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Comment by JohnJamesRambo | Hacker News Reader

You had me at everything except why the gold standard isn’t cool. I actually think the whole world is about to get a lesson in why the gold standard was cool.

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Limiting the growth of an economy (i.e. construction of houses, loans to new businesses) because not enough gold has been mined is silly.

Perhaps, but replacing the gold standard with no backing is not then the answer. There should be hard accountability on anyone who can create money. Cryptographic measures seem promising in this regard, but I have never heard of governments funding research on limiting themselves. China has been doing some work in digitizing its money, but it seems it is making the government even more powerful.

>Cryptographic measures seem promising in this regard

Have you not seen the absolute mess of stable coins? Tether has 'printed' the equivalent of 86 billion dollars from nothing.

>There should be hard accountability on anyone who can create money.

The bigger issue is a lack of accountability on the political systems. Most of which have been rife with corruption.

They print dollars and give it away with 0 accountability of whether economic value is returned for what is being printed.

High speed rail, national broadband, national healthcare, upgraded powerlines, renewable infrastructure, desal plants. Food for kids in schools, shelter for the homeless, high rise infrastructure (rather than shitty suburban shits that bankrupt cities in 50 years).

The above are effective, efficient and provide multiple dividends for the initial capital. Yet are viewed as socialist policies frankly and hence political suicide.

The Government can't even recognize how cryptocurrencies are by itself a negative sum game and hence should be heavily taxed or made illegal.

"Growth" isn't always helpful.

See: LA

True, but artificially limiting growth based on your ability to mine gold (or steal it from other countries) is still silly.

If you want to constrain growth in a controlled fashion, you still need a central bank managing the supply of currency.

“The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust." -Satoshi Nakamoto Feb. 11, 2009

I have to agree with Satoshi that these central banks have not done a great job at that haha.

The economy requires trust to work, including the cryptocurrency economy.

Cryptocurrency supporters like to mythologize about everyone managing their own wallet and running their own nodes, but practical reality shows that to reach any kind of scale you need trust.

Somehow all the cryptocurrency advocates who pan trusting central banks don't seem to have nearly the same issues with trusting a company like Tether or Binance who have far less accountability..

Although central banks definitely have their problems, the US bank scandals in the 1800s make the central bank's failures look positively benign.

And the circus of cryptocurrency is better?

We are not in control of what happens. No one is at the console pressing buttons. We are growing because millions of individuals are making individual decisions resulting in run away growth. The best we can do is alter the incentives and hope we did it well enough that those individual decisions change. Given that, sticking to a system where you know the population is growing at a rate where you cannot keep up by growing the supply of gold is locking yourself into deflationary currency. That is BAD for everyone in the system considering we want money moving not sitting idle.

>See: LA

I'm not even sure what this is supposed to mean? Los Angeles? What does Los Angeles have to do with Growth? Or is this some crypto coin?

You ought to look into the longest financial crisis of the 19th century and what caused it

Can you elaborate? I'm a complete novice in this area, so genuine question.

The typical argument is that the value of gold is somehow super stable (often the story is brought up that in biblical times, an amount X of gold would purchase Y loaves of bread, and today it is still the same!). By contrast, the dollar lost 96% or so of its purchasing power over the last century, so clearly gold is much better, and if you tie the value of the currency to gold (=gold standard), you have the best of both worlds.

However, that story neglects many things.

1. A worker can buy many more loaves of bread (not to mention other things) with a week of wages than two thousand years ago. So, who cares about the price of gold?

2. Everyone is free to buy gold with their money, anyway, if desired [0].

3. A moderate amount of inflation is not bad, and in fact what most central banks target for, and what they have achieved for decades.

4. If you have a lot of money lying around, invest it in the markets (or into gold), don't leave it in currency.

5. A gold standard would remove the central bank's ability to control the money supply, and hamstring its ability to conduct monetary policy. Gold standard proponents consider that a feature, but almost all modern economists consider it a bug. An instructive parable is the story of the Babysitting Coop [1].

My overall take is that

good fiat > gold standard > bad fiat,

and policy should be focused on good fiat, ie keeping the central bank competent and politically independent and with a clear mandate.

[0] There have been exceptions, eg in the US in 1933, see https://en.wikipedia.org/wiki/Executive_Order_6102

[1] https://slate.com/business/1998/08/baby-sitting-the-economy....

The problem with “good” fiat is that it is never good for everyone. Inflation usually hits discriminatorily. And it doesn’t last. Even the US now has high inflation.

The gold standard has its problems, but putting hard limits on currency creation and manipulation is prudent.

The "competent" part is doing some really heavy lifting there, and to be frank.

I personally have a lot more trust in the competency of a central bank than some random, unchangeable numbers an anonymous person pulled out of their hat in 2008. Or the gold mining cartels, for that matter. At least the central banks have some vague semblance of democratic control.

Central banks have their problems, but a history of banking in the US, especially in the early 1800s make modern central banks look amazing.

Said Central Bank was famously killed once, for equally good reasons, in our country's history. We've quite literally built in "endless growth" imto the fundamental architecture of our monetary system, which breaks the fractal self-similarity between the different levels of abstraction of an ideal State.

(Given nature's love of pattern reuse, finance on micro ()individual), should resemble finance slightly more macro (family), dhould resemble finance even more macro, (industry, state, nation))

Whereas what we have now is some horrible abomination where at the top-end, we get these debt fueled monstrosities that continually push asset prices into more and more ludicrous places where barrier to entry gets higher and higher, and the requisite concentrations of resources one must accrue before the power laws start kicking in relegates a greater and greater portion of the population to basically treading water in the hopes less than a single percent of it makes good capital allocation decisions.

Call me a contrarian nut if you want, but something is completely off. I accept unintuitive things can exist, but modern economic theory requires too mich fairy dust (Dude, trust us) to keep churning along for my liking. .

https://wtfhappenedin1971.com is a good start. The wheels seem to start falling off of everything when you can just create fake money out of thin air. Most of the money goes to those near the money printer and you get massive wealth inequality and all the problems that causes. Maybe gold is silly but it at least pegs the money creation to something.

A serious reply with a link: https://www.reddit.com/r/badeconomics/comments/i9ycy9/the_br...

But I always feel like I should reply to people who argue via a link (whether re: the gold standard, COVID-19, or any other topic) with http://web.archive.org/web/20160112000701/http://www.timecub... .

It's a standard "(hyper-)inflation is coming" line.

Gold itself is just another fiat currency, with the only advantage being that almost every society known to mankind has somehow evolved to accept gold as the one and only "true value" storage. Only 10% of the world's gold production goes to industrial usage (mostly electroplating of connectors), the rest off to plain investment and jewelry.

That is factually rather incomplete. Silver was the original metal of currency and was far more widely used historically. Silver wasn't fully supplanted by a gold only backed currency until 100-200 years ago in many countries.

I am always curious why silver never gets any love from the "gold is the only true currency" crowd."

It also has the advantage that it can't be inflated as quickly as fiat. You can't just print more.

... except those that preferred silver.

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