Common Tater, please don’t quote whole passage or violate other’s copyrights in any way. I’ve edited it down this time but please be mindful of it in the future.
Not entirely true. Gold has some useful properties in terms of conductivity and shielding, but its value is determined by the vanity aspect. Alternatives are so much cheaper that gold is only used when weight or performance is absolutely critical; helmets for the Apollo astronauts had gold visors, for example.
Which lead directly to the Panic of 1893 which started when gold fled the US to Europe. Some of the results (from wiki):
As a result of the panic, stock prices declined. 500 banks closed, 15,000 businesses failed, and numerous farms ceased operation. The unemployment rate hit 25% in Pennsylvania, 35% in New York, and 43% in Michigan.
This was a regular occurrence under the gold standard.
First. No it wasn’t a regular occurrence.
Second. It started in June and was over before the year was out.
500 banks closed? Banks are inherently insolvent in a fractional-reserve system- no surprises there. Bank runs disappeared because of FDIC, the gold standard had nothing to do with bank runs. Governments exacerbated bank runs in the 1800s in other ways I hope to go into in a more thorough thread when I have the time. I’ve touched on the problems in past threads. For example, governments sanctioned suspension of specie payment in every single panic. This has the effect of intensifying runs because the public rushed to withdraw specie before the government acted to abbrogate contracts.
A big problem in the early 1890s was silver agitation. The public trust in the standard was shaky because of political issues at home. The hicks were scaring everyone and the Senate even passed a free silver bill. If you want to make the case that gold standards are susceptible to government meddling that’s fine, I’d agree. Except id take the road of arguing against such meddling instead of handing them more control over the system. That’s my style.
You shall not crucify mankind upon a cross of gold.
How come I answer others’ questions, but no one dares to answer mine?
This I answered, demonstrating that not only does Crusoe’s marker function as money, but the new money serves as an economic stimulus!
Another question Farnaby refused to answer is whether the gold standard had a bigger effect on the 1880’s boom than the invention of the electric lightbulb.
Here’s another question:
Farnaby, can you grasp that specie-suspension panics cannot occur without specie? 
And since this post is miscellania anyway, let me express amusement and astonishment at the American hero-worship of Reagan’s FRB Chairman, the Ayn Rand devotee who was once called “the most powerful man in the world.” :smack:
Right off the bat you are wrong. Here’s a partial list:
Panic of 1837
Panic of 1857
Panic of 1873
Panic of 1893
Panic of 1907
Wrong again although I’ll give you the benefit of the doubt and assume you’re confusing it with the panic of 1907–it’s hard to keep them all straight. For example, unemployment didn’t recover to pre-panic levels until 1899.
Check out the panic of 1837. Private banks stopped redeeming specie payments.
If you think “the hicks were scaring everyone” was the root of the problem then you have no idea what you’re talking about and no understanding about tight credit.
My guess is that the 1880’s “boom” was a product of occurring right between two major recessions. It would be like measuring the DJIA starting in 2009 and watching it double in a few short years.
Darn. I was hoping Farnaby and Tater were going to go with
“The lightbulb would never have been invented if Edison had known that FDR was just going to confiscate his wealth at gunpoint 55 years later.”
This was so absurd I did not feel it necessary to respond. Anyone reading could see it is false. Time is scarce. Name a situation in which IOUs were circulating as money. As in a commonly accepted medium of exchange. Then we can tie your excellent imagination to reality.
I’d say the electric light had little to do with the boom. If you are actually talking about technological innovation in general caused the boom, I’d say that I already made that point, thanks for catching up.
of course. Suspension of fiat payments is the course the government would take absent FDIC. People are unable to separate problems with the gold standard from problems with fractional-reserve banking. The Panics of the 1800s were nearly all associated with the latter. People simply consult Wikipedia for a list of Panics with absolutely no knowledge of their cause and the underlying government meddling with the banking and monetary systems.
Right on cue. The big problem of the 1800s was fractional reserve banking. I don’t have time to go through all of these.
Where are you getting this?
Exactly. Governments allowed them to disregard contractual obligations. I guess you’ll blame problems with property law as a problem of the gold standard.
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If you think “the hicks were scaring everyone” was the root of the problem then you have no idea what you’re talking about and no understanding about tight credit.
[/QUOTE]
I understand “tight credit” is the perennial complaint of the crony businessman and ignorant hayseed.
