@soothfast saidThe US loaned the other nations the money.
I see. I guess what I'm thinking about (and I had to look it up to be sure) was World War 1, when nations at war simply had to run up deficits to fund their militaries in a life-or-death struggle. Before the war the gold standard was at its zenith, with the chief combatants all being adherents. But what happened is nations just suspended the gold standard during the war. ...[text shortened]... nstantly in flux, it's just bizarre to me to have a currency backed by a vault full of shiny bricks.
20 Jul 23
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@athousandyoung saidIt did, but those loans didn't cover everything. Primarily the loans covered the cost for needed imports from the US, I believe.
The US loaned the other nations the money.
In fact the UK already had debts to the tune of about £650 million when the war started, so deficit spending of some sort was already happening before the fighting (despite the gold standard). Maybe there were bonds issued, and loans from other national banks, or something else.
Actually this site is illuminating:
https://encyclopedia.1914-1918-online.net/article/war_finance_great_britain_and_ireland
While revenue increased dramatically [in the UK in 1914], it failed to keep pace with the growth of expenditure. The consequence was massive deficits. In the opening weeks of the war, the government paid for its outlays through short-term Treasury Bills and Ways and Means Advances from the Bank of England. Such expedients could not last indefinitely. The story of wartime revenue extraction is the effort to raise taxation without crippling public willingness to support the war effort. As for borrowing, two periods are apparent: the first, a period of reliance upon long-term War Loans, beginning in November 1914 and lasting until the spring of 1917; the second, from the spring of 1917, saw the abandonment of long-term borrowing in favour of shorter term instruments.
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The First War Loan was floated in November 1914. The loan was a failure, though its miscarriage was disguised by the Bank of England. Despite this fiasco, a commitment to long-term borrowing remained the centrepiece of government borrowing until the spring of 1917. The Second War Loan (1915) and the colossal Third War Loan (1917) were supplemented by shorter term borrowings, Bonds and Treasury Bills.
Okay, this is getting complicated. But the main point is that governments find ways to rack up deficits even with a gold standard policy. The policy can be suspended, or worked around some other way.
@sh76 saidTechnically not true. It is a little more complicated than that. You mean not supposed to.
A gold standard means the government cannot float more money than it can produce gold to cover.
The USA did just that while on the gold standard, but it was because they did not intend to honor the gold standard in the long term and increased the money supply creating inflation. France and other nations noticed the inflation (that the gold standard was supposed to prevent) and lost confidence in the US dollar so they decided to redeem a lot of dollars for gold the FRS knew it could not cover, because they intended to stop redeeming for gold and abandon the gold standard anyway and that is what they did.
So your statement is only true if the central bank intends to continue redeeming for gold. The gold standard was useful for creating confidence in the dollar which helped the dollar become the world reserve currency. Once dollar hegemony was achieved the gold standard was abandoned so they could tax anyone who held US dollars, which is most of the world.
Now the USA can tax most of the world with inflation as much as they want. The gold standard was an obstacle to that inflation tax. That is why they keep feeding you propaganda that a gold standard is bad. BRICS want to achieve world reserve currency status to replace the dollar's status as world reserve currency.
Remember when I pointed out that the gold standard was useful for creating confidence in the dollar which helped the dollar become the world reserve currency.
That is what BRICS is trying to do. Then they can print more money than they have gold just like the USA did and abandon the gold standard. That way BRICS can tax most of the world with inflation.
Now do you understand?
If they combine a gold backed currency with the abolition of fractional reserve banking, then it should help control money creation and inflation. I bumped into this about five years ago, as it ties in with a quantum computing system (and block chain technology) to manage the currency. It’s the bottomless money pit that the current Breton woods systems has been a party to, that has caused much of our woes, with the ability of some to simply print money and give it to their mates e.g. the “quantum easing “ of the first decade of this century.
21 Jul 23
@soothfast saidI suppose that if they change the definition of gold standard to match whatever they want to do, they can do whatever they want; but then it's not really a gold standard any more.
Are you strictly talking about a textbook "gold standard in theory"? Once politics gets into the mix things start getting fuzzy.
