Gold Standard, yea or nea?

[whorfin]

@IdahoMauleMan

And here, my friend, is where we shake hands and part friends.

I don’t want to turn over the control of my country’s monetary supply to ‘wonks’. I want them constrained by a physical resource. I want their hands to be tied…that’s the whole point of a gold standard. You can’t arbitrarily increase or decrease the money supply based on the decisions of a dozen or so human beings. You leave it to the market.

The gold standard, as you surely know, doesn’t leave the money supply to the market. It leaves it to a bunch of miners.

If you want to leave the money supply to the market, the solution is utterly free banking. People can issue whatever notes they want, backed by whatever they want. That way lies chaos.

You keep referring to the 19th century as a period of terrible deflation. Why was it so terrible? I think it was good. If you look at the wealth created between 1800-1899, and the increase in living standards as measured by

• Life expectancy
• Recovery from physical trauma
• Power production
• Time and cost required to travel, or send a letter
• Communications, which went from somebody carrying a letter on the back of a donkey, to the wireless
• Clean drinking water and sanitation

It was one of the greatest explosions of increased living standards, and creation of wealth, in the history of mankind. How could the deflation be so ‘terrible’? I would argue it was irrelevant, and possibly supportive of those business endeavors.

An interesting argument. What it fails to do is compare the 19th century to the 20th century–a century of moderate inflation.

I would agree that we saw improvements in each of the factors you indicate in the 19th century.

However, I would also argue that the improvment on each factor in the 20th century beats the crap out of the improvement seen in the 19th.

Compare the wealth created in 1800-1899, and 1900-1999. Cities, skyscrapers, computers becoming commonplace. Indoor plumbing becoming the norm. Car ownership.

• Life expectancy
  -Truly modern medicine, surgery that could be reliably survived, antibiotics, nutrition, etc, etc.
• Recovery from physical trauma
  Ditto.
• Power production
  unimaginably greater in 2000 than in 1900
• Time and cost required to travel, or send a letter
  1900-telegraph, the fastest way to send something physical was by ship or train. 2000-air mail, air travel, reliable roads and highways, radar and better ship construction making sea travel far safer and more reliable
• Communications, which went from somebody carrying a letter on the back of a donkey, to the wireless
  communications that went from morse code to the internet.
• Clean drinking water and sanitation
  Again, good in 1900, many times better in 2000

[whorfin]

@IdahoMauleMan

No, you don’t hoard it. You spend it, or invest it, or perhaps save it, according to your preferences for consumption vs deferral.

You don’t sit on a giant pile of gold, and then go without food, or a TV to watch the NFL, or an occasional trip to Cabo San Lucas. Why would a change to the gold standard cause people to change their behavior w.r.t. savings and consumption? The only time I could see that happening is if they lose confidence in the currency, which is of course what happened pre-Great Depression.

You deal with deflating prices every day, and tradeoffs between consumption and deferral, without even realizing it.
…

Why would any of that change because we went on the gold standard? The posts above are bizarre. You, and others, postulate that (somehow) if we went back to the gold standard, people would huddle around their little piles of gold, never going out, never spending anything, and never investing. What makes you believe people would change their behavior like that?

This is just economics 101. You seem to agree that the gold standard is, in and of itself, deflationary (though one might argue about the degree).

Inflation creates an incentive to spend. Money loses value relative to goods and services–so a rational consumer spends more of his income.

Deflation creates an incentive to save. Money gains value relative to goods and services–so a rational consumer spends less of his income.

Now, we could argue in terms of the extremist “inflation means everybody spends everything right away–1920s germany, where your pay can buy more in the morning than the afternoon”, or “deflation makes people sit around piles of gold, never investing.”

But ignoring those extremes, it seems clear that moderate inflation=more consumption, moderate deflation=less consumption. That is economics 101.

Now, if you value a nation’s economy in terms of stuff produced, is more consumption good or bad? It’s good. More consumption = more production. The economy expands.

Deflation, on the other hand, leads to more saving, less consumption, which means fewer goods are needed, so less production–the economy contracts.

[wmfellows]

@IdahoMauleMan

I don’t want to turn over the control of my country’s monetary supply to ‘wonks’. I want them constrained by a physical resource. I want their hands to be tied…that’s the whole point of a gold standard. You can’t arbitrarily increase or decrease the money supply based on the decisions of a dozen or so human beings. You leave it to the market.

This entire discussion is surreal. Leaving aside the disturbing irrationality of the level of anti government paranoia above, historical fact tells us that devaluation of metallic based currencies was a regular occurrence, only it generally occurred under crisis.

The historical record demonstrates clearly that “arbitrary” (rather I would say rational) calibration of money supply to liquidity needs can certainly occur under a metallic system, it will simply end up being done in less transparent (and often less reasoned) circumstances. Why one would rationally opt for a less efficient and more crisis prone monetary system really escapes.

Claiming Gold Standard Superstition is leaving it to the market is dangerous ignorance.

