The 1870-1914 Gold Standard

[philnotfil]

Originally Posted by ChartsandGrafs

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

Yes. A single data point is hard to make inferences from, but there is good support for the idea that the federal reserve trying to decrease the money supply went too far and deflation turned a recession into a depression.

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

Yes, and?

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

Quite a lot, and?

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.

Because of political considerations, not because of economic considerations. At least that is what the Republicans keep telling us.

That's interesting. Who said they would?

No one, at least not that I know of in this thread. That was my inference from the available data.

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?

While I think that educated and benevolent anarchy would be far superior to what we have today, government serves some important purposes. While it has its problems, the practical alternatives are less savory.

If your argument is that we should get rid of the federal reserve because we should be getting rid of government completely, I'm in agreement with the theory. The problem is the practice, it doesn't conform to the theory, and so is fairly useless.

[ChartsandGrafs]

Originally Posted by philnotfil

Yes. A single data point is hard to make inferences from, but there is good support for the idea that the federal reserve trying to decrease the money supply went too far and deflation turned a recession into a depression.

Perhaps by design, maybe?

Yes, and?

Quite a lot, and?

The point is pretty clear. The Federal Reserve represents the absolute pinnacle of "inside information". And it's not just standard inside information, it's potentially the most valuable economic inside information the world has ever known. It's one thing to be able to set interest rates, but it's another to actually know in advance what these changes will be. Over a period of time, and done incrementally, connected insiders could amass trillions and systematically buy up chunks of the economy with such inside information. The best part is, nobody will ever know, as the Federal Reserve isn't open to external, outside audits of many of its operations, specifically its open market operations.

The Federal Reserve is an untouchable, inscrutable engine of fraud, inflation, theft, inside information, and corruption, yet we're supposed to believe it is somehow necessary to the economy? That it makes everything somehow better?

Because of political considerations, not because of economic considerations. At least that is what the Republicans keep telling us.

Come on, man. What does this even mean? What does the Republican Party have to do with this?

If you honestly believe this, then this answer would also apply within an economic system that doesn't feature a central bank. One could argue that uncertainty in the economy is always due to politics, and not the free market.

No one, at least not that I know of in this thread. That was my inference from the available data.

Very well, that's what I figured.

While I think that educated and benevolent anarchy would be far superior to what we have today, government serves some important purposes.

I used to believe this, too. Then I started thinking critically, and now I can't go back.

While it has its problems, the practical alternatives are less savory.

Obviously debatable, that's a different discussion though.

If your argument is that we should get rid of the federal reserve because we should be getting rid of government completely, I'm in agreement with the theory. The problem is the practice, it doesn't conform to the theory, and so is fairly useless.

And how's government working in practice today? Does the government in practice conform to any of your theories?

[mastoidbone]

gold as MAIN currency is a recipe for slow growth. When and if an economy grows---gold supply does not. So deflation is result. And deflation causes businesses to NOT produce. And then recession and depression.

If money supply cant grow as economy grows you will have a disaster---this has happened MANY times with gold.

That said---if you dont have 5-10% of your assets in metals....you are taking a real risk.

[ChartsandGrafs]

Originally Posted by mastoidbone

gold as MAIN currency is a recipe for slow growth. When and if an economy grows---gold supply does not. So deflation is result. And deflation causes businesses to NOT produce. And then recession and depression.

If money supply cant grow as economy grows you will have a disaster---this has happened MANY times with gold.

That said---if you dont have 5-10% of your assets in metals....you are taking a real risk.

Sorry, but I don't believe this be a valid argument. Growth in the U.S. economy under the gold standard was brisk, to say the least. We basically went from an economic backwater to the world's most powerful economy in a relatively short time. America's most productive, and most sustainable economic period occurred during the gold standard, not the unlimited paper standard we have today.

Also, gold is always being produced. We're talking thousands of years of history here. If there's a shortage of available gold on the market and the supply goes down, the price naturally goes up, and production increases. When production increases, the supply goes up and then the market price falls again, making production less profitable. Either way, gold is being produced and the amount of available, above-ground gold is never really static for very long, if at all.

[orangeblueorangeblue]

There is functionally no difference between fiat backed by metal and fiat backed by pure faith. We have some serious monetary policy issues, and our central bank is a poorly designed entity, but this switching to a gold standard fixes nothing, really. It's a notion that has a lot of appeal to people who don't really understand how money works.

