Is the influx of gold into the USA from Europe the primary cause of the end of the Great Depression?

sparky · Aug 26, 2023

a reasonable link about gold is the Gold council , they are of course pro gold but are a serious source

Central banks

www.gold.org

a big factor in keeping gold price suppressed is it invention of "paper gold " basically printing of paper saying that someone will give you gold if you buy a promise
this is pretty much fiat gold , with about 200 times more paper than real stuff , of course a real recipe for disaster
it should be noted than the world central banks have been on a splurge of buying the real stuff and storing it at home
the most notorious example being Germany insisting on repatriating 500 tonnes of their gold from the US to Germany in spite of an extreme reluctance of the Federal reserve bank of New York
but other countries did the same

BrutusofNY · Aug 27, 2023

The Generalist said:
the intrinsic value would be what it would get in an open market in the same fashion as any other metal.

Fair enough...and I will swallow my dissertation on how badly the market is distorted by the extreme instability in the value of the currency unit. No market can express economic values in an environment where the expression of that value (price) is in terms of a rapidly changing unit.

It is like trying to measure the height of a basketball team team with a ruler that is constantly changing to large degree.

AlpinLuke · Aug 27, 2023

The real problem here is that there is who thinks that money should have an "intrinsic value".
Why?

Let's go back to when someone thought to invent money.

A fisher went to a village of hunters with a lot of fishes on his boat. The hunters welcomed him because they needed fish and so they bartered meat for fish.

But ... what if the hunters in the village didn't want fish? Our beloved fisher would have been in troubles.
This is why we developed money. Money is an invention, it doesn't exist [when I was in Scientology I heard even something worse, but that was an orthodoxy].
Do we want to base the value of money on gold? Why not on iron or radioactive polonium?

BrutusofNY · Aug 27, 2023

AlpinLuke said:
Do we want to base the value of money on gold? Why not on iron or radioactive polonium?

Because that was what people voluntarily decided while fiat money is the result of political force - government setting itself against the voluntary decisions of its citizens.

And, as you know, it has not always been specie - but that was thousands of years ago.

AlpinLuke · Aug 27, 2023

BrutusofNY said:
Because that was what people voluntarily decided while fiat money is the result of political force - government setting itself against the voluntary decisions of its citizens.

And, as you know, it has not always been specie - but that was thousands of years ago.

In ancient Egypt they considered silver well more valuable than gold.
So, it's always a matter of context.

BrutusofNY · Aug 27, 2023

AlpinLuke said:
In ancient Egypt they considered silver well more valuable than gold.
So, it's always a matter of context.

Yes, I agree.

And I recognize that my distinction between voluntary behavior and state-based coercion in regard to money is a normative one - and thus guaranteed to be controversial. But I do believe it can be well-defended.

grey fox · Aug 27, 2023

AlpinLuke said:
The real problem here is that there is who thinks that money should have an "intrinsic value".
Why?

Let's go back to when someone thought to invent money.

A fisher went to a village of hunters with a lot of fishes on his boat. The hunters welcomed him because they needed fish and so they bartered meat for fish.

But ... what if the hunters in the village didn't want fish? Our beloved fisher would have been in troubles.
This is why we developed money. Money is an invention, it doesn't exist [when I was in Scientology I heard even something worse, but that was an orthodoxy].
Do we want to base the value of money on gold? Why not on iron or radioactive polonium?

Iron rusts. Iron is too plentiful. Gold is prettier than iron.

Radioactive polonium is too rare to be used as money. Furthermore, radioactive substances cause cancer.

Murffy · Aug 27, 2023

If an espresso drink costs me $4 today, but tomorrow there's an increase in demand, then the price will go up. This kind of inflation is a result of a generally prosperous economy. If more people can afford more fancy coffee drinks and other stuff, prices will rise. Ths is the kind of inflation you want in a growth-centered economy where the ideal is to enhance general prosperity. I'd say much of the dollar's loss of buying power over the years is accounted for by this tendency. Wouldn't trying to curtail it be counterproductive?

grey fox · Aug 27, 2023

Murffy said:
If an espresso drink costs me $4 today, but tomorrow there's an increase in demand, then the price will go up. This kind of inflation is a result of a generally prosperous economy. If more people can afford more fancy coffee drinks and other stuff, prices will rise. Ths is the kind of inflation you want in a growth-centered economy where the ideal is to enhance general prosperity. I'd say much of the dollar's loss of buying power over the years is accounted for by this tendency. Wouldn't trying to curtail it be counterproductive?