An unmanaged fiat currency unconstrained by irrational superstition of some arbitrary metal supply would be leaving money purely to the market. I doubt it would work well, given all kinds of externalities, butthere would at least be a level of rationality to the proposition.

And that applies in general to government. I don’t want enlightened, elite people making decisions about my life.

So you’re essentially an anti-learning populist engaging in a bit of poorly informed paranoid fantasy.

[IdahoMauleMan]

@whorfin

P1. The gold standard, as you surely know, doesn’t leave the money supply to the market. It leaves it to a bunch of miners.

P2. If you want to leave the money supply to the market, the solution is utterly free banking. People can issue whatever notes they want, backed by whatever they want. That way lies chaos.

No, actually the gold standard has arisen in multiple civilizations, over multiple centuries, of its own volition. Without any ‘chaos’. The government actually has to do nothing, and it’s 99.9% certain the gold standard would return of its own volition.

I would cite some more Hayek and Rothbard on this, but when I do so I get ad hominem attacks in return. So it’s probably not worth the time.

P2. They are free to do so. And they have. But who would take them? Would you?

[IdahoMauleMan]

@Hellestal

But for my purposes, what’s most telling about the second chart is what happened after Paul Volcker’s term as Fed chair: there was still inflation, but it was steady inflation. Nice, calm, predictable inflation. Look at how wonderfully smooth that inflation rate is from the 1980s on. Shame that it doesn’t go up to the present day, or we should see that inflation rate drop to 0 (bad juju there). But even with the latest crisis, we’ve had some deflation but not the terrible pits of deflation that they saw in the 19th century, and all because Bernanke was able to fire up the printing presses and issue another trillion dollars worth of monetary base.

Tall Paul was indeed a fine Fed chairman. But let’s say for a moment that I agree with you. Or as Perry Mason might say, Defense Counsel stipulates that Volcker did a pretty decent job.

Does that mean that William Miller (who many argue was a disaster) and Greenspan, who bookended Volcker, did a less-good job? Do we just sit back and hope that the President nominates, and Congress approves, a good chairman?

What if they don’t? What if the man/woman isn’t that good? Then what happens?

Why would you devolve that power to someone?

Many of the posts above are obviously written by articulate, well-read Dopers. But the rhetoric is fantastic.

Paranoid. Nutball. Fantasy. Kook.

Let’s pull up to 100,000 feet for a moment. And think conceptually about a Big Picture Question.

Why does the Fed need to exist at all? What purpose is it serving? If our common objective function is improved living standards, primarily through the creation of wealth via productive employment, how does speeding up - or slowing down - the printing of little pieces of paper allow that to happen?

Can wealth be created ‘better’ or ‘faster’ by printing little pieces of paper, which are clearly and demonstrably NOT stores of value? How can doing nothing - and allowing whatever free-market money mechanism to fill the gap to happen - cause misery and depressions?

I would submit that it is impossible. Yet somehow the arguments above seem to rest on the foundation that No, IdahoMauleMan, unless enlightened people are speeding up, and slowing down, the printing of little pieces of paper we will not be able to create wealth as fast as we otherwise would be able to. And what’s worse, unless we do, misery and depressions will follow.

How is does that even make sense? Why did FDR need to forcibly expropriate gold from the citizenry, and then devalue the currency’s relation to gold, if it wasn’t that big of a deal?

[whorfin]

@IdahoMauleMan

No, actually the gold standard has arisen in multiple civilizations, over multiple centuries, of its own volition. Without any ‘chaos’. The government actually has to do nothing, and it’s 99.9% certain the gold standard would return of its own volition.

I would cite some more Hayek and Rothbard on this, but when I do so I get ad hominem attacks in return. So it’s probably not worth the time.

…

THE GOVERNMENT HAS TO DO SOMETHING TO CREATE A GOLD STANDARD, BY DEFINITION. THE GOLD STANDARD IS DEFINED BY A GOVERNMENT BACKING CURRENCY WITH GOLD, AND SETTING A FIXED CONVERSION RATE.

WE COULD DO BUSINESS WITH GOLD COINS TODAY–BUT IT’S NOT A GOLD “STANDARD”–BECAUSE WE’RE JUST CHOOSING TO DO SO, AND THE ‘PRICE’ WE SET FOR GOLD IS NOT FIXED WITH RESPECT TO ANY CURRENCY. NOBODY IS MAKING IT A “STANDARD”–DEFINING THE RATE AT WHICH CURRENCY SHALL BE EXCHANGED FOR GOLD.

Now that that’s resolved.

First, I don’t think my post says what you think it says.

The money supply is the amount of money in an economy. In an economy that uses the gold standard, this is defined by the amount of gold available to back currency.

That is determined by gold miners.

Second, you say this in response to my comment that a real market-based currency is free banking. I agree with you that free banking is a terrible idea–because it would lead to money that nobody would take.

P2. They are free to do so. And they have. But who would take them? Would you?

So given that, why are you for free banking? Which is it, good idea or bad idea?