This was sort of eye opening in master's econ, where we had a lot of young kids who thought the whole concept of fiat was inherently flawed. It's a simplistic view, to say the least. Money is a symbolic exchange of work; it does not necessarily need value, nor does actual scarcity have an advantage over artificial scarcity.

[philnotfil]

Originally Posted by ChartsandGrafs

Perhaps by design, maybe?

I would have a hard time accepting that the great depression was something purposely inflicted on the world. If it was, who benefited from it? Why didn't they, or someone else, do it again?

The point is pretty clear. The Federal Reserve represents the absolute pinnacle of "inside information". And it's not just standard inside information, it's potentially the most valuable economic inside information the world has ever known. It's one thing to be able to set interest rates, but it's another to actually know in advance what these changes will be. Over a period of time, and done incrementally, connected insiders could amass trillions and systematically buy up chunks of the economy with such inside information. The best part is, nobody will ever know, as the Federal Reserve isn't open to external, outside audits of many of its operations, specifically its open market operations.

The Federal Reserve is an untouchable, inscrutable engine of fraud, inflation, theft, inside information, and corruption, yet we're supposed to believe it is somehow necessary to the economy? That it makes everything somehow better?

Having regular audits of the federal reserve is an important thing that isn't currently happening.

Come on, man. What does this even mean? What does the Republican Party have to do with this?

If you honestly believe this, then this answer would also apply within an economic system that doesn't feature a central bank. One could argue that uncertainty in the economy is always due to politics, and not the free market.

The Republican claim has been that businesses are in a holding pattern because they don't know how much the government is going to raise their taxes. Surveys of business owners indicate that the problem is a lack of demand, not uncertainty over government intervention or inflationary risks. I'm inclined to believe the business owners that they are in a holding pattern because of lack of demand.

I used to believe this, too. Then I started thinking critically, and now I can't go back.

What have you learned that we can apply to the world that we live in?

Obviously debatable, that's a different discussion though.

Agreed and agreed.

And how's government working in practice today? Does the government in practice conform to any of your theories?

It pretty terrible, but not as bad as the alternatives.

[philnotfil]

Originally Posted by mastoidbone

gold as MAIN currency is a recipe for slow growth. When and if an economy grows---gold supply does not. So deflation is result. And deflation causes businesses to NOT produce. And then recession and depression.

If money supply cant grow as economy grows you will have a disaster---this has happened MANY times with gold.

This is the important argument against gold as the basis for currency. It's a pretty good one.

[philnotfil]

Originally Posted by ChartsandGrafs

Sorry, but I don't believe this be a valid argument. Growth in the U.S. economy under the gold standard was brisk, to say the least. We basically went from an economic backwater to the world's most powerful economy in a relatively short time. America's most productive, and most sustainable economic period occurred during the gold standard, not the unlimited paper standard we have today.

Also, gold is always being produced. We're talking thousands of years of history here. If there's a shortage of available gold on the market and the supply goes down, the price naturally goes up, and production increases. When production increases, the supply goes up and then the market price falls again, making production less profitable. Either way, gold is being produced and the amount of available, above-ground gold is never really static for very long, if at all.

Growth in the US economy hasn't been any different under gold or under fiat currency. The numbers are available, go and look at them.

A bigger problem is our lack of urgency in paying down debt when the economy is doing well.

[ChartsandGrafs]

Originally Posted by philnotfil

I would have a hard time accepting that the great depression was something purposely inflicted on the world.

I wouldn't. It paved the way forward for the government to grow by leaps and bounds in a very short period of time and forcefully altered the way in which the American people viewed their government, as well. Millions of Americans came to depend on their government virtually overnight.

Think of the power transfer that took place politically during the Great Depression.

If it was, who benefited from it?

I really don't know who benefited from the Great Depression with any certainty, other than the power-lusting politicians in Washington, but there can be no doubt that somebody somewhere benefited, and who better than those in charge of setting monetary policy and those who owned the controlling interest of the Federal Reserve's member banks?

The mainstream, government-approved story on the Great Depression is that it was all just some big, unfortunate "accident" and "miscalculation" of government and monetary policy. Of course, right? Everything that happens is an accident of incompetence. Nothing ever happens by design. Absolutely not. We're not supposed to believe that. Beliefs of that nature can only lead us towards the idea that there's a "man behind the curtain", or a "throne behind the throne", and that's simply verboten.