The idea is to try to reduce inflation without reducing prosperity.

Inflation is a hidden tax on the American people, especially creditors.

sparky · Aug 27, 2023

Radioactive polonium decay , the longer lasting isotope has a half life around 130 years , which means that by this time half or it is gone
gold is eternal

BrutusofNY · Aug 27, 2023

grey fox said:
Inflation is a hidden tax on the American people...

Excellent point – a politically unauthorized hidden tax as well.

As a tax, it has an appalling characteristic. Since inflation devalues the money in peoples’ pockets, it a tax, not on income or a sales tax on what people spend, but a tax on peoples’ entire cash balances.

In the case of poor people living paycheck to paycheck, it is a tax on their entire net worth.

So, inflation taxes someone like Bill Gates at probably under .1% of his net worth, but taxes the struggling single mom that cuts my hair at 100% of her net worth.

Inflation is absolutely the most regressive tax of all – immeasurably more regressive than anything conservative politicians ever dreamed of.

pugsville · Aug 27, 2023

BrutusofNY said:
Because that was what people voluntarily decided while fiat money is the result of political force - government setting itself against the voluntary decisions of its citizens.

And, as you know, it has not always been specie - but that was thousands of years ago.

No that decision was the result of political force just as much as fait money.

pugsville · Aug 27, 2023

BrutusofNY said:
Excellent point – a politically unauthorized hidden tax as well.

As a tax, it has an appalling characteristic. Since inflation devalues the money in peoples’ pockets, it a tax, not on income or a sales tax on what people spend, but a tax on peoples’ entire cash balances.

In the case of poor people living paycheck to paycheck, it is a tax on their entire net worth.

So, inflation taxes someone like Bill Gates at probably under .1% of his net worth, but taxes the struggling single mom that cuts my hair at 100% of her net worth.

Inflation is absolutely the most regressive tax of all – immeasurably more regressive than anything conservative politicians ever dreamed of.

Havey ou considered that words mean things and by calling X , "Y" you devaluing the ability of people to meaningful debate stuff.

Inflation is not tax. Please use words properly.

BrutusofNY · Aug 27, 2023

pugsville said:
Havey ou considered that words mean things and by calling X , "Y" you devaluing the ability of people to meaningful debate stuff.

Inflation is not tax. Please use words properly.

Keynes certainly disagreed with you – no need to mention any “conservative” or “libertarian” economists you would probably dismiss out of hand as ideologues.

On July 27, 1922 Keynes published and article called Inflation as a Method of Taxation and included the material in Chapter 2 of his Tract on Monetary Reform the next year where the phrase “Inflation as a Method of Taxation” was the first subtitle in the chapter and he used the phrase “inflationary tax” numerous times in the book.

In 1946 the Chairman of the Federal Reserve Bank of New York, Beardsley Ruml, published an article entitled “Taxes For Revenue are Obsolete” in the January 1946 American Affairs Magazine.

“The United States is a national state which has a central banking system, the Federal Reserve System, and whose currency, for domestic purposes, is not convertible into any commodity. It follows that our Federal Government has final freedom from the money market in meeting its financial requirements.”

You can slice and dice words like a lawyer if you want, but it does not change the fact that inflation and taxation are functionally the same in that they transfer wealth to those making policy.

Oldandeasilycofused · Aug 27, 2023

BrutusofNY said:
In the case of poor people living paycheck to paycheck, it is a tax on their entire net worth.

Such people are also betrayed by the system: They are encouraged to take as big a mortgage they can manage. Then an interest rise of only a quarter of a percent can be a catastrophe.

I read perhaps 30 years ago that vast numbers of Americans were only 2 or 3 pays away from the street. Same thing seems to have become the norm here too. They changed the rules. I bought my first house in 1976. At that time, the amount I could borrow was based on repayments not exceeding 1/4 of my gross income. The prime interest rate reached 17% here in the early 1980's

I don't remember when the rules changed here, possibly the 1990's. From that time, mortgages were based on two incomes. I'm not sure who set the limits. That's about as far as I can go without getting into current events. Suffice it to say that I wouldn't want to be buying a house today.

pugsville · Aug 27, 2023

BrutusofNY said:
Keynes certainly disagreed with you – no need to mention any “conservative” or “libertarian” economists you would probably dismiss out of hand as ideologues.