@IdahoMauleMan

As I posted above, I am all for free banking

Or, if we’re going down the road of systems that are created by the market time and time again–how about fractional reserve banking? That has existed for centuries–and was a creation of the market, later regulated by government. It has appeared in many countries.

So if we’re looking to systems that appear on their own as a sign of what we should do, Fractional-reserve banking is a winner.

Finally, if you want to make arguments without supporting them, that’s your prerogative. I’m here to debate-and part of that is being open to being convinced. You could even convince me that Rothbard is right. You just have to present his argument, and support it.

You seem to be worried about “ad hominem attacks.” I’d point out for the record that nobody is (as far as I can tell) attacking you as a person. I’m certainly not. You’re putting forward ideas that I think are flatly wrong, and I’m attacking those-but that’s not ad hominem.

Further, as far as I can see, the criticisms of rothbard have been that he puts forward some very silly ideas (such as a libertarian critique of fractional-reserve banking as fraud, calling for it to be banned even when all parties in the transaction have full knowledge of what they’re agreeing to). That’s not an ad hominem attack. That’s saying he’s wrong in many, many ways.

[IdahoMauleMan]

@Lumpy

Because the sixteenth century was one of the few times in history that at least temporarily and locally, a country had too much gold and silver. Gold and silver had been so dear for so long that people had fallen ito the habit of thinking gold=wealth. The kings of Spain didn’t understand that you can’t buy whatever you want simply by dumping more money into the economy. In this case all those Spanish pieces of eight were as harmful to Spain’s long term economic health as any run of a printing press. Being on the gold standard didn’t magically protect them.

I agree with all of that.

But I would also say that their collapse had nothing to do with the gold standard…it had to do with the fact that they were no longer creating wealth, and were instead consuming like banshees.

The gold standard doesn’t guarantee creation of wealth. Creation of wealth comes through risk-staking, hard work and enterprise.

What the gold standard prevents is the destruction of, and arbitrary seizure of, wealth by the government via overborrowing and inflation.

[IdahoMauleMan]

@whorfin

…

THE GOVERNMENT HAS TO DO SOMETHING TO CREATE A GOLD STANDARD, BY DEFINITION. THE GOLD STANDARD IS DEFINED BY A GOVERNMENT BACKING CURRENCY WITH GOLD, AND SETTING A FIXED CONVERSION RATE.

WE COULD DO BUSINESS WITH GOLD COINS TODAY–BUT IT’S NOT A GOLD “STANDARD”–BECAUSE WE’RE JUST CHOOSING TO DO SO, AND THE ‘PRICE’ WE SET FOR GOLD IS NOT FIXED WITH RESPECT TO ANY CURRENCY. NOBODY IS MAKING IT A “STANDARD”–DEFINING THE RATE AT WHICH CURRENCY SHALL BE EXCHANGED FOR GOLD.

Now that that’s resolved.

The government only has to ‘do something’ if it wants to borrow, or perhaps tax, in a certain denomination.

It could do nothing. It could simply let the market dictate prices in ‘grains of gold’ or whatever, and let banks or other stores of value print receipts for deposits in ‘grains of gold’ or whatever. A gallon of milk could be 2 grains of gold. A new car could be 30 kilograms of gold.

There is no inherent reason why a multiplier of linking grains to gold to [some unit, which the US calls a ‘dollar’] needs to exist at all. There’s no reason why a government sponsored currency really needs to exist at all.

I’m not saying that it doesn’t make things convenient, or that government borrowing is necessarily bad.

I’m trying to jar a little out-of-the-box thinking of some of the obviously smart posters on this Board, from who’s language is clear that they believe the government has to define a currency (misconception #1) and that the government fixes the price of gold (misconception #2…its actually the other way around). The government can choose to do nothing. And in fact it did, for many of the early years of the United States.

[IdahoMauleMan]

@whorfin

This is just economics 101. You seem to agree that the gold standard is, in and of itself, deflationary (though one might argue about the degree).

Inflation creates an incentive to spend. Money loses value relative to goods and services–so a rational consumer spends more of his income.

Deflation creates an incentive to save. Money gains value relative to goods and services–so a rational consumer spends less of his income.

Now, we could argue in terms of the extremist “inflation means everybody spends everything right away–1920s germany, where your pay can buy more in the morning than the afternoon”, or “deflation makes people sit around piles of gold, never investing.”

But ignoring those extremes, it seems clear that moderate inflation=more consumption, moderate deflation=less consumption. That is economics 101.

Now, if you value a nation’s economy in terms of stuff produced, is more consumption good or bad? It’s good. More consumption = more production. The economy expands.

Deflation, on the other hand, leads to more saving, less consumption, which means fewer goods are needed, so less production–the economy contracts.

I would say that your arguments about incentives are true, only if the rate accelerates or decelerates above its normal trend. In other words, if inflation suddenly gets a lot faster, than it creates incentives to spend faster. If deflation suddenly occurs, it creates incentives to hoard.

