The Economic recover: anyone willing to make a prediction?

[Buffy]

Originally Posted by charles brough

It is just that I put myself in historical perspective and see that when civilzations abandon the precious metals, they get roaring inflation and that it accompanies the decline of the civilization. ... I am thinking thinking ahaid to the next civilization in a "what would be best" sense . . .

Yes, "next civilization" is the relevant caveat. Using the historical perspective on this though is somewhat akin to saying "whenever societies persecute Jews for being Kosher, it causes outbreaks of the Black Plague." Somewhat correlated in the historical realm, but totally irrelevant now that we have modern medical and public health practices in place....

Nothing will prevent nutcases like Mugabe from creating hyperinflation despite the existence of modern monetary policy, but outside of absolute dictatorships, societies do not tolerate even "high" inflation for very long any more, and even go along with the horrible tasting medicine to avoid it.

In ev'ry job that must be done there is an element of fun, you find the fun and snap! The job's a game,
Buffy

[charles brough]

Originally Posted by Buffy

Yes, "next civilization" is the relevant caveat. Using the historical perspective on this though is somewhat akin to saying "whenever societies persecute Jews for being Kosher, it causes outbreaks of the Black Plague." Somewhat correlated in the historical realm, but totally irrelevant now that we have modern medical and public health practices in place....Buffy

I am not sure I understand this. It seems you are saying we have the ultimate economic, political, etc. system now.

[Buffy]

Originally Posted by charles brough

I am not sure I understand this. It seems you are saying we have the ultimate economic, political, etc. system now.

Not at all! In fact quite the opposite!

You see by arguing we need a gold standard, we're saying, "people will never ever make the right decisions, and we can't trust them, therefore we have to instill rigid rules that will cause major disruptions in our economy."

Our current system is open to an evolution of knowledge and increasing amounts of data whereby the government--always under the review and approval of the electorate--can make intelligent decisions about tightening or loosening the money supply or other levers of monetary policy in order to smooth over the economic cycles which cause so much pain.

Social Darwinists will not agree with this approach, but that's just because they see no downside to destroying millions of livelihoods if things might ultimately be better (for whom?).

The whole idea behind interventionist monetary policy is that it is open to new ideas and new approaches, and is certainly better than the alternative.

Imagine medicine as it used to be practiced, with "doctors" using Bloodletting and Trepanation simply because the books prescribed what you were supposed to do and no "creativity" was allowed in treating patients. Certainly the upside is that everyone would get the same treatment and there'd be no opportunities for medical malpractice-chasing attorneys. But on the other hand, no risks would ever be taken on new techniques that relied on a doctor's *judgment* because, well, we can't trust *anyone*...

Arguing against the gold standard is not an argument that the current system is perfect, just that the gold standard is an ancient, harmful, and fully discredited idea that serves no useful purpose in modern society.

I should wish to see a world in which education aimed at mental freedom rather than imprisoning the minds of the young in a rigid armor of dogma calculated to protect them though life against the shafts of impartial evidence,
Buffy

[LaurieAG]

Originally Posted by Buffy

Arguing against the gold standard is not an argument that the current system is perfect, just that the gold standard is an ancient, harmful, and fully discredited idea that serves no useful purpose in modern society.

Hi Buffy,

The gold standard was never really discredited, the US just stopped buying enough gold reserves to cover the money they were printing in the early 1970's. The original idea, and what was supposed to happen after the Bretton Woods agreement, was that a gold standard gives traders an absolute translation rate for different currencies regardless of where they were actually trading.

Soory Buffy, you are getting the difference between free trade and fair trade mixed up again.

A gold standard is fair trade for all traders where no standard leads us into the free for all mess we are in today.

[Buffy]

No, you're confusing it with the more modern economic concept of Purchasing Power Parity which is what is used by economists to more accurately measure differences in exchange rates based on "the price of a basket of identical traded goods and services."

Currencies are traded based on perceived disequilibriums that occur in individual economies, and this arbitrage actually forces people to keep their currencies in line.

