I realize some of these graphs may be coincidences but it makes a compelling case for me in understanding our current wealth inequality. When you can create money backed by nothing, those closest to the printer will know best how to funnel it into their pockets.

Blaming it on magic paper vs gold money to the exclusion of everything else seems like a red herring.

This is also a red herring. The New Deal did little to actually fix structural wealth problems. And "neoliberal" politics actually included a lot of progressive politics like negative income tax, drug legalization, prison abolition, etc.

A better reading of history would be that the post-war boom in the US mostly amounted to a lucky windfall and the US has wasted a lot of policies trying to recreate an economic boom using cultural levers.

Neither set of ideologies explains everything, but lots of little decisions over a few decades can add up.

(Also, I realize we're being fast and loose with labels here, but after 20 years of Reagan/Bush/Clinton drug war, taking credit for legalization feels a little bold.)

Under what interpretation of the word "neoliberal" do any of these things fall under? Especially the last two; find me a single person claimed to be neoliberal who supports either.

I have a hard time seeing the discontinuity between the New Deal people you're referencing and the 1960s Great Society ones that pretty much iterated on the same themes of the scientific management of society through monolithic institutions with expansive powers.

It's pretty much relentless hubris with little to show and much to answer for.

Or perhaps the question boils down to whether "on net" is the right objective function.

There's a lot of "quality of life" there that gets missed when people zoom all the way out and talk about state involvement, GDP and freedom.

I guess you'd have to ignore what Deidre McCloskey describes as the Great Enrichment of liberal democracies:

"[...] a rise in real wages 1800 to the present by a factor of 10 or 30 or (allowing for improved quality of goods) 100, which is to say 900 or 2,900 or 9,900 percent" [1]

Meanwhile there's a certain propensity for incredible inhumanity, eugenics (in the case of the 1920s Progressive movement) and the outright abuse and "reeducation" of minority races in China.

[1]: http://www.deirdremccloskey.org/docs/pdf/IndiaPaperMcCloskey...

I'm willing to change my mind. What sort of an ace in its hole does china have to change this situation?

The one child policy is 40 years old, China has been 4-2-1 for like 20 years at least, and no collapse has happened. Now they're allowing 2 children.

What's the specific thing that will collapse and be bad? An oversized retiree generation dying just frees up pension cash.

When people retire there is a sudden shift from investment to liquidation. That's a driving factor for popping asset bubbles, and china is currently one huge asset bubble.

Like it or not (i personally dont), we are also living in a world where the central planners rely on consumption-driven economics, and there just isn't a chinese consumer market anymore due to demographics.

The working population has been steady-state at 1-child for 40 years followed by 2-child for the last few years.

I suppose there could be some demand loss due to fewer people demanding things, but.. there's a lot of room for additional demand in China. Plenty of people where running water is a last-20-years nice new thing.

It's clear that it isn't working, which is why a heretical sect of MMT economics wants to do demand side. It's a big change, the kind that takes a generation dying off to accomplish. Especially since it may not work. It's a genuine unknown, with the primary advantage that we don't already know what kind of regulatory capture it would cause. Which is enough for some, given how badly the current situation is fraying.

You cannot make an absolute statement that consumers vs businesses deserve more money, you have to look at the current market.

However, the central banks have opened the flood gates for supply side monetary stimulus. It's not unreasonable to think that the demand side has been neglected massively and that money should be put into the demand side instead.

That question is usually answered by the people willing to take out commercial loans. Without the market supplying that function, you’d have to try and figure this out yourself centrally.

The second issue is that you really are spraying money evenly across the whole economy, effectively starving productive ventures of capital while at the same time endowing moribund ventures with it instead.

So it’s not quite an equivalent scheme, it has different benefits and costs.

(yes I know the Fed is “independent” but it is the tail on a government dog—the two are separated only in name)

> How can you "understand" anything from a page which provides no analysis and presents numbers with no caveats?

Presumably because one is able to do one's own analysis and think for themselves. Everything starts out as raw numbers.

> How can I trust that these charts aren't cherry picked?

Can you ever?

If we're talking "generally": Yes, we can trust that charts aren't cherry picked by reading the analysis. A proper analysis would include argumentation for why this metric is critical and why this chart is interesting.