That’s why Tall Paul’s nice, moderate expectation of inflation over many years created a nice stable economy. Knowing that inflation is 2%, plus-or-minus a skoosh, every year creates nice predictable circumstances that makes it easy to plan and invest.

But so does 0%. And what’s more, 0% ensures the government isn’t destroying the wealth of those who choose to use the currency as a store of value, or creating a hidden tax on those who’s receipts and expenditures are fixed in nominal dollars.

That was my point above.

[Lemur866]

@IdahoMauleMan

I’m trying to jar a little out-of-the-box thinking of some of the obviously smart posters on this Board, from who’s language is clear that they believe the government has to define a currency (misconception #1) and that the government fixes the price of gold (misconception #2…its actually the other way around). The government can choose to do nothing. And in fact it did, for many of the early years of the United States.

Look, nobody is requiring you to use US dollars–except to pay taxes in the US. There, it is true, you are required to pay dollars. But if you prefer to do all your transactions in gold, or silver, or cowrie shells, or whiskey, or cacao beans, or cattle, then you are perfectly free to do so, and you are only required to purchase dollars once a year every April 15th.

The only problem is finding people who would prefer to engage in transactions denominated in cowrie shells or gold nuggets rather than US dollars. And if your bank doesn’t want to set up a cowrie shell account for you, why should they be required to? If your grocery store only accepts US dollars, that’s their right. If your employer only pays salaries in US dollars, why shouldn’t they? Note that some employers provide in kind salaries–say, company cars and so forth.

And note that you’re just wrong that “the gold standard” will appear spontaneously without government intervention. That’s just wrong. Yes, GOLD will often be used as money in the abscence of government intervention. But there’s a pretty fucking big difference between trade using gold, and trade using pieces of paper that represent a certain weight of gold.

A gold coupon is not gold. It is merely a promise by someone to give the bearer of the coupon a certain weight of gold under certain circumstances. And as everyone has pointed out multiple times in this thread, in real life governments have reneged on those promises over and over and over and over and over and over and over again. And this will always happen during a crisis, at just the point where you’re going to need that gold rather than worthless promises. And there’s going to be nothing you can do about it, because the jackbooted thugs who suspend specie payment will just laugh at you when you complain that they PROMISED to pay you gold. You can stamp your feet and insist that a promise is a promise, but see, governments lie. And this happened ALL THE TIME in the history of gold-backed paper money.

If you don’t trust the government, then you’re an idiot to believe in the gold standard. If you don’t trust the government, all you can trust are tangible goods–like actual gold ingots. You can’t trust a bank, banks fail. You can’t trust the government, governments steal. You can’t trust commodities, because commodities fluctuate in value. You can’t trust contracts, because the well connected kleptocrats control the courts, and they’ll rule in favor of their buddies.

And so you’re screwed. Unless you work to keep the government under control of the people. Unless that happens, all your plans for financial independece will fail. Take a look at the Roman Republic. Whenever they needed money, they just declared some rich Patrician to be a traitor, and confiscated his estates.

So you don’t trust the government. So yeah.

[IdahoMauleMan]

@Lemur866

And note that you’re just wrong that “the gold standard” will appear spontaneously without government intervention. That’s just wrong. Yes, GOLD will often be used as money in the abscence of government intervention. But there’s a pretty fucking big difference between trade using gold, and trade using pieces of paper that represent a certain weight of gold.

A gold coupon is not gold. It is merely a promise by someone to give the bearer of the coupon a certain weight of gold under certain circumstances. And as everyone has pointed out multiple times in this thread, in real life governments have reneged on those promises over and over and over and over and over and over and over again. And this will always happen during a crisis, at just the point where you’re going to need that gold rather than worthless promises. And there’s going to be nothing you can do about it, because the jackbooted thugs who suspend specie payment will just laugh at you when you complain that they PROMISED to pay you gold. You can stamp your feet and insist that a promise is a promise, but see, governments lie. And this happened ALL THE TIME in the history of gold-backed paper money.

If you don’t trust the government, then you’re an idiot to believe in the gold standard. If you don’t trust the government, all you can trust are tangible goods–like actual gold ingots. You can’t trust a bank, banks fail. You can’t trust the government, governments steal. You can’t trust commodities, because commodities fluctuate in value. You can’t trust contracts, because the well connected kleptocrats control the courts, and they’ll rule in favor of their buddies.

And so you’re screwed. Unless you work to keep the government under control of the people. Unless that happens, all your plans for financial independece will fail. Take a look at the Roman Republic. Whenever they needed money, they just declared some rich Patrician to be a traitor, and confiscated his estates.

So you don’t trust the government. So yeah.

Those are awesome paragraphs. I think I agree with everything in them.

So what point are you arguing, here? That we should throw up our hands in despair, and let the government devalue the currency? Let a central bank be created, and exist to do just that?

What things are worth fighting for, as a citizen? Are you just accepting that governments lie, and that I should just roll with the punches? Why would I do that?

