There is quite a lot of reason to doubt that is the case in the long run. What I think dnautics is saying is that stability is trading off short term gains for long term gains. What about the stagnated real wages in the last 50 years? Is that good for the poor? What about seigniorage? Is that good for the poor?

When someone says something like "undoubtedly/obviously X" or "its commen sense that X" 99% of the time they haven't put much thought into it.

We're not comparing equal "short term" and "long term" events though. The short term effects are much more severe in nature. And because they are severe, these "short term" economic effects end up causing long term financial impacts for the people they impact, even after the economy has recovered.

Most non-high income people do not have huge rainy-day funds. If they lose their job, even for a short period of time, they will find themselves relying on debt that is a lot more expensive than 2% inflation.

Stability has a high value, it is just hard to measure in dollars.

> When someone says something like "undoubtedly/obviously X" or "its commen sense that X" 99% of the time they haven't put much thought into it.

Or rather, it's an easy question to answer because we've seen the situation happen many times. Who suffers during economic downturns?

We should probably define what kind of stability we're talking about before we devolve into fisticuffs. Are we talking about a "stable" economy? A stable buying power of the currency? Something else?

I am referring to economic stability.

Well, in a gold-backed world, we had frequent but small bubbles that corrected inefficient economic activity relatively quickly. In a post-gold-backed world, we have less frequent but much much larger bubbles that result in devastating economic crises. Is that really the stability you want?

With modern economic knowledge, technology, and techniques, a gold-backed dollar could be quite a bit more stable than it was in the 1800s, don't you agree? But we don't have to go back to gold to fix this problem. The problem is not gold or not gold. The problem is massive monetary inflation. That can be solved without going back to gold backing. What gold-backing did was create a culture that believed in a limited money supply. When we destroyed that culture, we created the problem.

Has it not occurred to you that it's precisely the modern economic knowledge, technology and techniques that have driven us away from gold backed dollars or trying to fix the money supply (and float the interest rate or crash the banks)? I mean, macroeconomists have spent the majority of the last century proposing and carrying out natural experiments on different monetary policies: if they've moved from being almost universally in favour of the Gold Standard to almost universally against it, that's not evidence that what we've actually learned is how to make a Gold Standard work.

And no, our post-gold standard economic crises have not been proportionally more devastating than the Great Depression, or taken as long to rectify as the Long Depression, and I don't long for that kind of "stability"

> Has it not occurred to you that it's precisely the modern economic knowledge, technology and techniques that have driven us away from gold backed dollars

It hasn't because its patently false. Both the gold confiscation in 1931 and cutting the cord of gold-backing in 1971 were both done as desparately rushed moves to reneg on the governments promise to uphold the value of the dollar. These weren't thoughtful reasoned well discussed actions. It had nothing to do with technology or best practices. It was a purely a politically expedient way to prevent collapse of an insolvent dollar.

> macroeconomists have spent the majority of the last century proposing and carrying out natural experiments

You don't run experiments in macroeconomics. Controls are impossible. And studies have so many confounding variables that any conclusions we come to are many orders of magnitude less certain than anything in the hard sciences.

> our post-gold standard economic crises have not been proportionally more devastating than the Great Depression

You must have misunderstood me. I never said any such thing.

Iirc our post gold standard crises have been nominally at least near as bad as the great depression. Of course we have much,much better infrastructure, healthcare, communication, etc, which economists tend not to take into account for how there aren't a starving people dying in the streets. None of that matters, it's all the stewardship of the fed.

I'd love to see that analysis if you can find the source.

> It hasn't because its patently false. Both the gold confiscation in 1931 and cutting the cord of gold-backing in 1971 were both done as desparately rushed moves to reneg on the governments promise to uphold the value of the dollar. These weren't thoughtful reasoned well discussed actions. It had nothing to do with technology or best practices. It was a purely a politically expedient way to prevent collapse of an insolvent dollar.