Wow. You introduce the two-person economy, in which IOU’s “circulating as money” is unlikely. I recommend introducing a third player: Thursday or Darby, see #169, but continued with the two-person model You introduced, fearful a three-person model might be too complex for you. Wow!! It appears even the two-person case is beyond your ken.
I’m sorry. If the above paragraph leaves you still in doubt about your own ignorance and confusion, report to the Pit — I’m tired of thinking up euphemisms.
Bud. You claimed the sinking of a boat was stimulative to the economy. I do not feel it necessary to engage with you on a serious level. As I said the more knowledgeable government idolaters sit these discussions out. Have fun with another of your featherweight pittings of me.
FWIW, as an interested reader, it’s quite clear to me who is making the more clear, more consistent, and more persuasive arguments in this thread.
Respectfully, it ain’t you, WillFarnaby.
Notes of Hand were circulated as currency in early Colonial America [1] . They were often written as being redeemable for currency and / or goods. They circulated due to a shortage of change at that time.
And right on cue we learn that the problem is fractional reserve banking. Or as mainstream economists call it, “banking”.
In other words, if Alice lends me $100, can I lend Bob $90? If we don’t allow fractional reserve banking then no. I’ve got to keep all $100 of Alice’s deposit on hand to pay her back. I’m not allowed to lend that money to Bob.
And thus make banking illegal. If you want a loan you can’t go to a bank, because banks can’t make loans, their deposits are effectively safe deposit boxes. You have to go to a venture capitalist who has the money, and he can lend you the money.
And of course, Will Farnaby makes the excellent point that a piece of paper that says it’s worth a certain amount of gold is only actually worth that amount of gold if someone is actually willing to exchange the gold for paper. If the government changes its mind, or the private bank changes its mind, then the paper is worthless. And there goes the gold standard. Again, a “gold standard” isn’t using actual gold, it’s using a promise to pay gold.
This is nonsense. So when a private bank does something, it’s the government’s fault because it allowed them to do it? And your solution is we should abolish government regulation - the lack of which is what you just said caused the problem.
This is the reason why nobody wants to discuss economics with you, Will.
Where did I say governments should not enforce contracts?
Which is why the government should uphold contracts and not change its mind.
Yes, but merely writing on each dollar bill “redeemable for 20 milligrams of gold” doesn’t make it happen. You have to have a government that would make it happen, even when it was inconvenient to make it happen.
Since the history of the gold standard shows literally hundreds of examples where governments refused to honor the promises stamped on the pieces of paper, then asking the government to print a promise on the paper money that they would only honor when it was convenient would be a worthless gesture.
As of today, you can redeem your paper money for gold at any coin shop. It’s not against the law to own gold. Yes, if there’s a financial crisis and the dollar drops in value overnight you’re going to get a pretty bad exchange rate converting your dollars to gold. So do it before the financial crisis. Gold is pretty low today, so it’s a perfect time to buy, if you really are worried about the sudden collapse of the dollar in the near term.
Again, very few people keep large amounts of dollars as their method of storing value for the long term. If you’ve got $100,000, I would not recommend putting that in a bank account and sitting on it for 30 years until your retirement. But neither would I recommend buying gold bars and hiding them under the floorboards. I’d recommend exchanging those fiat dollars for productive investments. Even if the gold bars held their value better than dollars, they’re still not likely to appreciate strongly in terms of exchanging the gold for tangible goods and services. If a McDonalds hamburger costs $100 in 2036 it won’t mean that gold has soared in value, it will mean the dollar has collapsed in value. If you had your assets in gold rather than dollars that’s good. If you had your assets in productive investments they would have appreciated in value rather than held their value.
The gold standard doesn’t protect against inflation any better than fiat money. If gold production grows faster than the economy then there will be inflation; i.e. gold will have less buying power. The California and Australian gold rushes in the mid-19th century led to world-wide inflation:
An additional impact of gold rushes of the nineteenth century was on prices. Because precious metals were at the base of the monetary system, rushes increased the money supply which resulted in inflation. Soaring gold output from the California and Australia gold rushes is linked with a thirty percent increase in wholesale prices between 1850 and 1855. Likewise, right at the end of the nineteenth century a surge in gold production reversed a decades-long deflationary trend and is often credited with aiding indebted farmers and helping to end the Populist Party’s strength and its call for a bimetallic (gold and silver) money standard.
If Common Tater had gold dollars in 1850 he would have lost 1/4 of his buying power by 1855. Has the US had 30% inflation over 5 years since getting off the gold standard?