On July 27, 1922 Keynes published and article called Inflation as a Method of Taxation and included the material in Chapter 2 of his Tract on Monetary Reform the next year where the phrase “Inflation as a Method of Taxation” was the first subtitle in the chapter and he used the phrase “inflationary tax” numerous times in the book.

In 1946 the Chairman of the Federal Reserve Bank of New York, Beardsley Ruml, published an article entitled “Taxes For Revenue are Obsolete” in the January 1946 American Affairs Magazine.

“The United States is a national state which has a central banking system, the Federal Reserve System, and whose currency, for domestic purposes, is not convertible into any commodity. It follows that our Federal Government has final freedom from the money market in meeting its financial requirements.”

You can slice and dice words like a lawyer if you want, but it does not change the fact that inflation and taxation are functionally the same in that they transfer wealth to those making policy.

They are not. Clarity and use of words matter. Using words clealry makes arguments clearer.

That others have made this mistake does not matter in the slightest.

People make such claims for sensationalism.

The Definitions of the two words are fundamentally different.

dubsar · Aug 27, 2023

BrutusofNY said:
Fair enough...and I will swallow my dissertation on how badly the market is distorted by the extreme instability in the value of the currency unit. No market can express economic values in an environment where the expression of that value (price) is in terms of a rapidly changing unit.

Exchange rates have always fluctuated. Back in the 15th/16th century, the exchange rates between English and continental pounds fluctuated depending on whether it was the season when weavers in the low countries were buying English wool in English pounds. A big part of the skill of being a merchant was keeping track of the relative values of all these gold and silver currencies. It didn't matter that they all contained gold and silver if you could not use them in the market you wanted to buy in (and it cost time and a percentage to take say money from Cologne and have it re-minted into English money).

Likewise, gold and silver money has been adulterated by the issuer as far back as we have records. If you have a contract saying you are owned 800 silver zagborts (because testing the purity of every coin every time you do business is really **** annoying) and before it is due the autocrat of zagbortia reduces the silver content of a zagbort by 10%, you have to suck it up. Just like if you have a contract saying you are owed 5 kg of 99% pure silver and a new silver mine is discovered and the value falls, you have to suck it up.

sparky · Aug 28, 2023

The middle ages and probably any commercial civilization solved the problem by having money changers
rating coins on their metal content , metal purity , integrity , general use or any factor of relevance from the weigh and color ,using touchstones and acid ,
those money changers expert would give you the equivalent value in local or any currency you might wish , if it was available

AlpinLuke · Aug 28, 2023

Now, in political economy the model of the "steady economy" exists at theoretical level.
To make it very simple it's a "stable economy".

The limit of this model is the everything has to be stable, human population included.

Anyway, the possibility to grow without inflation exists as well, but it requires that you increase the monetary mass with the economy [at the same pace].
This is the main reason why the convertibility to gold had abandoned: if the world economy increases by a nice 10% and you don't find gold mins to increase the extraction of gold by an equally nice 10% ... you will be in troubles.

BrutusofNY · Aug 28, 2023

AlpinLuke said:
Anyway, the possibility to grow without inflation exists as well, but it requires that you increase the monetary mass with the economy [at the same pace].
This is the main reason why the convertibility to gold had abandoned: if the world economy increases by a nice 10% and you don't find gold mins to increase the extraction of gold by an equally nice 10% ... you will be in troubles.

Then how can a couple thousand years of economic growth be explained when difficult-to-mine gold and silver usually represented the money in use?

In particular, does not the massive influx of gold and silver into Spain and wrecked its economy as it plundered the New World suggest that this idea is wrong? Is it not refuted by the very large increases in wealth and standards of living during the 19th century when the gold supply grew on average by one to two percent a year?

The belief in the necessity of a growing money supply is a hangover from Mercantilist thinking that a nation that could hoard gold (money back then) would surpass other nations. The idea as a theoretical construct goes back to at least David Hume - although this proto-Keynesian idea was in effect refuted by Copernicus before Hume was born, and even Keynes realized workers’ would not keep up with money supply increases (whatever the source of those increases).

However, it must be said that Hume fully recognized the danger of fractional reserve banking:

“it must be allowed, that no bank could be more advantageous, than such alone as locked up all the money it received, and never augmented the circulating coin...”

Hume also noted the such was the practice of the famous 100 per cent specie-reserve Bank of Amsterdam that was so important to the Dutch Golden Age.

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Is the influx of gold into the USA from Europe the primary cause of the end of the Great Depression?

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