http://www.minneapolisfed.org/community_education/teacher/calc/hist1800.cfm
From 1866-1896 was a period of persistent mild deflation. We were expanding fast as a nation, and the gold/bimetallic standard was unable to keep up, even as new sources of the metals were discovered. That is one of the chief disadvantages of the gold/silver standards. Limited monetary supply and debasement are its two greatest flaws.
The gold standard, or the bimetallic standard, or the debt standard; it doesn't matter. Legislative acts can upend them at any time. Every monetary system has its advantages and disadvantages. Today's has the great flaw of debt piled upon debt until the current system comes apart because of???
You guessed it. Limited money supply making it unable to pay interest on the debts incurred. Even running the proverbial printing presses can only work for so long. The debts keep being incurred, and in larger amounts, as money is pumped into the system, in order to create economic activity, creating ever increasing interest payments. Eventually we run into the hyperinflation problem. The FED has avoided it rather deftly so far. But they are bailing water right now, not fixing the holes. Congress is supposed to do that, and they haven't. They have been pouring water into the boat as fast, or faster, than the FED can bail it out.
Housing isn't a very good indicator of deflation right now because the market for real estate collapsed, and for the reasons I just listed. Autos had much the same problem. They priced themselves right out of a market. I maintain that we are in a mild inflationary period that has the potential to get out of hand.
If we cut out unnecessary spending, we'd have no problem paying interest on our debt.
Those are two very great flaws, but I'd add another, the inflexibility on monetary policy relative to fiat money.
We were expanding fast as a nation territorial wise, but economically not so much..."The Long Depression is sometimes held to be the entire period from 1873–96."
Business and the market will eventually forecast and attempt to factor in future deflation or inflation. But deflation is insidious in that it incents people to hold capitol in currency instead of investing it. If you can make 3 or 4% by just holding on to dollars, why invest? Persistent deflation makes for an economy with a very inefficient use of capitol.
"Today's has the great flaw of debt piled upon debt until the current system comes apart because of???
But I don't see that as a limitation of the gold standard. There is nothing to stop congress from borrowing and promising that our children will pay the chinese back in gold. No monetary system will stop congress from borrowing. Only a determined citizenry can do that.
But they are bailing water right now, not fixing the holes. Congress is supposed to do that, and they haven't.
Exactly on Congress. But I don't see the Fed as really bailing water yet because of congressional spending. The FED has kept inflation down, telling me they aren't bailing due to congressional spending.
And while QE does raise inflation fears, I see QE as more a response to current unemployment situation. And I don't see the current unemployment as a result of congressional borrowing, but rather as the result of unwise trade policies, a failure to prepare for the oil price shock, and a failure to regulate derivatives and abusive credit practices.