My favorite basket is of course The Economist's Big Mac Index which although originally created as a joke, has proven remarkably accurate in exposing these disequilibriums.

Some countries actually peg their currencies to others (e.g. the Chinese peg the Yuan to the US Dollar), but that results in numerous potential problems and can only be sustained in unusual circumstances (China can do it because of the incredible imbalance of trade it maintains with the rest of the world, especially the US).

But there are no serious efforts to reinstate the gold standard except among some far right wing nativists in a few places around the world. If you'd like to cite any, please do and we can discuss their rationales--or lack thereof.

You'll have to explain a bit more why anything I've posted in this thread has anything to do with free or fair trade: I understand the difference between the two but they have nothing to do with anything I've said here. Each can have an impact on currency valuations, but are irrelevant to the overarching topic at hand.

Sacred cows make the best hamburgers,
Buffy

[LaurieAG]

Originally Posted by Buffy

You'll have to explain a bit more why anything I've posted in this thread has anything to do with free or fair trade: I understand the difference between the two but they have nothing to do with anything I've said here. Each can have an impact on currency valuations, but are irrelevant to the overarching topic at hand.

It's just the difference between 'absolute' and 'relative'. In fact a Gold Standard is probably most like the 'relatively absolute' system that is the holy grail of physicists today, a universal link to all entities with directly translatable values that are not self referencing.

[charles brough]

Originally Posted by Buffy

the gold standard is an ancient, harmful, and fully discredited idea that serves no useful purpose in modern society.
Buffy

I can well imagine the Romans saying the same thing when inflation was out of control and Diacletian was bureauracrizing government and people were reverting to barter....or Confusian Scholars when paper money hyper-inflation was ruining the Chinese economy. Looking for a magical new way to create more money and pile up debt without suffering the consequences is like the knights riding off in search of the Holy Grail!

[questor]

If trade among countries is to occur, what should be the measure of value? The trade item itself can
have a value depending upon what someone will pay for it, but what is the value of the medium of exchange itself? What sets the value of the Romanian leu for instance? Would you sell your property for this currency? The dollar has been serving the purpose of currency of last resort, but now this is changing. What will become the standard, or store of value that the dozens of world currencies will all accept?

[Moontanman]

Originally Posted by questor

If trade among countries is to occur, what should be the measure of value? The trade item itself can
have a value depending upon what someone will pay for it, but what is the value of the medium of exchange itself? What sets the value of the Romanian leu for instance? Would you sell your property for this currency? The dollar has been serving the purpose of currency of last resort, but now this is changing. What will become the standard, or store of value that the dozens of world currencies will all accept?

Ok questor I'll bite on this one, since I am almost certainly the most ignorant one here on this subject I'm going to assume you know what you are talking about. What would you suggest? For that matter what do any of you suggest? So far all I read is what not to do, how about a what to do instead? I can see some real problems with the gold standard that have nothing to do with economics, not the least which is the limited supply of gold. At some point the cost of extracting gold from our environment will exceed the value of any gold extracted. What would be better than gold? Wouldn't the rarity of gold cause runaway inflation as the amount became fixed but the value of the world products keep climbing? School me in this. I have a suggestion, probably millions of reason why this would work but how about a standard value of man hours? Say one man hour is worth a certain amount, how many man hours it takes to produce a product would determine it's value and a man hour would be fixed at a certain amount just like an ounce of gold is now. As i said i am ignorant in this subject.

[LaurieAG]

Originally Posted by charles brough

I can well imagine the Romans saying the same thing when inflation was out of control and Diacletian was bureauracrizing government and people were reverting to barter....or Confusian Scholars when paper money hyper-inflation was ruining the Chinese economy. Looking for a magical new way to create more money and pile up debt without suffering the consequences is like the knights riding off in search of the Holy Grail!

Hi Charles,

Cicero said that 'the sinews of war are infinite money', obviously after they ditched the gold standard.