The 1870-1914 Gold Standard

[Burke]

"During the 20th century, and now into the 21st, no central bank in the world has been able to match this [gold standard] performance. They are not even in the same galaxy. No world monetary arrangement has provided even a pale shadow of that era’s incredible successes.

"We could create an updated version of the world gold standard system of the pre-1914 era. However, there isn’t really much need to change things very much. It worked fine, and would still be working today if not for World War I, and soon after, the rise of Keynesian notions that governments could manage their economies by jiggering the currency. This requires a floating currency, which is why we have floating currencies today.

"Once we finally abandon these funny-money notions – probably because of their catastrophic failure – it will be very easy to create, once again, a superlative world gold standard system."

http://www.forbes.com/sites/nathanle...-ever-created/

And what happened in 1914?

The US Federal Reserve went into operation.

There is only one reason we went off the gold standard: You can't print gold.

[philnotfil]

Panic of 1873
1882-1885 recession
1887–88 recession
1890–91 recession
Panic of 1893
Panic of 1896
1899–1900 recession
1902–04 recession
Panic of 1907
Panic of 1910–1911
Recession of 1913–1914

Those are the glory days you want to return to?

[Lawdog88]

Originally Posted by philnotfil

Panic of 1873
1882-1882-1885 recession
1887–88 recession
1890–91 recession
Panic of 1893
Panic of 1896
1899–1900 recession
1902–04 recession
Panic of 1907
Panic of 1910–1911
Recession of 1913–1914

Those are the glory days you want to return to?

Will you quit trying to diminish our right to be anxious about our own glory day panics, Phil ? Geez.

[bluelang]

Correlation or it didn't happen.

Also, even with the gold/silver standard, the value still floated. It floated much less slowly, but it did float.

[bluelang]

If you buy this stuff about the gold standard:

A) You might as well believe that Clinton's policies balanced the budget and supercharged the economy.

B) Why doesn't anyone use the gold standard today?

[adamgator96]

Originally Posted by Burke

"During the 20th century, and now into the 21st, no central bank in the world has been able to match this [gold standard] performance. They are not even in the same galaxy. No world monetary arrangement has provided even a pale shadow of that era’s incredible successes.

"We could create an updated version of the world gold standard system of the pre-1914 era. However, there isn’t really much need to change things very much. It worked fine, and would still be working today if not for World War I, and soon after, the rise of Keynesian notions that governments could manage their economies by jiggering the currency. This requires a floating currency, which is why we have floating currencies today.

"Once we finally abandon these funny-money notions – probably because of their catastrophic failure – it will be very easy to create, once again, a superlative world gold standard system."

http://www.forbes.com/sites/nathanle...-ever-created/

And what happened in 1914?

The US Federal Reserve went into operation.

There is only one reason we went off the gold standard: You can't print gold.

Hvvj
Cgijvvij

Edit: My two year-old grabbed my phone and started typing. I'm sure she meant every word of it.

[Burke]

When money is created, someone gets the newly created money (usually pols and their pals), and everyone else gets inflation. It's just a transfer of real wealth from some to others. Those who had their wealth in money holdings really get screwed.

The fact is that the only reason most use govt money today is that they are forced to with the legal tender laws and in other ways.

Between 1985 and 2010, the dollar decreased a flat 50%.

With all the money printing going on, it's going to get a LOT worse.

[ChartsandGrafs]

Originally Posted by philnotfil

Panic of 1873
1882-1885 recession
1887–88 recession
1890–91 recession
Panic of 1893
Panic of 1896
1899–1900 recession
1902–04 recession
Panic of 1907
Panic of 1910–1911
Recession of 1913–1914

Those are the glory days you want to return to?

A few questions.

What was our average economic growth rate at that time? How do those growth rates compare to the growth rates in the years following the creation of a central bank? How many of those panics and recessions were due to government interference in the economy and not necessarily the gold standard? How many of those panics and recessions were manufactured by the international bankers so that they could bludgeon the public into accepting a central bank which they would control and profit off of?

Also, since you seem to be so concerned about panics and recessions, what do you have to say about all the much larger and more global panics and recessions that have occurred since the imposition of the Federal Reserve? Or are those OK?