The whole point of the gold standard is that I ALWAYS have a healthy, skeptical distrust of government. So should you.

Why wouldn’t I? Why wouldn’t you? The gold standard is a nice, unavoidable constraint that the government cannot get around, unless it undertakes the brazen theft of FDR, circa 1933. And on a broader conceptual note, as I’ve tried to show above, there is no reason for the government to get involved in the money business anyway. Just like the Post office, or running Amtrak.

Would you allow the government to arbitrarily seize your wealth without a fight? If Barack Obama, or George Bush suddenly showed up at your door, and said ‘Give me all of your $20 bills. I’m going to give you $10 bills in return. But by the way, you still owe the same amount in taxes as you did before.’ would you let them do that?

[Lumpy]

@IdahoMauleMan

The government only has to ‘do something’ if it wants to borrow, or perhaps tax, in a certain denomination.

It could do nothing. It could simply let the market dictate prices in ‘grains of gold’ or whatever, and let banks or other stores of value print receipts for deposits in ‘grains of gold’ or whatever. A gallon of milk could be 2 grains of gold. A new car could be 30 kilograms of gold.

There is no inherent reason why a multiplier of linking grains to gold to [some unit, which the US calls a ‘dollar’] needs to exist at all. There’s no reason why a government sponsored currency really needs to exist at all

The reason historicallly was that coinage was a government certification that the lump of metal being traded was of a fixed weight and purity, which the government would certainly insist upon if it’s collecting taxes in coin. And talk about brazen government theft: from the beginning, governments charged a premium, seigniorage, on the process. As has been stated upthread, the requirement to conduct business in gold was little obstacle to government fraud.

And banks did print receipts for deposits in gold. They were called “bank notes”, and were effectively a check signed by the bank redeemable by the bearer. Of course then that leads us to fractional reserve banking, which led by the beginning of the twentieth century to virtually all governments nationalizing the issuance of paper money.

[Inner_Stickler]

I just wanted to drop in and thank everyone for a very enlightening thread. I especially enjoyed the discourse on fractional reserve banking. I had no idea that’s how it worked and really enjoyed the trip down the rabbit hole.

Ok, hijack over, please to commence with the educating again.

[IdahoMauleMan]

@Hellestal

We’re in GD now, so yeah, you can hold fast to your opinions. They are yours, and this is the place for it, and you have every right to them, even when they’re based on fantasies no more real than unicorns and pixies.I’ve already explained why deflation is bad. Repeatedly. I’ve got all of mainstream economics at my back from all over the spectrum. This is not a dispute between professionally trained libertarians and liberals. It’s a dispute between people who know what they’re talking about and people who haven’t the slightest clue.

And Exapno has already pointed out that the 19th century had inflation on net. On the long haul, prices were stable during the 19th century compared to the 20th, but the currency still inflated on net over the entire time period. My point, the point that I made repeatedly, is that periods of deflation can be especially harmful. And you know what? Those periods of deflation in the 19th century were especially harmful. They coincided with the “Panics” of that age, and they exacerbated those panics. Did average human welfare increase in the 19th century? Of course it did. But human welfare would’ve done even better if they could’ve avoided the deflationary periods. This is not the difference between growth and no growth–it’s the difference between strong, steady growth and growth that’s interrupted by long periods of suffering that could have been avoided with a different monetary system.

Evidence for this can be seen today. Right now, China is rapidly catching up from those centuries when it was left behind, and they’re doing it without a gold standard. They were having 10% annual growth before the crisis, and it seems they managed to avoid the worst of this latest worldwide downturn. China doesn’t have a gold peg. China doesn’t need a gold peg. A gold peg would be less stable than what they have now.

What’s especially hypocritical about this is that you have already admitted some of the problems of the 19th century. From your own post:I agree entirely that large whipsawing in the price level is damaging. Now read the second table from Exapno’s cite. Where is the whipsaw effect? Not in the present era under fiat currency. The real whipsawing happened under the gold standard. You claimed earlier that whipsawing was bad, and when I pointed out that the most stable inflation rate we’ve ever had happened with the wonks’ control of the fiat currency, you immediately flipped and said that was a bad thing. Typical from any fundamentalist. The argument changes like mercury to support what you always wanted to believe. It’s the same reason you provide a link to Arthur Laffer about scary FDR and ignore him when he undercuts your deflation arguments (great catch from Mapcase there). You use what you think helps you and ignore the rest.

Well, you were right in the first place about whipsawing in the change prices. It’s bad, and if you really cared about that (which you don’t), you’d acknowledge the Fed’s superior ability so far to control those fluctuations with fiat currency. My other, deeper point about deflation coincides with this: the downward portion of that whipsaw is especially damaging. This is not disputed by any respectable modern economist in the world. Even today’s professionally trained hacks don’t dispute this, so far as I know.I know you argue thus. You do so because your beliefs are based not on evidence, but on personal dogma. You believe what you believe, facts be damned.