Think about it this way. You play a video game with micro transactions. You receive 1000 units of premium currency. Why is that currency valuable? It's valuable because you can exchange it for cash shop items. Imagine if the cash shop shuts down but the game keeps running. Your currency would be worthless because you lost the ability to exchange it.

I even once got into a discussion with someone on a science fiction forum who's belief in gold was so absolute that he thought it would inevitably be the foundation of all interstellar commerce, even with alien species because gold is so unique it's one thing everyone would inevitably agree on being a universal store of value.

Money is “backed” by the trust that someone else will be willing to accept it at a later date for goods and services.

If the unit of exchange was always physical gold coins then yes, there would be a finite amount of money. However the moment we turned to promissory notes, cheques, bank notes and financial instruments such as in fractional reserve banking the link to physical gold was a fiction. Such notes have been around a very, very long time although of course increasing in prominence over time.

It was a fiction even for precious metal coins as well because the moment a government started running low on the metal, or just wanted to inflate it's currency, it would just debase the coins.

Gold standard means that the value of an unit of currency is tied to a specific amount of gold. In addition it may mean that the amount of bank notes in circulation in such system matches the amount of gold in the vaults of central bank.

Neither of those means that the amount of money people have lent to the banks (i.e. money at their bank account) has any meaningful relationship to the amount of gold - at least without extremely strict regulation of financial companies, lending and saving.

(Of course, same applies to cryptocurrencies, the claim that current cryptocurrencies would somehow set a limit for money creation is just a massive misunderstanding of money and credit.)

A naive example:

Alice has a gold coin. she walks to a bank and makes a deposit. Now she has one gold coin in her bank account and bank is holding her coin.

Now Bob walks into the bank and says that he needs a loan of one gold coin to buy things. Bank happily lends the coin received from Alice to Bob.

Bob walks to Alice and buys things from Alice and gives the coin to Alice.

Now Alice has one gold coin and another gold coin at her bank account. Total amount of money she has is now two gold coins, even if only one gold coin exists in the whole universe!

And yes, that money at her bank account is as real money as money nowadays gets. And yes, the truth is even more weird, you do not even need to circulate the money as in the naive example, banks can and will just create money out of thin air to people's accounts. After all, the money at the account is literally, literally nothing more or less than a way for bank to say that it will pay you money some later date if you so wish. To make that promise, you do not need any money to exist anywhere. Even I can do that promise on any imaginable currency (what that promise is worth is another discussion). And as said, this has absolutely nothing to do with what "base money" the monetary system is built on. And of course, this is the reason why financial system is so heavily regulated.

If there is little confidence in that, people wouldn't store their gold there.

There is, therefore, a natural limit to how fractional your reserve can be and keep trust over a long term.

With fiat currency backed by nothing, the reserve no longer needs to exist at all as long as you have control over the creation of new money.

I'm not saying the gold standard is the answer but it is different. That difference does not go away when we talk about lending.

The point is that both fiat and gold sit in a system of debt powered by trust. If you're theorizing a natural limit to the smallness of reserves, you might as well be theorizing a natural limit to the amount of money that can be printed.

edit: it's certainly physically easier to have no reserves than to print infinite paper.

[1] See your favourite mania, or even crisis of 2008 that can be argued to be because of failure of regulation to limit leverage of financial institutions.

This happens even if the monetary 'base' remains a fixed quantity, like bullion gold.

Look into the market value of the gold certificates that the fed has on its books. The fed hasn't marked their gold position to the market since the 70s. Very peculiar if you ask me. Also consider why each of the federal reserve banks trade these certificates amongst one another.

On top of that you can read the treasury's website and find that the policy states that the treasury gold plays an important role as collateral on the dollar https://www.treasury.gov/resource-center/faqs/Currency/Pages... "Congress has specified that a Federal Reserve Bank must hold collateral equal in value to the Federal Reserve notes that the Bank receives. This collateral is chiefly gold certificates and United States securities. This provides backing for the note issue. The idea was that if the Congress dissolved the Federal Reserve System, the United States would take over the notes (liabilities). This would meet the requirements of Section 411, but the government would also take over the assets, which would be of equal value. Federal Reserve notes represent a first lien on all the assets of the Federal Reserve Banks, and on the collateral specifically held against them."

