https://ritholtz.com/2008/11/gold-and-economic-freedom-by-al...
The world we are in now, especially in the US, is one where there is near unlimited government credit but it is, according to many, papering over deep structural problems. At some point, these chickens will come home to roost in some way or another. But it is hard to predict when.
So he was in favour of the gold standard because it prevented massive unconstrained expansion of credit and that seems sensible.
The Gilded Age, which had quite high levels of inequality, occurred when the gold standard was active:
* https://en.wikipedia.org/wiki/Gilded_Age
It should also be noted that the gold standard did not bring any kind of price stability:
* https://archive.is/https://www.theatlantic.com/business/arch...
Further, sticking to the gold standard made the Great Depression worse as it reduced flexibility and options of central banks had, and made deflation worse:
* https://www.nber.org/papers/w3488
The sooner countries left the gold standard the sooner they started recovering from the Great Depression:
I've got some news for you about modern levels of inequality.
If we want to talk about the causes of the 'New Gilded Age' that's something else. As a general starting point I'd begin with:
* https://en.wikipedia.org/wiki/Friedman_doctrine
I feel like the existence of endless almost-free credit rewards gamblers, and when they win, they win big.
Which saw 40% increase in median real wages over 30 years. [1]
> It should also be noted that the gold standard did not bring any kind of price stability:
Prices are *475%* what they were 50 years ago, far exceeding price changes under the gold standard.
> Further, sticking to the gold standard made the Great Depression worse as it reduced flexibility and options of central banks had, and made deflation worse:
It did make deflation worse. Deflation = Bad is an assumed tenant of modern economics.
> The sooner countries left the gold standard the sooner they started recovering from the Great Depression:
By a certain definition. The US did not really leave the gold standard until 1971 (which coincidentally, is when inflation really started to take off).
Which occurred in spite of the Gold Standard, rather than because of it:
* https://econbrowser.com/archives/2012/09/the_gold_standa_1
There were major periods of instability during that period. Growth that is unlikely to be repeated:
* https://en.wikipedia.org/wiki/The_Rise_and_Fall_of_American_...
> Prices are 475%* what they were 50 years ago, far exceeding price changes under the gold standard.*
And wages would have been worse under a Gold Standard:
* https://econbrowser.com/archives/2012/09/return_to_the_g
> It did make deflation worse. Deflation = Bad is an assumed tenant of modern economics.
It is not an assumed tenant, it is (or was for many millions) a lived experience.
Let us say a farmer had taken out a mortgage in 1928, and let us say his mortgage payment was US$20 (equivalent of 1 oz. of gold). In May 1929 he would have had to have sold 114 pounds of cotton to earn $20 (or 18 bushels of wheat, 23 of corn, 44 of oats). By May 1932 he would have had to sold 369 pounds of cotton (or 38 bushels of wheat, …):
* https://www.sciencedirect.com/science/article/abs/pii/030439...
* https://econbrowser.com/archives/2012/02/why_not_abolish
And it would have been the same for selling any good or service: to pay whatever debts you had (mortgage, car/business/student loans) you would have to work more to earn the same amount of money. Is that good?
https://www.mediamatters.org/fox-nation/fox-cites-ownership-...
The great depression was triggered in part by imbalanced gold flows when we returned to gold back currencies.
https://explaininghistory.org/2025/06/12/golden-fetters-the-...
We are essentially replaying the greenback inflation of the 1860's and have been doing it since 1971.
” The Wall Street Crash of October 1929 precipitated a U.S. recession, but it was the gold standard that converted this into a worldwide depression. With currencies locked to gold, there was little scope to ease monetary conditions. When the U.S. economy slumped, its import demand plummeted and it exported deflation to the rest of the world. Gold-standard countries could not respond by cutting interest rates or letting their currencies depreciate to stimulate exports – their priority was to defend the peg. As a result, economic downturns spread rapidly.”
So-called fiat money didn't become a thing until after FDR became president, which was after 1932.