I take it you haven't read any mainstream macroeconomic analysis written over the course of the past century, the theory, analytical techniques and predictions which informs modern central banking practices. I have. It is certainly not patently false to suggest that there has been plenty of discussion and implementation of newer ideas, an enormous amount of focus on the dynamic of inflation, and the result is very few economists seeing any sense in the notion that the optimum quantity of money to support the growth of the United States happens to coincide with fluctuations in world gold output.

But even aside from the actual theory and techniques, part of the knowledge base is simply concluding that if it was necessary break a system to prevent the collapse of an insolvent dollar, it is probably best not to attempt to recreate that state of economic affairs.

> You don't run experiments in macroeconomics. Controls are impossible. And studies have so many confounding variables that any conclusions we come to are many orders of magnitude less certain than anything in the hard sciences.

We agree it's not a hard science, and that natural experiments are very difficult (they are especially difficult when a proposal like "maybe we should try to ensure a particular USD aggregate stays at a certain level, and raise interest rates as high as necessary to keep it at that level" results in mass unemployment. When "maybe we should fix the interest rates instead" turns out to result in inflation remaining within predictable ranges for the next three decades, it is even harder to recommend the former policy). Similarly, if the Gold Standard fails to deliver the stability it promises, and then its vociferous minority of advocates promise hyperinflation is around the corner every year for decades without ever being right, new theories which accurately predict inflation take over.

> I never said any such thing.

I may have misunderstood you. If we agree that the Great Depression and Long Depression were examples of significant economic crises in addition to periodic smaller financial panics and forced devaluations, we agree. I see that as a pretty good indication our current financial crises are less worse, especially given our current policy framework gives us tools other than "wait it out" to ameliorate the suffering.

> It is certainly not patently false to suggest that there has been plenty of discussion and implementation of newer ideas, an enormous amount of focus on the dynamic of inflation...

Ok. I agree with all of that. And none of it contracts what I said, which was that modern economic knowledge did not "drive us away from gold backed dollars". What drove us off the gold standard was rash actions by a federal government backed into a corner.

> if it was necessary break a system to prevent the collapse of an insolvent dollar, it is probably best not to attempt to recreate that state of economic affairs

Well, that conclusion conflates the solution with the problem. For example, if you're in an airplane and you recklessly burn all your fuel because you were having fun going fast and have to eject and abandon your plane to crash, the solution is not "bring more fuel next time" nor "don't use planes anymore". The answer is don't be an idiot and reckelessly burn all your fuel.

> If we agree that the Great Depression and Long Depression were examples of significant economic crises in addition to periodic smaller financial panics and forced devaluation

I think I agree with that.

I just don't agree that either of those depressions were caused because gold-backed currency isn't sound. In fact, before the Long Depression, we used gold backed currency. What caused the Long Depression was stupidly removing silver from the monetary supply very suddenly. That was an enormous shock to the economy that happened without enough warning. It was a monetary cliff, and cliffs are bad. Engineering transitions like that to be smooth and slow is the way to avoid that.

And the Great Depression was caused because banks lent out too much money and since the Federal Reserve had driven out all the private clearing houses and refused to act as lender of last resort. Bank runs contracted the money supply by 33%. Not sure how much that is in comparison to the Long Depression, but its a lot regardless.

> What drove us off the gold standard was rash actions by a federal government backed into a corner.

What drove us off the gold standard was that the gold standard backed the government into a corner, yes. What drove essentially all macroeconomists to conclude that this was the correct one was new theory about why this had happened, the economic possibilities of this new theory, the new theory turning out to allowing finer control over price stability than the Gold Standard had ever done and the woeful quality of the analysis of the few economists still defending the gold standard.

> For example, if you're in an airplane and you recklessly burn all your fuel because you were having fun going fast and have to eject and abandon your plane to crash, the solution is not "bring more fuel next time" nor "don't use planes anymore".

"Bring more fuel" sounds like a much better solution to fuel-shortage induced aircraft accidents than slowing down to me, and I'm confident that aircraft investigators agree with me.