This is GD, but I’m not going to debate with a market fundamentalist. But since this used to be a GQ thread, if you continue to post errors, I will continue to correct them for as long as it seems worthwhile. You want to make a moral argument? That’s fine. More power to you. But I’m not going to let you pretend that your moral arguments have some sort of factual foundation. They don’t. They never have.

The biggest spikes I see in the second chart are around

• The Revolutionary War
• The War of 1812
• The Civil War

and then up until WWI.

And I see your point…the average variance from that era does appear to be more than post WWI. I’ll have to think about that. I might have some questions about

1. How reliable the data from that time period actually is

2. The relative tradeoff between a predictable, but constant destruction of value vs. a more random, but overall less cumulative value-destroying time period

But color me (at least a little) skeptical from any source that says

‘It’s possible that the only source of US prosperity of those times was slavery and exploitation of workers.’

Give me a frickin break. I haven’t even bothered to check the bonafides of the source, since I don’t have reason to. But come on. Please. To go from 1800 where

• Most Americans were scratching out a living in the dirt, with an average life expectancy of about 35, to 1900 and

• The radio and telephone, steamship travel, entire cities powered with electricity, clean drinking water, early automobiles, massive increases in agricultural productivity, the Wright brothers heading out to Kitty Hawk, etc.

and it was all due to slavery and exploitation? I’m going to let that one go by with a little smirk, and get back to the debate.

Thanks for the posts.

[IdahoMauleMan]

@Lumpy

The reason historicallly was that coinage was a government certification that the lump of metal being traded was of a fixed weight and purity, which the government would certainly insist upon if it’s collecting taxes in coin. And talk about brazen government theft: from the beginning, governments charged a premium, seigniorage, on the process. As has been stated upthread, the requirement to conduct business in gold was little obstacle to government fraud.

And banks did print receipts for deposits in gold. They were called “bank notes”, and were effectively a check signed by the bank redeemable by the bearer. Of course then that leads us to fractional reserve banking, which led by the beginning of the twentieth century to virtually all governments nationalizing the issuance of paper money.

Thanks for the post.

Some quick reading about private coinage in the US and England, that I found interesting.

Get Government Out of Coin Manufacture | George A. Selgin

[Exapno_Mapcase]

@IdahoMauleMan

Many of the posts above are obviously written by articulate, well-read Dopers. But the rhetoric is fantastic.

Paranoid. Nutball. Fantasy. Kook.

Now that we’re in GD you’re free to share any opinions about government you want.

However, Whorfin and Hellestal and others keep demonstrating that your statements on economics are demonstrably wrong and I and others have shown repeatedly that your history is factually wrong.

In response, you ignore any factual refutation and fall back on statements that the government is not to be trusted and various other rants about theft, confiscation, and the power of the Fed.

How can anyone not take away that a feeling that your side of the argument is somewhat less than compelling?

And once again your statements are even contradicted by your own cites.

@IdahoMauleMan

Let a central bank be created, and exist to do just that? [devalue the currency]

@Arthur Laffer

In early 1933, the federal government (not the Federal Reserve) declared a bank holiday prohibiting banks from paying out gold or dealing in foreign exchange. An executive order made it illegal for anyone to “hoard” gold and forced everyone to turn in their gold and gold certificates to the government at an exchange value of $20.67 per ounce of gold in return for paper currency and bank deposits.

Your understanding of history is nonexistent and your understanding of economics is incoherent. To support your case you presented information that is the opposite of factual, even though it could have been easily checked. You’ve repeated information that is not true even when you have acknowledged cites that refuted it. You’ve cited experts whose words do not back you up.

These are not ad hominem attacks. We have attacked, and IMO, demolished everything you have written existing in a factual world outside your belief system. That is our role.

In response, you offer nothing more than: “The government is evil. Why won’t you believe me?”

This route is not working. Your belief system is not compelling. It is suffering the fate of all such belief systems when subjected to factual analysis. Facts have a distressing tendency to win out in the end.

I’m not going to debate your beliefs. But I’ll be happy to refute any additional erroneous statements you make about history.

[IdahoMauleMan]

@Exapno_Mapcase

Now that we’re in GD you’re free to share any opinions about government you want.

However, Whorfin and Hellestal and others keep demonstrating that your statements on economics are demonstrably wrong and I and others have shown repeatedly that your history is factually wrong.

In response, you ignore any factual refutation and fall back on statements that the government is not to be trusted and various other rants about theft, confiscation, and the power of the Fed.

How can anyone not take away that a feeling that your side of the argument is somewhat less than compelling?

And once again your statements are even contradicted by your own cites.

Your understanding of history is nonexistent and your understanding of economics is incoherent. To support your case you presented information that is the opposite of factual, even though it could have been easily checked. You’ve repeated information that is not true even when you have acknowledged cites that refuted it. You’ve cited experts whose words do not back you up.

These are not ad hominem attacks. We have attacked, and IMO, demolished everything you have written existing in a factual world outside your belief system. That is our role.

