Quote Originally Posted by c1ue View Post
http://www.economicpopulist.org/cont...-and-class-war

A gold standard in periods of growth hinders growth via money supply restriction even as it beneficially hinders credit growth when said growth period stagnates.


Pandora's box is already open - a gold standard isn't going to close it again. What can be done, however, is to strengthen the government regulations which are the only real path to fixing the present problem and avoiding future ones.

A cry for a gold standard today is primarily a cry to preserve MY money because it is in gold - not specifically a prescription for fixing the myriad problems in the US and world economy.
People who own gold are preserving their savings whether a gold standard becomes public policy or not. The desire that cash savings retain purchasing power is perfectly legitimate. It is a great shame that the "best" public policy is to devalue the currency to ease the debt burden. It is very unfair to cash savers. In fact, I feel that debt repudiation would be a better policy.


A gold standard in periods of growth hinders growth via money supply restriction even as it beneficially hinders credit growth when said growth period stagnates.
I disagree. I think nations using a gold standard have had long term growth equal to or better than paper money. My examples: Britain 1700-1913 USA: 1790 -1913/1933/1971
POZ posted a big survey of global economic data, 1945+, and it turned out that growth was faster during Bretton Woods than after. There are a lot of factors affecting growth rates, but I have not seen convincing data that a gold standard hinders long term growth.

Germany's Erhard policies are an example of hard money under a fiat system. And their economic growth is strong, and the nation has large gold reserves.

You want a money system to restrict credit growth during booms. That is what will prevent big busts.

A gold standard without leveraged lending would do this.

The problem in the 1920's, was that the US had both a gold standard and leveraged lending. So, as the leverage increased, the debt level and price level increased. Then, during the bust, the price and wage level went down (deflation), but debt values had been established at the boom level ---resulting in widespread bankruptcy.

The preventive measure would have been to restrict credit growth, for example by raising rates. But the fed had been lowering rates to help the pound . . .