[ChartsandGrafs]

For what it's worth, I'm not a big supporter of a gold standard. Not because of any inherent flaws with gold as money, but because of the current economic system in place and how it has allowed a relatively small number of people to accrue unimaginable amounts of wealth at the expense of others. It's very likely that there are connected families in this world, like the Rothschilds for instance, who've used their control and influence over hundreds of years of central banking policy to amass stockpiles of gold and wealth that wouldn't even fit inside Fort Knox. As such, they could dominate and rule over a gold money system just as easily as they dominate and rule over a paper money system.

Even if you don't believe in any of that, there are gigantic wealth imbalances in the current, corrupt system, that have only been created due to the workings of the current, corrupt system that couldn't and wouldn't be rectified under a gold standard. In other words, a gold standard would only fix a few of the problems in the current system, but not all of, or the most important problems. A gold standard would only serve to make those problems permanent.

This isn't a viable solution.

[ChartsandGrafs]

Was the famous Panic of 1907 a natural, organic economic event, or was it entirely manufactured by the elite banking class to achieve a desired end (i.e., "never let a crisis go to waste")?

From Ellen Brown's The Web of Debt:

Congressional opposition to the plan [Aldrich plan] was led by William Jennings Bryan and Charles Lindbergh Sr., who were strongly against any bill suggesting a central bank or control by Wall Street money. It took a major bank panic to prompt Congress even to consider such a bill. The panic of 1907 was triggered by rumors that the Knickerbocker Bank and the Trust Company of America were about to become insolvent. Later evidence pointed to the House of Morgan as the source of the rumors. The public, believing the rumors, proceeded to make them come true by staging a run on the banks. Morgan then nobly helped to avert the panic by importing $100 million worth of gold from Europe to stop the bank run. The mesmerized public came to believe that the country needed a central banking system to stop future panics. Robert Owens, a co-author of the Federal Reserve Act, later testified before Congress that the banking industry had conspired to create such financial panics in order to rouse the people to demand “reforms” that served the interests of the financiers.

Congressman Charles Lindbergh in Banking and Currency and the Money Trust:

None of us will have the opportunity to do what he did at this time. Because when we really understand, we will not permit anyone to fleece us as J.P. Morgan and Co. and other bankers have fleeced us. The King Bankers put in motion in 1907 a great scheme. They had gambled and speculated on Wall St. until so many watered stocks and bonds had been manufactured on speculation that numerous speculators big and small sprang up all over the country. The largest crop ever grown upon that time was harvested in 1907. The King Bankers knew the condition, and in turn knew the condition, and informed the favored of their friends what was to come. There was to be a Panic in the Fall of 1907 that would be advertised as the result of our bad Banking and currency laws. This 1907 Panic was to be the full means by which our people would be forced to pay the full face value of our watered stocks and bonds. That guarantee would make the people pay the interest on the dividends them forever. Thus, in 1907, we were given the Panic as the initial move for the proposed steal/the Aldrich plan.

The Money Trust caused the 1907 panic. ... [T]hose not favorable to the Money Trust could be squeezed out of business and the people frightened into demanding changes in the banking and currency laws which the Money Trust would frame.

Frederick Allen in a 1949 Life magazine article titled "Morgan the Great":

The Morgan interests took advantage... to precipitate the panic [of 1907] guiding it shrewdly as it progressed.

If it's possible that the 1907 Panic could be orchestrated, what about the other panics of that time?

[Burke]

Actually, I'm not in favor of a gold standard, which is still govt dictating to people what they must use as money. I'm in favor of the govt having nothing to do with the money and banking system, except for enforcing obligations people incur. Almost certainly, people would then begin to use gold as money.

[rpmGator]

Kenysian got Europe out of depression before us. If your plan is to stop public spending while the private isn't, the depression just gets deeper.

And since we got aircraft carriers named Enterprise, Hornet and so on with that spending which saved our ass in WW2, you owe your freedom to that spending.

[T3goalie]

Nixon pulling the plug on the last foothold of the gold standard green lighted all of the spending and stimulus/printing you see today.

An inch is a standard, a foot is a standard, a mile is a standard, a lb is a standard... A $USD has no standard. It is a diminishing unconditional promise to pay nothing in particular.