In response, you offer nothing more than: “The government is evil. Why won’t you believe me?”

This route is not working. Your belief system is not compelling. It is suffering the fate of all such belief systems when subjected to factual analysis. Facts have a distressing tendency to win out in the end.

I’m not going to debate your beliefs. But I’ll be happy to refute any additional erroneous statements you make about history.

I’ve enjoyed the debate and the posts, especially your charts.

I just re-read them all, and I hardly see things that are demonstrably wrong, arguments that have been demolished, rants, or anything else. And please go back and check my wording on the Laffer cite I provided…what exactly did I say when I posted that?

But this is the point of Great Debates, is it not? I’m happy to be educated.

If you want to boil this down to sharply barbed one-liners, your attack on my argument seems to be

“The government is evil. Why won’t you believe me?”

I would say it a little differently…I would say something like

“Why wouldn’t you want government borrowing and spending tied to an obvious and inviolate constraint, one that all citizens can understand and keep our eyes on?”

Now, if I were to come up with a sharply barbed one-liner of my own, I might say something like

“You guys all seem to be well-read and educated economists. You seem to support putting enormous power in the hands of a small group of similarly schooled and like-minded individuals, far removed from accountability to the average citizen, and trust that they will do a good job, with no real constraints that are visible and understandable to the general populace.”

But I won’t say that. At least not yet.

If you don’t mind, I would love you to make one more post. Since you and I seem to reading the last four pages and seeing different things.

Please pick out your best 2-3 cites (from the ones already posted) that you think destroy my argument. I know you think we’ve already gone through this, but I would appreciate it if you could summarize it for me. I’ll go back and cogitate on your points again.

[wmfellows]

@IdahoMauleMan

I just re-read them all, and I hardly see things that are demonstrably wrong, arguments that have been demolished, rants, or anything else.

I submit that if you do not see your argument demolished, it is because you lack the basic understanding of the arguments being put forth. Really, you need a far better basic level understanding of economics. I am afraid your confidence in markets (and I say this as someone entirely favourable to free markets) rests on an almost superstitious kind of understanding.

The refutations have been clear:
(i) Money supply linked to a physical asset like gold assures nothing but an artificial inflexibility of the money supply relative to demand for money;
(ii) Historically does not impede “artificial” manipulation, merely renders it less efficient and more crisis prone

“Why wouldn’t you want government borrowing and spending tied to an obvious and inviolate constraint, one that all citizens can understand and keep our eyes on?”

Because
(I) there is absolutely no need, because money supply and government spending and borrowing is not constrained by money supply (the lessons of history show that this is pure mythology, governments going into deep debt was entirely possible and indeed frequent under Gold and Silver based systems, your belief in this area doesn’t stand up to historical experience);
(II) Gold supply is neither obvious nor inviolate, insofar as (a) debasements are entirely possible and historically frequent, (b) Gold and Silver have increasingly significant non monetary usages, rendering the supply available for money non-obvious, and (c) "understanding’ said constraint is evidently not as simple or easy to “keep eyes on” as your presumption given unlike fiat money with its clear reporting (one can check M1+ money supply statistics with all major currencies in almost real time) Gold and Silver are subject to (1) physical supply changes that have nothing to do with the larger economy, (2) hoarding and secret stocking, (3) price of Gold & Silver will vary for reasons different than their monetary usages, thus actually obscuring rather than clarifying a governmental monetary policy, in particular in short term.

Fiat money is easy to track, and with only a modicum of maths and economics education, easy to understand. The reporting undertaken by all major economies renders their money supplies and fiscal policies about as transparent as possible. It does not take immense education to be able to understand the essentials.

Your argument is based on two things:
(i) an essential irrational paranoia and paranoid approach to “controlling” relative to government and
(ii) an essentially superstitious belief in Gold and Silver that does not stand up to rational analysis in any way. There is no reason to opt for either except for essentialy irrational superstitious belief that Gold and Silver are more “real.”

“You guys all seem to be well-read and educated economists. You seem to support putting enormous power in the hands of a small group of similarly schooled and like-minded individuals, far removed from accountability to the average citizen, and trust that they will do a good job, with no real constraints that are visible and understandable to the general populace.”

Your continued populist appeal is without foundation.

It does not take deep education to understand basic economic numbers like M1 money supply, and in fact if the average citizen wants to track such, it is easily available. Gold and silver are mirages of lazy thinking, that would only give the populist an appearance of knowing what is going on, but in fact the governmental policies would become less transparent and less easy to understand.

Further, the policies would return to rough equivalent to 19th century, meaning more brutal price changes and the attendant efficiency losses. One thing that seems clear from economic history, massive price changes (deflation or inflation in double digits generally) are BAD. gradual and generally predictable price changes are far better, in particular if they maintain long-term regularity, as it allows improved investment planning. Modern monetary policy with its focus on inflation targets in the 2-4% range is a boon for long-term investment. And with modern monetary statistics there is a great deal of transparency as to price evolution. A Gold standard gets you… what? A mirage of control, at best, based on historical superstition re shiny metals that our distant ancestors found easy to work in simple metal shops.