Assuming that the real problem with running out of fuel isn't the quantity of fuel but that jets aren't limited to early 1900s speeds and engine technologies sounds like a pretty apt analogy for calls to return to a Gold Standard, actually...

> What caused the Long Depression was stupidly removing silver from the monetary supply very suddenly. That was an enormous shock to the economy that happened without enough warning. It was a monetary cliff, and cliffs are bad. Engineering transitions like that to be smooth and slow is the way to avoid that.

I think we can agree on that (though the reason it was removed is because the bimetallic standards with dollars redeemed in fixed quantities for commodities whose actual value ratio fluctuated were absurd). For related reasons, we decided monetary cliffs generated by metallic standards were worse than having an elastic monetary supply. The Great Depression was caused because the Fed could not print enough money to act as the lender of last resort. Again, a situation we seek to avoid by having the actual quantity of money determined by the amount of credit supplied and demanded by the market, rather than simply hoping gold reserves would automagically align with it.

> The Great Depression was caused because the Fed could not print enough money to act as the lender of last resort.

Not true. I'll quote from https://www.federalreservehistory.org/essays/great-depressio...

"One reason that Congress created the Federal Reserve, of course, was to act as a lender of last resort. Why did the Federal Reserve fail in this fundamental task? The Federal Reserve’s leaders disagreed about the best response to banking crises. Some governors subscribed to a doctrine similar to Bagehot’s dictum, which says that during financial panics, central banks should loan funds to solvent financial institutions beset by runs. Other governors subscribed to a doctrine known as real bills."

I've never seen any source other than you say that the great depression was caused because the Fed couldn't create money.

> Most non-high income people do not have huge rainy-day funds.

Why do you suppose that is? See, the system protects itself.

Because the cost of living is set by what other people spend. If I earn $3k a month and my neighbor earns $3k a month, and I want to save $300, I only have $2700 to spend. My neighbor can offer more for limited resources (housing), and thus I can only save if I don't have to pay for that housing.

Those same people did not have large rainy-day funds pre-1970's either. Poor people have always spent most of their money.

You're evading the point. The savings rate has gone down since then. Today the middle class has no savings, not just the poor

Attributing that to any one thing requires a large amount of evidence. For example, Americans spend a much larger percentage of their income on housing than they did in the past.[1] House prices vary wildly based on local because of demand and local legislation that affects how and what can be built. How much of that is because of increased housing cost, and how much of increased housing cost is because of monetary policy which is national and not local conditions, when prices vary so much by locale?

If you're trying to make a case that the middle class has less savings because of reasons other than that, it seems prudent to at least explain that away.

1: https://listwithclever.com/research/home-price-v-income-hist...

Housing is one of the _very_ few ways a peasant can leverage debt beyond his means to hedge against inflation.

There's no other way I could take out a loan for > $100k to buy an asset. Since leveraging dollar debts to assets is the only sane thing to do in an inflationary regime, it's no surprise that housing has become ridiculously overpriced.

Buying a house is the only way an average person can utilize financial techniques of the wealthy. Namely leveraging dollar debts against an inflationary hedge.

And the rise in housing prices is a bubble created by monetary inflation. Asset prices increase first when money is created. Houses are one of the many safe havens that people put their money into when the economy has poor investment and savings options. Monetary inflation also fuels cheap loans that inflate these assets and get people into long term debt obligations - because money is largely created by giving out loans. This is all part of the same problem.

> And the rise in housing prices is a bubble created by monetary inflation.

That doesn't account for the vast difference in price based on locale. Inflation is not locale based, but housing prices definitely are.

I don't doubt that monetary policy affects housing, because it makes it easier to get loans which will affect demand, and thus pricing, but it's not the whole story, and may not even be half the story depending on the area. For example, another thing that affected demand is urbanization. But, interestingly, the rate of urbanization seems to have decreased since the 1970s (and in some regions actually regressed in the 1970 in total, not in rate of change).[1]

I think this needs to be accounted for in any coherent theory that tries to link monetary policy to lack of savings now compared to the past, when we already know that housing prices have risen much faster but that housing prices are also extremely locale based, which monetary policy isn't.

