Quote from: BubbleBoy on June 08, 2011, 01:59:57 PM

Quote from: hugolp on June 08, 2011, 05:25:17 AM

Third and most important, talking about "the gold standard" is terribly vague. The monetary systems that people label under "gold standard" are extremely different and only someone very ignorant about economics would join them together and treat them all the same. There are times where people used gold as money without any government intervention. Then governments usually start the shenerigans by imposing some type of specific gold coin, to later on create a central bank with paper (suposedly) backed by gold. But each monetary system is completely different (even when they all are using gold in some way) and its stupid to treat them all the same.

Specifically for the period of time you are mentioning: When the Federal Reserve was created in 1913 it wasnt that bad actually. It could only create dollars if they were backed by so called "real goods" and 40% of gold. Obviously this was only temporary and not 5 years were gone when they started changing the law so the Fed could expand. The first big expansion was for IWW where the Fed doubled prices in the USA in 5 years (if I recall corectly). To pay for the war the government gave the Fed the power to buy government bonds. Housing bubbles appeared all over the USA, specially in Florida. Finally the bubble popped and there was the crisis of 1921-22. This is a crisis keynesians dont like to talk about and ignore it because the government lowered taxes and reduced spending: the crisis was over in a year and a half, even when it started worse than the Great Depression.

Then the Fed finally got definitive powers to expand and it created the roaring 20's with a big stock market bubble that popped in 1929. How is this the fault of gold? And how is this related to other type of monetary systems like the ones I have explained earlier? Its stupid to group all the monetary systems that use gold in some way together because they can be very different.

For the record, during the 20's Fisher congratulated the Fed for its great job at managing the economy and during 1929 said that the collapse would not happen, that it was only a plateau. In 1927 Keynes said that they had now the hability to control the economy and that crisis were a thing of the past. Hayek and Mises said there was a bubble and that a crisis was coming. Mises even rejected a job at a big bank and remained in his professor job (earning a lot less money) because he said the bank would fail and he did not wanted his name associated with all that. His wife was not happy, but the bank end up failing 2 years later. There is unwritten law in economics: When a keynesian says they have now control of the economy and crisis are things of the past, a big crisis is coming.

First of all please let me take a stance regarding fractional reserve banking: accepting deposits, putting a fraction aside and lending out the remainder is the standard way any and all banks operate, regardless if they use gold, green paper or bitcoins. The notion that fractional reserve banking is somewhat only possible if enabled by a central bank is a Zeitgeist conspirationista type of fallacy. One who doesn't understand what fractional reserve banking is, and the way it enables monetary expansion from M1 to M2, like our friend here AV, is nothing but a crackpot armchair economist who does not even warrant a response.

Are you a troll? I did not even mention once fractional reserve banking. I did not state that fractional reserve banking was or not possible with or wihtout a central bank. Is this some kind of message you have stored in your computer that use for everybody or are you directly crazy?

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Secondly, the issue in question is not whether a government-imposed gold standard is better than other types of "sound money", but rather if deflation is good or bad for the economy.

Yes, that was the issue, until you changed it here as I denounced. So you changed the issue, I called you on that but decided to answer you anyway, and now you accuse me of chaning the issue... I have no words.

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Regardless if it's 100% or 40% backed by gold, any fixed money supply has the same natural tendency to deflate and choke the economy, by rewarding the hoarders and punishing debtors.

Baseless statement. A price deflationary monetary system does not choke the economy as seen in history. You keep disregarding reality.

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The US maintained the 40% gold standard until the winter of 1933-1934,

No, the USA did not mantain a 40% gold standard until the winter of 1933-1934. The Fed did not keep a 40% gold way before that. Please learn some monetary history.

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which unsurprisingly coincided with the very bottom of the depression.

The Great Depression did not end until the 40's. What some keynesians like to point as "prove" of their mesures working is just some statistics improving because of the government manipulations. But those manipulations is what caused the economy to stall until the 40's. There was no recovery, just some statistical improvements in the same way Obama likes to point out to some statistics as "prove" that the recession is over while everybody knows we are in a depression.

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Comparatively, the keynesian decision to float the Pound in UK lead to a much quicker recovery.

The situation in the UK was extremely different than in the USA, because the pound was overvalued during the 20's because of the decission of the Bank of England to return to a gold ratio it could not mantain after what he printed for the IWW. So it made sense that the economy benefited from loosing that stupid position that the central bank kept for so long.

The situation in the UK and the USA during the 20's was completely different, and comparing them just shows your historic ignorance again.

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The anecdotal evidence you present regarding the deep foresights of Austrian economists is largely irrelevant. Fisher was in no way a keynesian, not even Keynes was until after the onset of the depression (The General Theory was published in 1936). Indeed the depression was such a catalytic event that it provided deep insights to Keynes, much to the despair of Hayek who painstakingly prepared a compelling rebuttal of Keynes earlier work, only to be scoffed with the famous quip "I no longer believe that".

Yes, Keynes is well known for changing his economic views constantly. In fact, weeks before his death, he said he did not agree with a lot of what the keynesians were saying. How is constantly changing your views in contradictory ways a good thing? It shows that he did not understand how the economy worked.

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So any quote from the Keynes before cca 1930 should be taken with a pound of salt.

And any quote of Keynes after 1930 too.

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The ability to predict the future would have made Misses a very rich man shorting the stock market, I believe in this instance we're simply dealing with selection bias.

I am sorry to tell you that the one having selection bias is you. You can check the statements of Mises and Hayek predicting the 1929 crash. If you dont like reality and prefer to ignore it its not our problem.

I just wanted to answer you for the record, but I think you are just a troll so this is the last answer.