What "rapid industrialization" is happening today?
Cite? I'm pretty sure that the 1920s, $20 was literally a gold coin of a certain size.
Semi-ironically France was the reason the US fell off the dollar standard after it panic hoarded gold AGAIN when the French government made one last, massive purchase of gold from the US using US dollars, paying $35/oz. A French warship arrived in New York in early August 1971 to load the gold and bring it back to France.
Reckless spending post WW2 was the main reason the US shot itself in the foot and got into this position where they couldn't reasonably pay most clients back and France saw this developing.
All in all France managed to deal massive blows to the US economy covertly TWICE within the same century.
https://scholarship.law.columbia.edu/cgi/viewcontent.cgi?art...
France was not panic hoarding anything. It was converting its UK pound-sterling holdings to gold so that it could be more independent of other countries by having its own currency better backed without an 'intermediary' conversion through London.
There was no "panic" involved, just simple fairness: if the UK and US could have physical gold in their vaults, why couldn't France?
(Don't get me wrong I am grateful that America spent billions on the CIA fighting commies and launching rockets to the moon but in hindsight that party was never going to last)
And now it seems to be the US' turn in returning the favor. First 2007ff (caused by irresponsible actors in the financial world), then the lackluster response to Covid and Russia's invasion against Ukraine, and now we're set to look at the AI bubble collapsing, a bubble much much larger than Lehman Brothers ever was.
> The Gilded Age, which had quite high levels of inequality, occurred when the gold standard was active:
And the Gilded Age [1] ended long before the gold standard. Which makes sense since the Gilded Age is a political issue not a monetary one; how will the productivity from railroads be redistributed?
> It should also be noted that the gold standard did not bring any kind of price stability:
A comparison of 35 years against 4?
That's like bragging about how smart private credit is by showing the low volatility in it's price over the past year.
The large concern from gold bugs is that by printing money we just make the next crash even larger. But of course we just print more in the next crash so it doesn't happen. Take a look at the fed balance sheet [2]; under Kaynsian ideology you were supposed to sell that off during the boom years so you can take on debt during the busts but politicians are not disciplined enough to do that so the Gold Standard would've never let them.
---
IMO, the real argument against the Gold Standard is that the US left it is because we spent more money than we made to finance the Vietnam War. If we returned to it, then we'd just leave it again when it became inconvenient. It's not the Gold Standard that needs fixing in the country.
[1]: https://en.wikipedia.org/wiki/Progressive_Era
[2]: https://www.federalreserve.gov/monetarypolicy/bst_recenttren...
* https://en.wikipedia.org/wiki/Cross_of_Gold_speech
> A comparison of 35 years against 4?
* https://en.wikipedia.org/wiki/Great_Moderation
Panics and economic downturns during the Gold Standard period were much more frequency. The term "Great Depression" used to refer to something else besides what happened in the 1930s, and the gold standard was a contributing factor to that as well:
* https://en.wikipedia.org/wiki/Long_Depression
> Take a look at the fed balance sheet [2]; under Kaynsian ideology you were supposed to sell that off during the boom years so you can take on debt during the busts but politicians are not disciplined enough to do that so the Gold Standard would've never let them.
On the Gold Standard the flexibility of emergency spending during bad years would not be possible: see 1930-1932, and then again in 1937–1938 when FDR tried to go back to balanced budgets through austerity.
* https://en.wikipedia.org/wiki/Recession_of_1937–1938
The politicians that tend to talk about "hard money" and responsible spending are the GOP—but who only seem to talk about it when a Democrat is in the White House. When their guy is in then it's all tax cuts, which do not pay for themselves:
* https://en.wikipedia.org/wiki/Kansas_experiment
and spending (see >$1T Pentagon budget(s)). They're mostly trying to roll back the New Deal (and later Great Society) and cut social programs:
- spending cuts
- stopping fraud
- figuring out how the net worth of people in Congress increases from hundreds of thousands of dollars to 10s or 100s of millions of dollars
- addressing wasteful and ineffective programs
Given those issues, the only solution will be inflation. The circling the drain moment will hit with the associated welfare programs get a direct staple to inflation itself, so we will spend more to combat inflation, causing more inflation faster.
