woods ended and the government was given a free hand to start 'printing money' so to speak, and inflation became the new policy. Since then the CPI has increased by more than 800 points, 1600% more than our baseline. So if the 'Gilded Age' saw deflation of ~30% over some decades, what will historians in the future call an era of thousands of percents of inflation over some decades?
[1] - https://www.minneapolisfed.org/about-us/monetary-policy/infl...
2 replies →
> Is there evidence for this?
A simple and logical pattern.
1) Unconstrained spending without commensurate taxation leads to a required inflation of the money supply
2) An inflation of the money supply with increase the price of assets relative to the value of the currency.
3) Asset owners thus become "more valuable" by measure of currency.
4) Renters / non-asset-owners have to eat the costs of inflation while benefiting by none of the inflationary pressure on assets.
ergo - a gold standard is just a proxy for "constraints on debt" is a force that acts against inequality between asset owners and non-asset owners.
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Historically, I'm not aware of a single major case of the Gold Standard helping with inequality.
In all cases where inequality went down, it was helped by inflationary spending.
Yet Gold Standard (and its intellectual descendants) directly led to several examples of stagnation. The most recent one was in Europe, it lost a decade of growth after 2008 by insisting on austerity.
> probably
bro your argument hinges on "probably" and then completely ignores it