This is why Islam, Judaism, and Christianity prohibit interest. That closes the door on exploits like this.

The intrinsic value argument hardly makes any sense because it's almost always lower than the actual value. Someone interested in intrinsic value would be buying copper, not gold.

Compare this to Bitcoin which can be replaced by any competitor.

Compare this to the US dollar which is required to pay taxes. You will still see a use case for the dollar in a hundred years.

When talking about money, the term intrinsic value means the market value of the commodity the money is made from, versus the face value of the money.

This is very real and has been exploited in the past, with people effectively melting down large quantities of money and selling it as a commodity.

But anyways, if one looks at why gold emerged as the preferred money for its time and place, “finiteness” aka non-zero marginal cost of production is certainly a relevant factor.

Ignoring that half those graphs are just arrows pointing to arbitrary knees in exponential functions, I couldn't find this one which, unlike most on that page, directly graphs an ongoing policy choice, minimum wage vs. productivity: https://i0.wp.com/chicagopolicyreview.org/wp-content/uploads...

https://economicsfromthetopdown.com/2020/01/17/debunking-the...

It is how we all got immeasurably richer since then, while constantly fearing that all jobs will be automated away soon.

Wealth tends to flow uphill. Even in Communism the politically connected realized that wealth in that system was political capital and learned to position themselves to accumulate it. There is a reason the USSR collapsed and gave way to one of the most aristocratic states in the world.

I don’t discount that site though. A lot more happened in or around the early 70s than just the collapse of Bretton Woods.

I also don’t dismiss your comment as untrue. A fair inflationary currency would almost literally drop money from helicopters, not issue it to banks and governments. Still I imagine over time people would learn how to chase the helicopters.

All systems will be gamed. No exceptions.

Isn't that what money really is about?

Debt and money go together. When you take on debt your creditor can decide to sell his credit to somebody else, de facto using your promise to repay your debt as a currency.

Isn't your promise...just a promise? Yet you can buy stuff with it?

Congress lost secret voting,

https://www.congressionalresearch.org/Jumbotrons.html

I'm more of the opinion that our problem is hyper targeted lobbyist money...

[1] https://rationalwiki.org/wiki/Gish_Gallop

https://economicsfromthetopdown.com/2020/01/17/debunking-the...

Let’s be kind and “assume the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize.”

States have picked all kinds of units for accounting and tax purposes for literally millennia. Wheat, silver, wool, gold. They adjusted standard weights and measures all the time to manage their debts and the economy. Fiat is the historical norm, going back about five thousand years.

Separately, some governments have made coins out of various things for a little over two thousand years. And separately still, people have traded gold throughout history as a commodity.

But it's just not true that gold and silver were de-facto money somehow until 1971.

But let's suppose that what Murphy really wants is a "state-directed economy", and that he's concerned that opponents of that are making bad arguments about inflation to oppose it. In that case, why shouldn't he write an article explaining why he disagrees with the key premise of those arguments, namely that there's a real danger of problematically high inflation?

It seems like the principle you're appealing to ("why not just ... and dispense with the charade?") is that if you want X, you should always just argue for X rather than addressing bad arguments against X. I think that principle is very wrong. People are often persuaded by bad arguments, and if someone has been persuaded by a bad argument against X then they will likely not listen willingly when you present your arguments for X. (Because they already know X is bad.) But if you write something about the specific argument they've been convinced by, they might pay attention, and you might convince them.

Back when dimes were silver you could get a gallon of gas for about a dime. If you found a silver dime today and sold it for melt value you will get pretty close to being able to get a gallon of gas for that dime still!

In case this is an honest misunderstanding:

Pretty much every society in history used gold, silver, or some other rare natural resource. Of course there was never a global such system, but OP didn't mean to say that.

https://en.wikipedia.org/wiki/History_of_money

In fact it references the same book I mentioned earlier, which clearly talks about the lack of such systems in early societies. And of course, such societies dominate human history.

If you want to talk about more modern well-recorded history, again I turn to the book mentioned. And there the simplest summation I can come up with is "yes, but no."