Comment by 4er_transform
3 hours ago
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...
> 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.
You’re trying to make a logical argument from first principles about a complex, dynamic and ultimately social system that admits no such argument.
I would think it would be the opposite, as the old joke-y "Golden Rule" goes: He who has the gold makes the rules.
> 3) Asset owners thus become "more valuable" by measure of currency.
Under the Gold Standard the currency itself is also an asset, much more so than under (so-called) fiat.
In a supply-demand situation where supply is finite, and demand is potentially limitless, then the suppliers can charge higher prices. When the demand is for money itself, the price is the interest that is charged by the suppliers (lenders, financiers) can be higher.
And not just in good times when everyone is trying to get a piece of the action: the historical records shows interest rate hikes during major economic events (e.g., 1857, 1873, 1893, 1896, and 1907) when risk was higher.
> 4) Renters / non-asset-owners have to eat the costs of inflation while benefiting by none of the inflationary pressure on assets.
Inflation helps debtors:
> If wages increase with inflation, and if the borrower already owed money before the inflation occurred, inflation benefits the borrower. This is because the borrower still owes the same amount of money, but now they have more money in their paycheck to pay off the debt. This results in less interest for the lender if the borrower uses the extra money to pay off their debt early.
* https://www.investopedia.com/ask/answers/111414/does-inflati...
1 reply →
Yup. I'm extremely unconvinced that a non-distributionary constraint (ex: limiting the money supply one way or another, i.e. the gold standard, bitcoin, etc.) fixes a distributionary problem.
You know what would fix a distributionary problem? A (re)distributionary solution.
The most obvious one is progressive/wealth taxation (a ceiling) and UBI (a floor).
Keep competitive market dynamics, narrow the window in which they're allowed to operate and add some hard constraints.
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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