I don’t understand the passion to return to the gold standard when the economy was even more unstable when we were 'on it." But I also don’t understand how, given the size of our economy, there could be enough gold to back every dollar.
Also, a gold standard would be really nice for countries like Peru and Russia and China…countries with mountainous gold-mining regions. Not so much fun for Belgium and the Netherlands.
Didn’t we learn our lesson with oil? Don’t make a gigantic financial investment on the basis of the happenstance of geological distribution of resources!
That would entirely depend on what a dollar was declared to be worth, in terms of gold. Which is of course completely arbitrary.
Some in the thread may be arguing for alternatives to the gold standard. Perhaps there’s sentiment for currencies like Bitcoin, backed by nothing. Let the free market decide what money is in use! At least Bitcoin prices aren’t controlled by mischievous government drones! (And Bitcoin has risen against the dollar, no?)
Like Adam Smith, John Locke, Milton Friedman, etc., I rather think government has important roles to play. Central bank money (a more nuanced term than fiat money) has worked well – although in the U.S. we can be grateful that it’s authority hasn’t been turned over to Congress.
Taking longer than we thought? No. This is precisely the point. Constant in what way? In nothing but arbitrary nominal units of no particular utility, because there is no objective unit of account. One of the chief attributes of money is a store of value. Another is convenient medium of exchange. Modern money works great in the latter, but really lousy in the former.
And this is why the current arrangement is so dishonest. WHY do prices change in aggregate? Why do the ingredient qualities continue to decline? Why do the containers get smaller and smaller? Inflation is a hidden tax, where a part of one’s labor is stolen from, and not one in a hundred usually has a clue. People act like it’s some sort of external event, like a tornado. As a general rule all things being equal, things over time get LESS expensive, not more. Not always, but typically, as better means of production and economies of scale take place. Funny money ruins all that.
Politically we see this on display. Without regard to the wisdom of a mandatory $15 an hour minimum wage, notice what is never discussed - WHY wages need to keep rising, to keep up. Without monetary inflation, this would be barely an issue.
It would still be called a dollar. It would still be “worth” a dollar, but it’s purchasing power will not be anywhere close! Fail.
Little Debbie Swiss Rolls went from $1 a box back in the '80s to $1.19 a box today. They aren’t as good as I remember.
And this is why your entire argument is misconceived. If inflation is a tax or rent, who is reaping the benefit? You seem to think someone is stealing from soemone else, reaping illicit benefit. Who is that? (Spoiler Alert: No one: your perspective is flawed.)
Of course, sudden inflation would be a big boon for debtors but (a) most people are debtors, and (b) today’s inflation is small, and anyway predictable. If all dollar amounts suddenly doubled, the net effect would be nothing: they’re just accounting tallies.
Focus on that question: Who is “stealing part of your labor” and using it for their own benefit?
I’m not arguing for a gold standard. I can repeat this as often as necessary, if you think it helps keep people on track.
What kind of standard are we on now? Or what would you call it? This is my point, there really is no objective standard now. The * unit of account* has no definition, and it can be conjured out of thin air (essentially). The framers of the constitution, fresh from the horrors of unbacked paper currency, made paper money illegal. Later, the government decided to make gold illegal.
That is a little odd, don’t you think? An element on the periodic table - naturally occurring in streams and rivers etc. Jus’ Sayin’.
But back to the issue at hand. I don’t know where you’re from where 2% or 6% annual inflation is OK, you’re smoking your socks. That is utterly ruinous over just a couple decades.
Again, the lack of a meaningful standard unit of account means that comparisons over time become distorted, they can claim to use “constant” dollars but, we don’t have those, remember this is the issue.
We can’t spin straw into gold, but everyone here wants to set up gold as a strawman. My argument here is while gold is money, money can be something other than gold, provided it will hold value over time. The current “stuff” is just awful in that regard, and is particularly bad for the elderly and those not interested in the stock markets, bonds are paying next to nothing and have done so for ten years. In fact, there is talk of “negative interest rates” and by extension, outlawing paper money as well.
Not comparable. A movie “back in the day” was B&W and maybe had sound (depending on how far back you need to go to get 5-cent tickets). The amount of work that goes into a movie these days is orders of magnitude greater than “back in the day”. It would be silly to compare straight-up the cost of movies then and now.
Inflation is just a measure of changes in the economy. If inflation is at 2% it’s not that the government is now earning an extra 2% in tax.
Inflation occurs as there is increased demand for products and services. There is an increased demand because of a growing economy and increased purchasing and investment. Which is one reason why deflation is considered such a negative state for an economy: it implies a drop in purchasing and business investment in the previous year.
What happens typically those who get the first use of “printing press” money reap the most benefit because it hasn’t cycled through the economy yet and resulted in higher prices. Remember inflation is ever and always a monetary phenomenon.
When purchasing power erodes as a result, that is a loss of wealth. Let’s be clear here, this is because the unit of account is undefined. I will agree the US has probably the longest lasting currency extant, over 100 years, e.g. small size Federal Reserve notes are still technically legal tender, although one might get looked at a little strange. No other country comes close.
And this I think, is the original poster’s point. Numerous countries have had several currencies come and go - becoming worth less and less, to worthless, overnight devaluations and other fuck all moves that impoverish millions overnight, this has happened over and over and it’s not unreasonable to raise an eyebrow at a government debt that will never be paid and unfunded promises that dwarfs that.