[orangeblueorangeblue]

Originally Posted by T3goalie

An inch is a standard, a foot is a standard, a mile is a standard, a lb is a standard... A $USD has no standard. It is a diminishing unconditional promise to pay nothing in particular.

This is the reality of all fiat, though. Even those backed by precious metals are valued arbitrarily.

[orangeblueorangeblue]

There is, in reality, no fundamental issue with the way we produce money. It's merely a fluid symbol for the value of work. Monetary manipulation is tried and true with regard to pushing or pulling the economy.

A central bank is good. A central bank that produces money is fine.

Our real problem is that our central bank is a public-private institution. This puts our government, perpetually, in the hands of private banks.

[busigator96]

I just find it funny a shiny metal has to be the standard to the world. It is all a rigged game until people fail to honor what money is supposed to be. It is sad when all of the developed world and their central banks keep injecting money to create a false economic recovery. Also, unless you are independently wealthy, are slaves to the almighty US dollar. Do you ever wonder why good and pure ideas are untimely put into place, or watered down to the point of any marginal benefit to the populace?

The bottom line is bastardized capitalism destroyed our republic.

[philnotfil]

Originally Posted by ChartsandGrafs

A few questions.

What was our average economic growth rate at that time?

According to the data that Angus Madison collected (xls), from 1870-1914 GDP growth in the US averaged 3.8% from 1870-1914.

How do those growth rates compare to the growth rates in the years following the creation of a central bank?

Using the same dataset, from 1915-2008, GDP growth in the US averaged 3.4%.

What those averages don't show you is the huge variability. 1870-1914 had huge ups and downs, with recessions every two or three years, and huge swings from up 12% to down 8%. The creation of the central bank came along with WWI, the roaring twenties, the great depression, and WWII. Once of all those things were out of the way, since 1950 GDP hasn't been over 9%, but it also hasn't been under -2%. A very different economic environment (and I would argue better for most people) than what we had prior to the central bank. I believe that reducing the fluctuation was a stated goal of the creation of the central bank, and it has been successful at that.

How many of those panics and recessions were due to government interference in the economy and not necessarily the gold standard?

1873 was in part due to government interference. The US government stopped using silver for money and went, in practice, to the gold standard. This was in addition to problems in Europe which caused problems for American banks. That is the only one that I can identify as having government roots, although this is not an area where I feel well-educated, so if you know more, please share. I do find it a little amusing that at least one of these, the panic of 1893, was caused by a run on gold.

How many of those panics and recessions were manufactured by the international bankers so that they could bludgeon the public into accepting a central bank which they would control and profit off of?

No idea, but if they could manufacture panics and recessions at will, why would they need a central bank to do that for them?

Also, since you seem to be so concerned about panics and recessions, what do you have to say about all the much larger and more global panics and recessions that have occurred since the imposition of the Federal Reserve? Or are those OK?

The world is more interconnected now than ever before. Many of the panics and recessions I listed were influenced by international concerns.

[ChartsandGrafs]

Originally Posted by philnotfil

What those averages don't show you is the huge variability. 1870-1914 had huge ups and downs, with recessions every two or three years, and huge swings from up 12% to down 8%.

Ah, so even without a central bank, the market was able to correct itself. In other words, a spike in inflation was quickly followed up by a spike in deflation. It was turbulent, and unpredictable, but there was a sort of equilibrium. The dollar maintained its value and people could generally build wealth and invest over time. The future was exceedingly bright.

The creation of the central bank came along with WWI, the roaring twenties, the great depression, and WWII. Once of all those things were out of the way, since 1950 GDP hasn't been over 9%, but it also hasn't been under -2%. A very different economic environment (and I would argue better for most people) than what we had prior to the central bank.

You could argue, yes, but you wouldn't be able to make a conclusive case either way. A lot of subjectivity involved.

I believe that reducing the fluctuation was a stated goal of the creation of the central bank, and it has been successful at that.

Yes, at the cost of permanent inflation (i.e., stealth tax, wealth transfer). They were successful at removing normal market corrections to imbalances and replacing them with permanent stealing.

And this is good how, exactly?

1873 was in part due to government interference. The US government stopped using silver for money and went, in practice, to the gold standard. This was in addition to problems in Europe which caused problems for American banks. That is the only one that I can identify as having government roots, although this is not an area where I feel well-educated, so if you know more, please share. I do find it a little amusing that at least one of these, the panic of 1893, was caused by a run on gold.

