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| quote: | Originally posted by Communist
Again, recessions are mitigated by increasing money supply during economic downturns. A gold standard prevents this because the money supply is beholden to the supply of gold, NOT the needs of the economy. Monetary policy would be beholden to gold production as fluctuations in the gold supply would lead to inflation or deflation, most often deflation. Shouldn't be a surprise the numerous deflationary spirals which occurred in the 19th and early 20th century.
The total value of all the gold ever mined is approximately $4.5 trillion. If we were to return to a gold standard and end fractional reserve banking, the economy would experience a massive deflationary spiral in addition to the skyrocketing price of gold.
Growing economies need growing money supply.
Here is something which should interest you...
http://econ161.berkeley.edu/Politic...ldstandard.html |
That link doesn't link a gold standard as being the cause of any of the recessions or panics of the 19th century.
But thanks for the read!
| quote: | | For example, in the spring of 1995 the dollar weakened against the yen. Under a gold standard, such a decline in the dollar would not have been allowed: instead the Federal Reserve would have raised interest rates considerably in order to keep the value of the dollar fixed at its gold parity, and a recession would probably have followed. |
A recession did follow. It was called the Dot-Com bust.
| quote: | * Countries that were not on the gold standard in 1929--or that quickly abandoned the gold standard--by and large escaped the Great Depression
* Countries that abandoned the gold standard in 1930 and 1931 suffered from the Great Depression, but escaped its worst ravages.
* Countries that held to the gold standard through 1933 (like the United States) or 1936 (like France) suffered the worst from the Great Depression
o Commitment to the gold standard prevented Federal Reserve action to expand the money supply in 1930 and 1931--and forced President Hoover into destructive attempts at budget-balancing in order to avoid a gold standard-generated run on the dollar.
o Commitment to the gold standard left countries vulnerable to "runs" on their currencies--Mexico in January of 1995 writ very, very large. Such a run, and even the fear that there might be a future run, boosted unemployment and amplified business cycles during the gold standard era.
o The standard interpretation of the Depression, dating back to Milton Friedman and Anna Schwartz's Monetary History of the United States, is that the Federal Reserve could have but for some mysterious reason did not boost the money supply to cure the Depression; but Friedman and Schwartz do not stress the role played by the gold standard in tieing the Federal Reserve's hands--the "golden fetters" of Eichengreen.
o Friedman was and is aware of the role played by the gold standard--hence his long time advocacy of floating exchange rates, the antithesis of the gold standard. |
First of all, this piece forces the reader to try and believe that correlation equals causation. Second of all Hoover absolutely did instill government stimulus into the economy, which is contrary to popular belief.
http://www.time.com/time/printout/0,8816,738193,00.html
http://www.larouchepac.com/news/200...ckage-1929.html
FDR expanded on it even more so (New Deal), which pushed us into a 15 year long Great Depression. It had absolutely nothing to do with being on a gold standard. There was plenty of stimulus going around that did absolutely the opposite of its intended purpose.
But anyway, I'd seriously like to read something that pins gold as being the cause of the recession and panics of the 1800s.
Last edited by DOOMBOT on Sep-25-2009 at 23:14
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