It's not going to be fun.
https://inequality.org/article/11-charts-tax-wealthy-corpora...
This is really ambiguous:
"- stopping fraud"
And can mean many things. On the right, it often means Somali daycares, on the left it means the underfunding of the IRS so that it doesn't do audits of rich people.
I find this to be mostly a distraction:
"- figuring out how the net worth of people in Congress increases from hundreds of thousands of dollars to 10s or 100s of millions of dollars"
We should ban stock trading by members of the government, the Ro Khanna bill, but while it can be a source of corruption, it isn't a major source of inequality in the US.
This is unclear, can you be more specific as it has different answers based on one's partisan leanings:
"- addressing wasteful and ineffective programs"
I think a lot of the distortion of US policy towards the rich is a result of Citizens United and similar unrestrained lobbying funds.
Good to know that this will be an evergreen argument despite an extremely well-supported project to do just that taking place in the last two years with nothing to show for itself other than hundreds of thousands of deaths.
> Good to know that this will be an evergreen argument despite an extremely well-supported project to do just that taking place in the last two years with nothing to show for itself other than hundreds of thousands of deaths.
Not to mention the most prominent example of this this year sidestepped the Congressional stomach completely. An order of magnitude larger budget than all of the NSF grants combined spent on the war with Iran over 100 days.
Both wasteful and ineffective: it failed to achieve any of its goals and had a massive negative impact on the US economy that will continue for some time.
Does it count as fraud, though, or just gross negligence when experts had already warned that this would be the exact outcome ahead of time but were ignored?
a weird extremely small executive branch task force with pretty much zero power is not what i would call a well supported project in the context of the trying to reduce spending in the american government.
Congress controls the purse, doge had nothing to do with congress.
The federal budget over time...
2026 - $7.5 trillion
2020 - $4.8 trillion
2015 - $3.9 trillion
2010 - $3.7 trillion
https://fred.stlouisfed.org/series/FGEXPND
We do not have a tax problem, we have a spending problem. There's no reason that the US federal government shouldn't be able to operate on a budget equivalent of about $4 trillion which was just about the average from 2010-2020. There seems to be quite a lot available to cut.
Another ~$0.5 trillion is from higher interest payments.
A large fraction of the budget consists of wages and actual spending. Inflation is 25–30% since 2020.
Then there is healthcare spending, which can be expected to grow faster than inflation, as the population is growing older.
The US is basically running into the same issues as European welfare states. While government spending remains qualitatively the same, demographic changes make it grow faster than tax revenue. Those who couldn't maintain a balanced budget in the past are finding the situation particularly difficult. In some sense, the situation is even worse in the US. Healthcare (old age spending) is particularly expensive, while individuals have greater responsibility for childhood expenses.
The benefits agencies that make up the bulk of the spending have very low overhead and are run very efficiently. The vast majority of funds go directly to beneficiaries.
Balancing the budget will require massive cuts to very popular programs.
For inflation to have an impact on the US debt, it has to be approaching the level at which the US debt is increasing. In the last year, the US debt increased by 7.6%, much higher than inflation.
https://usafacts.org/government-spending/
https://usafacts.org/answers/how-much-debt-does-the-us-have/...
Hmm.... I found this, I wonder if there is any way this line item in the budget could be reduced, it looks sort of big:
https://www.usaspending.gov/agency/department-of-defense?fy=...
The average federal budget from 2010 to 2020 was $4 trillion. This year it is $7.5 trillion. There's quite a lot to cut.
Prices should get cheaper. That's a progress dividend. We get better at growing food every year, why shouldn't food get cheaper? Imagine a world in which prices regularly go down. You're a passive beneficiary of technological progress.