The theft starts out slow, then all at once, to paraphrase somebody.
No, let’s define our terms. Inflation is an increase in the money supply. Prices can indeed fluctuate without regard to monetary inflation. What we see over time though, is prices going up, and up, and up. That is not the natural order of things, generally speaking.
This is my point. With an objective unit of account, a pound of coffee doesn’t change much in price over time. The quality doesn’t go down. It doesn’t get smaller in weight, and the “new” pound consist of 8.37 ounces in the twee packages.
What will keep prices constant (all other things being equal) is the money supply expanding and contracting exactly in line with expansion/contraction in the total value of goods and services offered in the market.
There’s no reason to suppose that gold-backed currency will have this outcome; in fact it would be an astonishing coincidence if it did.
It’s at least possible for the supply of fiat currency to be managed in a way which approximates to this outcome; there’s no prospect for the supply of gold being managed in that way.
We’re on a Federal Reserve standard. Just 'cause you don’t like it doesn’t mean it “isn’t a standard.” Yes, the FRB could “conjure money out of thin air.” They’re doing that right now. They can also slurp money away again, if inflation rises too high.
That’s the point of the system: it’s controlled (to a certain extent.) It’s a thermostat. If it gets too hot, they cool things down; too cold, they help heat it up again.
The Gold Standard (or any other “objective” standard) would be like setting a forest fire and moving away any time it seems too hot. A Reserve system lets us control the size of the fire in the first place.
Now we have backed paper money, not unbacked paper money.
And highly variable in its market value, plus highly subject to change due to ore discoveries and mining. You don’t like inflation, yet you point, with admiration, to a substance whose value is highly susceptible to inflation. Ecuador makes a major mining breakthrough…and all the gold in your pocket suddenly loses a part of its purchasing power.
IBM stocks…and Superman (Number 1) comic books have held (or increased) their value. The trick isn’t basing the economy on something that will hold or increase value. The trick is knowing what will hold or increase in value! The stock market remains attractive because many stocks increase in value.
No, it has never come close. The value of dollars has remained so stable, decade after decade after decade, the people in other countries want to use dollars as their currency.
As for the rise in movie prices, have you thought that maybe they reflect the increasing costs of making movies? Pretty sure “back in the day” when movie tickets cost a nickel, those movies didn’t have $200,000,000 budgets.
Common Tater, you didn’t properly address the question I asked…
This makes no sense. The “printing presses” are operated by the government. Are you worried that the government somehow gets illicit gains? If it did that would be … good! – that would mean less need for the taxes and fees businesses and consumers need to pay to finance government activity. (Nevermind about the “hasn’t cycled yet” which makes little sense.)
Challenge your own confusion when you write “loss of wealth.” The “wealth” you worry about losing primarily subtracts() from bondowners, mostly banks. Is that who you’re worried about “having wealth stolen from them”? And if there were a loser, of course there’d be a winner too. Regard the accounting as a zero-sum game. ( - Though, again, no “subtraction” applies with anticipated inflation, as interest rates adjust.)
You’re parroting incorrect memes without honestly making the contemplation I asked you to. When you do, you’ll see that your formulation is incomplete. Remember that central-bank money isn’t wealth – wealth is land, capital, manpower, mined metals, etc. – it’s just marks on paper.
Then go ahead. Stop telling us there’s a more stable unit out there. Tell us what it is. You say you’re not talking about gold. Well, drop the other shoe. What standard do you think we should base our economy on? Silver? Diamonds? Oil? Land? Stocks? Movie tickets? The value of all of those has fluctuated much more wildly than the value of a dollar has.
Well it’s an increase in the money supply relative to other factors.
The absolute amount of money could increase yet prices could be in a period of deflation if there is a greater contribution from increased productivity and low investment.
Likewise, if I buy some office space in the center of my town because I see the town is flourishing and think I will be able to sell it on at a profit…it should remain exactly the same price forevermore, because money should have a fixed peg?
Because value is inherently subjective? Units of measurement are arbitrarily and objectively defined against each other and this works because the lengths actually are real. If you measure an object and I measure an object and we come up with different lengths, then at least one of us is objectively wrong.
But how much anyone is willing to pay for any given object is highly subjective - some people might be willing to drop millions on what is essentially random paint splatterings, while I might buy the piece for a few hundred if I saw the opportunity. An old momento like a sled with some initials carved into it with a penknife might have untold value to the right person but be worth maybe 20 bucks at a yard sale to someone else. “Value” is, in this way, utterly arbitrary, and it’s almost impossible to peg any sort of “inherent value”, even to things like food or land that everyone needs. this is a problem inherent to money, as the thing it seeks to “measure” is inherently vague and vacuous. Or can you tell me what objective worth a plot of land on the everglades has, independent of any other factors?
Perhaps the confusion itself is the definition of money, if there are some misconceptions on what words mean then of course we can’t really agree on anything.
When you claim that money isn’t wealth, just marks on a piece of paper or whatever, maybe this is part of the problem. Money is in a sense an abstraction, a method of keeping score, this is also true.
At the most basic level the attributes of money were described thousands of years ago. Of course we live in a highly technological environment relative that. Now, as money, no other currency comes close to gold in terms of longetivity. 5000 years? I dunno, and the US is looking a little hinky at 50.
I said I wasn’t arguing for a good standard, just that without an objective unit of account, the numbers soon become meaningless and unpayable, fake money unfortunately causes real problems.