That’s not what that proves lol, but it does prove that the gold standard does not work and is not sustainable.
You should probably read up a little bit on history, the facts disagree with you. The US government had to use regulations and policies to influence the supply of gold: grants for gold mining, setting the reserve rates, hoarding gold to keep out of circulation. Until the gold standard dropped, there was even a limit on the amount of gold one could legally own. On top of this, other gold producing nations had the power to directly influence US monetary value and undermine US sovereignty.
Throw in implications and challenges of being a global reserve currency (Triffin dilemma), and you end up having a really bad time with an unhealthy economy.
Foolish people that don’t know history want to pretend that the gold standard magically creates some kind of natural currency free of “government meddling”, but the reality is that even more meddling and government control was required under the gold standard than compared to fiat currency.
That’s not what that proves lol, but it does prove that the gold standard does not work and is not sustainable.
If the economy grew at the rate of mining pre1976 and had no relationship post1976 then your hypothesis would be proven. Data shows this is false.
Yes the FED wanted full control over the US money supply, which is impossible under the gold standard. This desire was unrelated to inflation or deflation.
If the economy grew at the rate of mining pre1976 and had no relationship post1976 then your hypothesis would be proven.
Ahhh! I understand what you are misunderstanding, now. You think that I said that the change in size of the pool of currency IS the change in the size of the economy itself. Here’s what I said:
The total pool of currency needs to be able to grow with the economy.
The pool of currency and the economy are two separate things that can grow at two separate rates. It just creates serious economic problems when they are not aligned with each other. Homework assignment: read up on the Great Depression.
If it is true that total pool of currency needs to be able to grow with the economy then the rate one variable grows must be linked to the rate the other grows. If there is no link then there is no relationship.
The great depression was caused by a stock market over inflated with leverage. This has nothing to do with the gold standard.
And notice how we have deviated from the topic of deflation. It’s a topic built on myth and misunderstanding that easily slips out of focus.
There is absolutely no evidence that deflation itself is bad. The great depression occurred because there was too much debt. Japan suffered in the 90s because it had too much debt. Deflation/inflation just measures who gains more over time, debtors or lenders.
It’s a myth.
Go on, back up that statement with references from your first year econ course notes.
Under your model, how was the economy able to grow before 1976?
Gold can be mined.
Ah. So the rate of gold extraction exactly matches the expansion of the economy.
Oh, it doesn’t.
Try again.
Hurray! You’ve correctly identified the problem! Congratulations.
So we agree you’ve proved your statement that “The total pool of currency needs to be able to grow with the economy” is false?
Excellent. Glad I could help.
That’s not what that proves lol, but it does prove that the gold standard does not work and is not sustainable.
You should probably read up a little bit on history, the facts disagree with you. The US government had to use regulations and policies to influence the supply of gold: grants for gold mining, setting the reserve rates, hoarding gold to keep out of circulation. Until the gold standard dropped, there was even a limit on the amount of gold one could legally own. On top of this, other gold producing nations had the power to directly influence US monetary value and undermine US sovereignty.
Throw in implications and challenges of being a global reserve currency (Triffin dilemma), and you end up having a really bad time with an unhealthy economy.
Foolish people that don’t know history want to pretend that the gold standard magically creates some kind of natural currency free of “government meddling”, but the reality is that even more meddling and government control was required under the gold standard than compared to fiat currency.
If the economy grew at the rate of mining pre1976 and had no relationship post1976 then your hypothesis would be proven. Data shows this is false.
Yes the FED wanted full control over the US money supply, which is impossible under the gold standard. This desire was unrelated to inflation or deflation.
Ahhh! I understand what you are misunderstanding, now. You think that I said that the change in size of the pool of currency IS the change in the size of the economy itself. Here’s what I said:
The pool of currency and the economy are two separate things that can grow at two separate rates. It just creates serious economic problems when they are not aligned with each other. Homework assignment: read up on the Great Depression.
If it is true that total pool of currency needs to be able to grow with the economy then the rate one variable grows must be linked to the rate the other grows. If there is no link then there is no relationship.
The great depression was caused by a stock market over inflated with leverage. This has nothing to do with the gold standard.
And notice how we have deviated from the topic of deflation. It’s a topic built on myth and misunderstanding that easily slips out of focus.
There is absolutely no evidence that deflation itself is bad. The great depression occurred because there was too much debt. Japan suffered in the 90s because it had too much debt. Deflation/inflation just measures who gains more over time, debtors or lenders.