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To: PGR88
The problem with the gold standard is that while it usually (but not always) constrains inflation, it can also limit monetary growth when needed or cause deflation if new supplies of gold are not mined and added to the monetary base at a steady rate.

Much of the cause of the Depression was that the US and France prompted worldwide deflation by buying up gold, growing their stocks of gold bullion, but not adding it to their monetary base by issuing equivalent additional currency. This policy of gold accumulation caused a relative decrease in the world's supply of gold as the monetary base. This depressed the general price level, thereby making debts more costly in real terms and impossible to service for many borrowers.

That is why the US went off the gold standard as part of ending the Depression. Sadly, Hoover and FDR also did much that aggravated the Depression. They let the banks fail, did not expand the money supply to remedy its previous decline, and adopted regulations that disrupted and burdened economic production.

Another defect of the gold standard is that it can empower dangerous countries like Russia and China that are major gold producers. Gold mining and refinement are also environmentally damaging operations, and a wave of new gold production could prompt inflation.

Countries can also engage in economic warfare by accumulating or selling gold so as to manipulate its price. Consequently, a gold standard requires that the world's central banks collaborate so as to maintain gold price stability. As explained, failure to do so helped trigger the Depression -- which was last century's great spur to war and Leftism.

16 posted on 03/22/2023 11:51:41 PM PDT by Rockingham
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To: Rockingham
The problem with the gold standard is that while it usually (but not always) constrains inflation, it can also limit monetary growth when needed or cause deflation if new supplies of gold are not mined and added to the monetary base at a steady rate.

Again, you cite its main advantage as a fault. What is wrong with deflation? The USA had general deflation for 50 years from the civil war until the Federal Reserve was created. It was an incredible time of growth in the USA, with stable prices and the highest rise in real wages ever. Inflation is THEFT by whomever controls the money supply of your wages and your savings.

There is, in practical terms, NO difference between a criminal counterfeiting US dollar bills in his basement, and the Federal Reserve and US government monetizing massive debt to allow Fed.gov spending. It all debases the currency and your purchasing power.

The upshot of your argument is that "central planners" need control over money supply, to reach "economic goals."

Funny how we reject Soviet-style central planning over most commodities, but never question it for our money supply.

18 posted on 03/23/2023 8:26:33 AM PDT by PGR88
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