The argument that prices can't get cheaper or [bad thing will happen] was never very convincing to me. Prices already do get cheaper for large swaths of the economy that have technological progress grow faster than money supply. Cell phones are rapidly depreciating. You can wait 6m to a year and get a significant discount on the latest iPhone version. People don't stop buying iPhones, and Apple doesn't stop investing in iPhones. This is even more true w/ AI models. Investors/companies are burning billions to build tech that will only get cheaper and obsolete in years if not months.
So if you were to try to convince me that deflation would reduce investment or spending, tell me why this doesn't apply to tech products that get cheaper every year.
Does that include the price of labour? Are you okay with your salary going down? Because the historical record shows that's what happens during deflationary periods: producers of good/services see the price that they can sell things for goes down, and so they insist on their suppliers and inputs—including labour input—reduce their prices as well.
Again, tie it to things that decrease in price over time.
This can only really happen if the rate of efficiency gains consistently out pace resource and labor costs, such that the marginal cost of delivering produce to market is flat or decreases for the farmer over time.
That world results in a lot of people individually deciding "why buy now, when I can buy for less later" and sitting on their money.
That in aggregate makes the economy much worse.
You're up against human nature here. Money may be an arbitrary numerical denomination of value, but people's behavior around it and how that affects the economy at large need to be accounted for. Having prices slowly creep upwards over time (low inflation) tends to result in more, better things sooner.
Why do people buy iPhones today knowing that they can get a significant discount in 6-12m for that same iPhone
Does it really? A lot of our problems seem to stem from conspicuous consumption. People will still need things (food shelter clothing) and that will motivate purchasing. "Oh n0es people won't buy flavor of the month consumer garbage, what ever will we do" just doesn't track.
Gimme all the gold contacts in all of your electronics please, we shouldn't be using gold for those I guess....
Also - I think if you look at the data you’ll find periods off the gold standard where food prices grew more slowly than inflation and even wages, ie food becomes cheaper. 80s and 90s for example.
It has gotten cheaper, as a percentage of people's income and spending.
Because a lot of people earn their living by producing or selling food. Your other necessities don't become more affordable just because food prices go down, but if that's your livelihood it becomes at risk. Food was incredibly cheap during the great depression. There's an amazing quote from the PBS documentary series on it; "A sack of flour cost a nickel, but where were you gonna get a nickel?". Steady, controlled inflation via fiat is the only way to keep a capitalistic economy functioning, because you can't micromanage or control the price of everything, and people need money to live. The real issue is stagnation of wage growth while assets explode. It's the transfer of real wealth from earners to owners that has put us in the current position, not absolute prices.
You don't credit an arsonist with "keeping a homeless person warm" when they set a homeless person on fire...
I don't think anyone really holds him responsible for the dotnet crash of 2000 as that was a market issue and irrational exuberance issue and not a monetary one.
And 2008 was similar. The Fed doesn't control or have any responsibility for lower lender standards or ARM mortgages.
Congress was responsible for the GSE's that bought any mortgages and wrote insurance on those mortgages, so you can't blame the FED for that.
Wallstreet are their regulators were responsible for the securitization of mortgages that went bad in 2008, not the FED.
At worst you can say they had the wrong monetary policy but that's an opinion and not something that can be said as a fact.
Can you flesh out how you feel Greenspan is responsible for 2008?
As for the Great Recession, taking the Fed Funds rate from 6.5% to 1.0% and holding it there for a year was the catalyst for driving everyone into the mortgage market looking for returns. And then did not regulate subprime lending or the shadow banking market:
"As the housing market boomed, subprime mortgage originations skyrocketed from 8.2% of all mortgages in 2003 to 23.5% in 2006. The Fed possessed the authority under the Home Ownership and Equity Protection Act (HOEPA) to crack down on predatory lending and loose underwriting standards but chose not to act aggressively."