So you don't really know what caused those recessions and panics, but since they happened during the gold standard, the gold standard must somehow be directly responsible, right?

No idea, but if they could manufacture panics and recessions at will, why would they need a central bank to do that for them?

For the same reason all rich people utilize government: To consolidate their control over the economy, command the nation's credit and interest rates, squeeze out competition, and lord over all creation.

This is the story of history, man.

[philnotfil]

Originally Posted by ChartsandGrafs

Ah, so even without a central bank, the market was able to correct itself. In other words, a spike in inflation was quickly followed up by a spike in deflation. It was turbulent, and unpredictable, but there was a sort of equilibrium. The dollar maintained its value and people could generally build wealth and invest over time. The future was exceedingly bright.

Yes. Just like under a central bank, only with the central bank, the highs aren't as high and the lows aren't as low.

You could argue, yes, but you wouldn't be able to make a conclusive case either way. A lot of subjectivity involved.

Yes, it is subjective, volatile markets make for fun times if you are a day trader or have inside information.

Yes, at the cost of permanent inflation (i.e., stealth tax, wealth transfer). They were successful at removing normal market corrections to imbalances and replacing them with permanent stealing.

And this is good how, exactly?

Yes, there is a tradeoff. No system is perfect. Long-term planning is more wothwhile with a central bank.

So you don't really know what caused those recessions and panics,

Correct.

but since they happened during the gold standard, the gold standard must somehow be directly responsible, right?

Incorrect. The conclusion I drew is that going back to the gold standard wouldn't prevent the recessions and panics.

For the same reason all rich people utilize government: To consolidate their control over the economy, command the nation's credit and interest rates, squeeze out competition, and lord over all creation.

This is the story of history, man.

Agreed, but if they were able to do that without the central bank (if they created the panic of 1907), why would they need a central bank to do those things?

[ChartsandGrafs]

Originally Posted by philnotfil

Yes. Just like under a central bank, only with the central bank, the highs aren't as high and the lows aren't as low.

The Great Depression says, "hey, remember me?".

Yes, it is subjective, volatile markets make for fun times if you are a day trader or have inside information.

Nobody has more "inside information" than those who set central bank policy.

What do you think inside information about future changes to the federal funds rate is worth?

Yes, there is a tradeoff. No system is perfect. Long-term planning is more wothwhile with a central bank.

Sure, if you live in some kind of fantasy land. We live under a central bank now and most businesses have no idea what's in store for them in the future. Many have been in a veritable holding pattern since 2008 because they don't know where the economy is heading.

Incorrect. The conclusion I drew is that going back to the gold standard wouldn't prevent the recessions and panics.

That's interesting. Who said they would?

Agreed, but if they were able to do that without the central bank (if they created the panic of 1907), why would they need a central bank to do those things?

Because there's a tremendous difference between just regular corruption, fraud, and stealing and corruption, fraud, and stealing legally sanctioned and protected by force of government guns. One is considered illegitimate while the other considered perfectly legitimate.

Think about it for a second. Most people detest the idea of private monopolies and intuitively understand that private monopolies are far more likely to produce inefficiency, bad products, stagnancy, and marketplace abuses than non-monopolies. They demand competition and a level playing field, right? It's in the public's best interests, right? Competition is considered king in the private sector.

This all changes when it comes to public monopolies, though. And that is what government is. It's essentially a legal monopoly on the initiation of aggressive force. It's the most anti-competitive monopoly that has ever existed, yet people demand its existence. If you even dare to mention the idea of doing away with a government monopoly and mention all of its inefficiencies, bad products, stagnancy, and abuses, people scream bloody murder. It's completely irrational, but that's just the way it is. In the public's mind, private monopoly = bad, while public monopoly = good. Competition is considered the devil in the public sector.

Well, it didn't take long for the robber barons and monopoly capitalists to figure this out, and they banded together in different industries and pooled their resources to worm/buy their way into government on every level. That's basically what the Federal Reserve is. It's a cartel of private banks, which prior to the existence of the Federal Reserve, were all controlled by different families/monopoly capitalists, that had grown so large and so powerful, that the public was demanding something be done about it.

Do you follow?