[Exapno_Mapcase]

@IdahoMauleMan

“You guys all seem to be well-read and educated economists. You seem to support putting enormous power in the hands of a small group of similarly schooled and like-minded individuals, far removed from accountability to the average citizen, and trust that they will do a good job, with no real constraints that are visible and understandable to the general populace.”

This can be applied to history, albeit recent history. The economic failure that virtually all spectrums of economists agree nearly took down the entire world banking and credit systems and could have plunged the U.S. into a recession as bad as the 1930s, was the result of small group of private sector individuals. A recent article in Fortune said 25 people were responsible, and that was coming from one of or near the 25. (It was in a recent issue but that’s a hard quote to search for, so you’re free to dismiss it unless I can find a hard source. Do you read Fortune magazine? It’s been an invaluable source of information about the disasters of the last couple of years.) And that same range of economists credit the Fed for stopping the disaster and restoring confindence, although approval of all their moves is obviously lacking.

Those 25 people were “similarly schooled and like-minded individuals, far removed from accountability to the average citizen.” They are, in fact, far more homogeneous than those in government and have no accountability whatsoever. Try to spin the yarn about no accountability to the Republicans who controlled the Presidency and both houses of Congress as recently as three years ago.

Now, it’s purely a belief system that the government, which is just people, is evil and cannot be trusted even though they can be and are voted out of power and the private sector, which is just people, should be given totally free rein answerable only to the Invisible Hand. It’s not a belief system that most average citizens can comprehend, which is why neither libertarianism nor anarchy nor any offshoots of these ever make any traction with a significant percentage of them.

You’ve been given a wonderful schooling in economics and economic history. You said you’ve re-read it. Try reading it without the premise that seems to destroy all further thought. If you can’t, then with luck others will.

[Lemur866]

@IdahoMauleMan

Those are awesome paragraphs. I think I agree with everything in them.

So what point are you arguing, here? That we should throw up our hands in despair, and let the government devalue the currency? Let a central bank be created, and exist to do just that?

Yes, we went through a currency devaluation during the 70s. But that isn’t happening now, and hasn’t happened for 30 years. So of course fiat currency allows for manipulation of the currency, but history shows that it doesn’t guarantee manipulation of the currency. We can have a stable fiat currency, under certain conditions.

What things are worth fighting for, as a citizen? Are you just accepting that governments lie, and that I should just roll with the punches? Why would I do that?

The whole point of the gold standard is that I ALWAYS have a healthy, skeptical distrust of government. So should you.

And this is the point we’ve been trying to make. The history of the gold standard shows that the gold standard doesn’t force governments to be honest. They just have to manipulate the currency is untransparent ways. And even gold coins are manipulable.

Why wouldn’t I? Why wouldn’t you? The gold standard is a nice, unavoidable constraint that the government cannot get around, unless it undertakes the brazen theft of FDR, circa 1933. And on a broader conceptual note, as I’ve tried to show above, there is no reason for the government to get involved in the money business anyway. Just like the Post office, or running Amtrak.

And there you go. They can’t get around it, except when they decide to get around it. It is not an unavoidable constraint. Governments can borrow, they can lend, they can tax, they can spend, and none of it depends on whether they have a pile of gold or not.

Would you allow the government to arbitrarily seize your wealth without a fight? If Barack Obama, or George Bush suddenly showed up at your door, and said ‘Give me all of your $20 bills. I’m going to give you $10 bills in return. But by the way, you still owe the same amount in taxes as you did before.’ would you let them do that?

Isn’t that what you said can’t happen under the gold standard? Except it did?

Inflating the currency by 100% is effectively doing what you said, taking a $20 bill and changing it so you can only buy $10 worth of goods with it. But that isn’t what is happening now. And of course, wealth isn’t the same as money. You might have a bank account worth $X, but that’s probably only a small fraction of your net worth. You own (part of) a house, you have investments, and so on. These can be accounted for as worth $X, but the value of this wealth doesn’t depend on the relative value of the dollar. The only difference is that if you have a loan at a certain interest rate expecting a certain rate of inflation or deflation, and then the value of the currency changes in the middle of the loan. And then either the lender or the borrower gets screwed. During unexpected inflation the lender gets screwed, during unexpected deflation the borrower gets screwed.

BUT THE GOLD STANDARD DOESN’T PROTECT AGAINST THIS. Gold and sliver coinage doesn’t protect against this either, as the history of debased coinage shows.

Does that mean I throw up my hands and declare that all governments are corrupt and therefore there’s nothing we can do? No, it means that I declare that some governments are more corrupt than others, and that a gold standard doesn’t tend to keep governments honest. It means that I can’t rely on a certain type of money to keep the government from stealing from me. I have to rely on voting and advocacy and the process of democracy, not on rules or constitutions.