For what it's worth, Franklin D. Roosevelt's son-in-law, Curtis Dall, said this about the Great Depression in his book My Exploited Father-in-law:

The depression was the calculated 'shearing' of the public by the World Money powers, triggered by the planned sudden shortage of supply of call money in the New York money market....The One World Government leaders and their ever close bankers have now acquired full control of the money and credit machinery of the U.S. via the creation of the privately owned Federal Reserve Bank.

Perhaps Curtis Dall had an axe to grind. Perhaps Curtis Dall had an active imagination. Perhaps Curtis Dall was a "conspiracy theorist". Then again, as a Wall Street banker himself, and a member of the Roosevelt family, perhaps Curtis Dall knew something the regular American people weren't told and weren't supposed to know.

Why didn't they, or someone else, do it again?

Who says they haven't? Is it not possible that the World Financial Crisis of 2008 was meant to be the spark that would send the global economy into another Great Depression? Rich people like getting rich and they also like consolidating power through the governments they control and influence.

What better way is there to do this than manufacturing crises through their control of central bank monetary policy?

Having regular audits of the federal reserve is an important thing that isn't currently happening.

Of course not. Can you imagine what a truly independent audit of the Federal Reserve's open market operations might reveal over the past 50 years? Why do you think it doesn't ever happen?

The politicians' bread is buttered by the banks and corporations. Nobody in this country can get elected to high office without two things:

1. Gigantic quantities of money to finance campaigns.
2. Favorable media coverage and marketing.

The entire election process is controlled by these two factors, and any politician who wants a seat at the big table in Washington is dependent on both in tandem. Not one or the other, but both.

And who controls the purse strings and media? Rich people do. Corporation do. Banks do. That's how the system works. The politicians serve the rich. Not because they are corrupt scumbags, even though most of them are, but because they have to. They have no choice.

That's why there isn't a real Federal Reserve audit and why there will never be a real Federal Reserve audit. It's as rigged as rigged can get.

The Republican claim has been that businesses are in a holding pattern because they don't know how much the government is going to raise their taxes. Surveys of business owners indicate that the problem is a lack of demand, not uncertainty over government intervention or inflationary risks. I'm inclined to believe the business owners that they are in a holding pattern because of lack of demand.

And why is there a lack of demand? Might it have anything at all to do with ruinous monetary policy set by the scoundrels at the Federal Reserve?

What have you learned that we can apply to the world that we live in?

Honestly? That we are screwed. There is a system in place that is so total and so complete that the mind that is aware of it is rendered almost incapable of finding a weakness or edge from which it can start to dig around or underneath it. Nothing short of a mass spiritual and cognitive awakening will suffice.

In the meantime, we can discuss the theoretical limitations of various political and economic systems as if they existed in a more rational world.

It pretty terrible, but not as bad as the alternatives.

If you're capable of recognizing and admitting how terrible it is, we can talk and exchange ideas. From there, we can discuss alternatives and maybe even learn a thing or two.

[mastoidbone]

gold supply is finite---each year a SMALL amount is produced. If gold supply increases 3% and economy increases 5% you will have MASSIVE deflation as you will have goods fighting for currency....which is a disaster.

Gold is DIFFICULT and expensive to mine---meaning your economic growth is CAPPED.
If you recall---when we had gold std in 1800s we also discovered the largest gold mines EVER found....which allowed growth.

Days of easy gold are over....gold as currency=deflation.
Deflation=NO INVESTMENT for fear of reduced return.

[ChartsandGrafs]

Originally Posted by philnotfil

Growth in the US economy hasn't been any different under gold or under fiat currency. The numbers are available, go and look at them.

A bigger problem is our lack of urgency in paying down debt when the economy is doing well.

Disagree. The United States grew to become the world's largest and most powerful economy under the gold standard. This includes all of the period up to the collapse of Bretton Woods 1 in 1971.

Since that time, under a paper standard, we've been in slow decline. There's no way to sugarcoat it either. The U.S. economy of today is a shell of its former self. The only thing that's kept us afloat is massive public and private debt, inflation, and our petrodollar empire. We used to have an economy that produced enough domestic wealth to support our standard of living. Now we have an economy where we can't support our standard of living without amassing a mountain of IOUs, threatening others with our military, and exporting our inflation abroad.

Seriously. No rational person could compare the U.S. economy pre-71 with what we have today. It's a joke.