Ultimately, while I think monetary is powerful in how it affects myriad things, I think we would be remiss to use it as an explanation for everything just because it's easy to point to. Most things are far more complex than that and have many inputs that affect them, and without careful examination we can't be sure if monetary policy was the majority of the reason, or even the primary reason.

1: https://en.wikipedia.org/wiki/Urbanization_in_the_United_Sta...

>Monetary inflation also fuels cheap loans that inflate these assets and get people into long term debt obligations

You're forgetting something extremely important here. It's the savings that are fueling cheap loans. Those savings force the Fed to lower interest rates. It's not the Fed that is making this decision, it's the market collectively deciding that depositing money and lending it out is the best use of their money and those savings have to go somewhere.

Before 2008 those savings were flooding into mortgage bonds and banks ran out of mortgages to sell so they just took subprime mortgages and got the rating agencies to lie for them. All for that sweet sweet commission.

> It's the savings that are fueling cheap loans

What? I don't think that's at all true.

> the market collectively deciding that depositing money and lending it out is the best use of their money

I don't think anyone thinks that earning bank interest is the best use of their money. Interest is basically 0. In some countries you have to pay to hold deposits in banks.

> those savings have to go somewhere

They actually don't. We could legislate 100% reserve requirements for example, instead of the 0% we have today.

> Before 2008 those savings were flooding into mortgage bonds

I think you're misunderstand how banks operate these days. Banks no longer lend out proportional to the deposits they get, banks lend out as much as they can without any limit. The amount people are saving is literally irrelevant at this point. It was already basically irrelevant in 2000. https://www.newyorkfed.org/research/epr/02v08n1/0205benn/020...

There's 4 major things that happened in the 70s that affected wages, and everyone blames the one they'd like to based on their ideology.

1. Closing the gold window

2. Outsourcing of manufacturing begins in earnest (combined with weakening of unions, the Clean Air and Water Acts, etc)

3. Computers really start taking over (obviously accelerates in the 80s)

4. Women started having real careers on a large scale

1. Closing the gold window

Inflation benefits those that can leverage dollar denominated debts against inflationary hedges. Wealthy people with assets undoubtably can do this at a grand scale while the closest thing an average person can do is buy a house.

2. Outsourcing of manufacturing begins in earnest (combined with weakening of unions, the Clean Air and Water Acts, etc)

Yes, and maybe slower globalization would have been better, but I personally am a free market all the way guy.

3. Computers really start taking over (obviously accelerates in the 80s)

This is akin to making the `pie` that is the economy greater. It does does not explain why the wealthy gained most of the new growth of said `pie`.

4. Women started having real careers on a large scale

I'm a bit torn on this as an argument. Women having careers should have increased the size of the economic `pie` and everyone should have been better off, but what seems to have happened is that competition between laborers became more intense and while the `pie` grew, the average person lost a significant portion of their share.

I have yet to fully wrap my head around this one, but it seems like labor competition combined with corporate and or governmental control in a way that prevented the distribution of the increased productivity?

> 3. Computers really start taking over (obviously accelerates in the 80s)

> This is akin to making the `pie` that is the economy greater. It does does not explain why the wealthy gained most of the new growth of said `pie`.

Sure it does. The productivity gains from any tool are a direct monetary benefit to those who implement it. The pie is only subsequently redistributed if other market effects coerce the original beneficiary into doing so.

Record-keepers, secretaries, etc, being laid off from their job obviously have no opportunity to negotiate for higher wages as a result of that productivity gain. The only people who were in a position to negotiate were the ones who could implement these new tools. And they did: tech jobs are well paid.

You've missed massive oil price shocks, the least controversial and most quantifiable.

It's also notable how many of the wage effects really took off in the 1980s, when there were a lot more dramatic policy shifts.