"The Fed failed to properly monitor off-balance-sheet vehicles, investment bank leverage, and complex derivatives like mortgage-backed securities (MBS) and collateralized debt obligations (CDOs). Because these instruments developed outside traditional commercial banking oversight, a highly leveraged 'shadow banking' system grew completely unchecked under the Fed's watch."
So yeah, the Fed has its fingerprints all over the scene of the crime. Lots of blame to go around though..
Greenspan felt Greenspan was responsible for 2008.
https://www.nytimes.com/2008/10/24/business/economy/24panel....
He set the stage for the financial crisis that started crumbling a year after he left the fed chair. It wasn't all his fault (politicians lost any spine and bankers any sense), but he was the conductor.
I tend to think the benefits of unbacked currency exceed the downsides, but it’s not exclusively upside.
I don't understand why people keep banging about the theoretical advantaged of a gold standard whan it was the default monetary system for centuries and we have firsthand evidence of the problems it causes (and certainly not more equality in the world!). It has been tried by the whole Earth during several generations.
If you think, like Greenspan and others, that there ought to be a mechanism to force some monetary restraint on governments, try to think of a new mechanism, because the "old way" wasn't better. We know it. Move on.
>near unlimited government credit
Really? How do we get some? And, beyond that, what do YOU think the limits should be on increasing the money supply by a sovereign nation?
A nation becomes wealthy by producing things to sell. Nothing else matters, including debt. But, we live in a world where people want to be rich, but also don't want to use resources, or build, or manufacture things, or run an empire. It's contradictory, and we are starting to see the effects.
At the height of the Great Depression (1936), some economists proposed The Chicago Plan to separate the provision of credit from the money supply by eliminating fractional reserve banking, giving better control of the increases and contractions of credit, the elimination of bank runs, and a dramatic reduction in debt. There was a recent (2012) paper from the IMF [1] that seemed to find this actually is pretty sensible, although I do not claim to be smart enough to understand all of the implications.
[1] https://www.imf.org/en/publications/wp/issues/2016/12/31/the...
What happens in practice is that you set a conversion rate to account for this, and basically immediately things start to drift further and further out of whack leading to massive distortion. There's a reason the gold standard era was a cycle of big swings of inflation and deflation, with panics, recessions, crashes pretty continually.
It's the same with fixed or pegged exchange rates - you can set it to something reasonable at the start but it will always drift, usually until things are distorted that the system fails. That's why we don't have a gold standard anymore and why fixed exchange rates have all mostly failed and gone away too.
There's just no reason to believe that pegs to commodities or other currencies would ever correspond to the amount of money that the economy needs to be in circulation, so they always fail.
That’s why stocks go up, spending goes up and the asset class gets richer. When you peg these to an arbitrary “value” you can see, companies aren’t getting trillions of dollars more efficient, the government isn’t delivering more services and the utility of a business or property hasn’t increased.
That's because it permanently cripples economies by creating an artificial constraint and pretending it's useful. All it does is create another speculation market in gold and cripple credit markets.
It's worth reading all of them, even if you disagree with most of it.
As I understand it, all the gold that has ever been mined would fit in a cube the size of a baseball diamond.
https://www.businessinsider.com/warren-buffetts-lesson-on-go...
Nixon was responsible for ending the silver standard.
https://www.usmoneyreserve.com/news/executive-insights/when-...
I hated the system but it's fair. English and the allied forces inherited the western world and nobody was willing to claim it, the king of England gave it to his daughter.
Gold should be revalued but we're entering a phase where America is leaving law and order for law and equity. Essentially WW2 is ending but most never bothered to consider if there's a goal to all the chaos.
Basing currency on a shiny rock is the stupidest idea ever, that only happens to work because it plays into the worst of human convictions, which is egosim around fraud and debasement of currency.
Gold Standards are like very strong medicine with bad effects.
Notably, they would almost assuredly hold back the economy and cause deflationary traps.
The economy needs a bit more currency as it expands and that's that.
