The periods of double digit inflation spikes were times of war and when the fedgov. borrowed and/or created fiat currencies to finance the military. These were temporary and quickly reversed when the need ended.
It's good that we at least agree that the gold standard is worthless for controlling inflation during times of war. Maybe we can also agree that it's no good between the wars either.
Compare the last two decades of inflation to that of the two decades before WWI. Inflation went higher with the gold standard -- over 5%. That's bad enough, but what was truly unacceptable was the fact that it could just as well plunge without warning into an even worse rate of deflation. The peace time gold standard gave us a price growth range of 11 percent versus our recent spread of just 3 percent. Gold standard insanity versus Federal Reserve success.
Earning interest on a loan of a non-existant assest is fraudulent and should be illegal.
What I was referring to is what happens when you go to the bank, and you see the gold lettering (one of the few sensible uses for gold) that says "Assets of more than $10,000,000". When you deposit $100, you have not increased the bank's assets --the bank now owes you money. You have given the bank a liability. This is why they want to loan out your $100 to someone else. When this happens you still have $100 in your bank account. After all, it's your money isn't it? What's different is that there's this new guy that borrows the $100 and now he has $100. The bank has created additional money and the nation's money supply has just increased.
Wait a second (I hear you interject). That guy has $100 money and he also owes $100. Nobody is saying that wealth was created. Wealth is what happens when the new guy goes out and invests the money and makes twice the rate of return that the bank is charging. This kind of wealth creation happens with or without the gold standard. The only difference is that there's more wealth creation now than there was then.
When you deposit $100, you have not increased the bank's assets --the bank now owes you money. You have given the bank a liability. This is why they want to loan out your $100 to someone else. When this happens you still have $100 in your bank account. After all, it's your money isn't it? What's different is that there's this new guy that borrows the $100 and now he has $100. Actually, this is not a problem at all and no moeny has been created in your scenario. Only, no, your money is longer in the bank, it is out on loan and due back at a certain date. You cannot retrieve your money until that date. This is 100% asset backed banking.
What happens today goes more like this....I deposit the $100. Due to fractional reserve laws, the bank can use my 100 to loan out 10 times as much (actually up to 100 times or more now). So I still think my 100 is there, but actually the bank has loaned out 1000 backed by only my 100. Then that thousand gets deposited somewhere else and is used to create loans for 10 times that amount. This multiplier effect is what causes the massive money supply growth.
It is my contention that this is immoral and fraudulent and should be illegal. This is what caused the inflation/deflation spike that you see in the pre-WWI times. It is not a standard part of the system. Neither is govt usuring its power to create fiat monies to finance war. An economy based upon a 100% gold backed monetary system is not a panacea, it is however, the most honest and market driven and provides for the most efficient growth of real wealth.
I went over some of this in posts 192 and 194 above.