Ultimately, one pole is simply writing the notes and letting the currency float on the open market. This is what most currencies do.
The other pole is pegging your currency's value to a commodity or another currency.
There are gradations in between.
Keynesian economics (which is really the basis of Macroeconomic policy in the western world) requires flexibility. Keynes' main idea was to increase the availability of currency when the economy is soft and to tighten it when the economy is too strong (thereby causing runaway inflation).
While governments have, unfortunately, been irresponsible in being too loose with increasing monetary supply and failing to tighten supply enough when that's been called for, tying the hands of governments and stopping them easing supply to prevent depressions is a bad idea.
21 Jul 23
@medullah saidRelying on the blockchain model for all currency means the end of government involvement in macroeconomic policy.
If they combine a gold backed currency with the abolition of fractional reserve banking, then it should help control money creation and inflation. I bumped into this about five years ago, as it ties in with a quantum computing system (and block chain technology) to manage the currency. It’s the bottomless money pit that the current Breton woods systems has been a party to, ...[text shortened]... int money and give it to their mates e.g. the “quantum easing “ of the first decade of this century.
While this has some superficial appeal because government is often so irresponsible in its monetary policy, you're condeming your society to periodic depressions that would normally be part of the economic cycle.
It's like the car you buy for your teenager and he drives irresponbily. You can take away the car, but then he can't get to school and work and practice, etc. Or you can try to force him to use it responsibly. Taking away the car is throwing the baby out with the bathwater.
@medullah saidWas Breton woods before or after the depression of the 1930s.
If they combine a gold backed currency with the abolition of fractional reserve banking, then it should help control money creation and inflation. I bumped into this about five years ago, as it ties in with a quantum computing system (and block chain technology) to manage the currency. It’s the bottomless money pit that the current Breton woods systems has been a party to, ...[text shortened]... int money and give it to their mates e.g. the “quantum easing “ of the first decade of this century.
The working class get dumped on all the time regardless of which form of pea knuckle the rich and powerful play.
BRICS however is a grouping of authoritarian states in a huddle so hopefully whatever they have planned will fail.
It will probably fail because the interests of these states are diametrically opposed, especially China and India, whilst they all want to see the demise of US economic hegemony they probably know it will only be replaced by a Chinese economic hegemony which would put India and Russia in a very bad place.
This is no more than authoritarian leaders strutting in on a stage of their own making for their domestic audiences and nothing more.
21 Jul 23
@sh76 saidAh, the joys of the "dismal science."
I suppose that if they change the definition of gold standard to match whatever they want to do, they can do whatever they want; but then it's not really a gold standard any more.
Ultimately, one pole is simply writing the notes and letting the currency float on the open market. This is what most currencies do.
The other pole is pegging your currency's value to a commodity ...[text shortened]... tying the hands of governments and stopping them easing supply to prevent depressions is a bad idea.
Countries and individuals have been using gold for transactions whether there's a gold standard or not.
The difference is that a gold standard REQUIRES people to use gold for transactions, backed by State force, and if rich people hoard gold, then too bad for everyone else! The State will be required to use guns and prison to protect the riches of those who hoard gold even if there is no currency left in circulation!
https://en.wikipedia.org/wiki/Hoarding_(economics)
Hoarding in economics refers to the concept of purchasing and storing a large amount of product belonging to a particular market, creating scarcity of that product, and ultimately driving the price of that product up. Commonly hoarded products include assets such as money, gold...
28 Jul 23
@no1marauder saidTrue, but government and the FRS can create as much currency as they want and exceed the needs of economic activity. That is why inflation is too high right now. They do that to tax people with inflation.
The amount of currency and other forms of money in a system should be based on the needs of economic activity, not how many colored rocks are in a certain geographical area.
If they didn't want to tax people with inflation the inflation rate would be near zero. That is not their goal. They say it is 2%, but only temporarily. They intentionally exceed that when they want to and give the newly created currency mostly to the wealthy taxing mostly the lower and middle class.
To be concise, it is a class warfare scam. Robin Hood in reverse. Steal from the poor and give it to the rich. Plutocracy.