if you have a bunch of participants with money, and create new money,either you 1) give each participant an equal amount (this drives relative wealth towards equality) 2) give each participant an amount proportional to their wealth (result: nothing changes, relative wealth of all participants is the same) 3) you give to some and not others (all youve done is funnel relative wealth from some to others, while pretending you have created money)
in real life, 'money creation' is almost exclusively 3)
The gold standard actually doesn't do anything because no nation on Earth uses it any more. We have lots of evidence that when it was used, it created instability and economic chaos. Nobody who seriously studies economics things a "return to the gold standard" is a good idea. Here's an example poll of people who have studied economics at the highest level for their entire lives: https://www.igmchicago.org/surveys/gold-standard/
Conspiracy theories about the gold standard are peddled on youtube/twitter because it's easier to blame things on conspiracy theories than to understand complex topics. Kind of like climate change or covid.
The gold standard prevented governments (somewhat) from inflating their currencies. The reason we say “gold standard” is because the pound was convertible into gold until WW1. With the outbreak of the war, the bank had a rush on their reserves, which they had printed far more notes than they had available.
The solution was to ban the conversion of paper into gold, seize all additional gold, and force all international colonies to back their currencies with pounds and USD rather than gold.
This is not a conspiracy, it’s simply the history of how we went from a gold standard to the fiat standard. There are good reasons for why this happened. I just simply believe it’s a mistake and view the current strangeness in our global economies as a side effect of all the odd characteristics of a system where the lender of last resort (central banks) can print money at will. It’s a very strange system and I think it is bad. However I still myself must live in this system and think, reason, and invest accordingly.
https://www.natwestgroupremembers.com/banking-in-wartime/ban...
Ironically, while the "Austrian School" blames credit for the Great Depression...Austria's banks were the first to fail, because Austria didn't move off the gold standard as quickly as its neighbors did, and Austria was one of the hardest-hit countries during the Great Depression.
But again, I have a radically different view of economic history from the mainstream, which I accept and am ok with.
It is still the govt's word that the taxes, GDP etc will grow over time to pay off those debts which it owes to the central bank, isn't it?
No you don't have to take on new debt to issue new currency.
Let's say you're a dictator running a banana republic. Your currency used to be modestly stable, prior to your coup. It even stabilized for a while after your coup, as you made a lot of fake promises around stability and economic improvements that the West wanted to hear. Then you begin your authoritarian implementation, you start breaking things to maintain your grip on power. The currency begins to devalue, slowly at first, and then more rapidly. The economy starts to shake apart, you implement price controls and various regulations to restrict & control supply chains. Things just keep getting worse, tax revenue isn't what it used to be and keeps getting worse. International debt markets are no longer believers, they don't trust you to repay anything. Now you're struggling to pay for routine governmental things including salaries for workers to keep the government functioning, or police & military to maintain order (which you're rapidly losing control of as your nation spirals into chaos). So you turn to rampant printing of your nation's already badly weakened currency (you order the printing presses from the Germans, Giesecke and Devrient GmbH). There's no need to issue debt as you do it, you just print new fiat bills and give it to whomever is still willing to accept it in exchange for goods or services (and you definitely force it upon your government employees, which they promptly ditch - at an increasingly steep conversion fee - in pursuit of USD). The word is out, everybody knows what you're doing to the national currency, it proceeds to sink like a stone. You just keep adding zeros on to the new bills as you print them. Maybe you get more desperate and fake-outlaw USD and turn its use into a black market (in reality you and your cronies, and the elites, will still be utilizing USD freely; and the USD black market will be understood as a common presence, it's just that now you can arbitrarily smash people that go near it for any reason at any time, everybody is now a criminal).
The ability of our financial system to create more money (print) allows lenders to lend more money, which translates to growth, assuming the debt created is used for something that can generate wealth (like creating a small business or buying an asset that appreciates).
Furthermore, the US centralized banking system has helped developing nations to grow, as we've lent those nations money. So - the US printed more money to lend to foreign nations, who used the money to develop their countries, improving mortality rates, poverty rates, etc, all while the US GDP continues to grow with those countries. It's not just wealth redistribution, it's wealth creation.
All that said, it's not a system without flaws. The system has effectively exported the US labor force to those developing countries. The environmental costs of exporting labor are massive. Not all money loaned out has been used well. Our monetary policy has (most likely) pushed us into wars (WMDs anyone? No? Ok. Don't sell oil in Euros).
One major issue of our debt-based, easy-money society is that everyone understands the Fed explicitly backs the regulated banking system from default and implicitly backs the shadow banking system, as the collapse and subsequent bailout of less-regulated firms has repeatedly shown us. The profits are privatized and the losses are socialized. Another problem is that all firms eventually revert to being financial services firms - it is more profitable for Macy’s to provide 20% interest credit cards than it is to sell clothes (half their revenue pre-bankruptcy) with the clothes merely a means to get people signed up for credit cards. They accomplish this by being able to borrow from the capital markets at very cheap rates, then lend their cheap money to consumers at high rates, and then securitize and resell the debt.
What I advocate and want is impossible to achieve. Instead I make my own investments and plans based upon my knowledge of the world, the financial systems, and how things shake out. For example, the 30 year fixed rate mortgage is a both a huge subsidy to the well-off and one of the few ways you can build wealth to protect against inflation. The situation with housing is complex but the end result is what you see everywhere in developed countries - ever increasing prices and society-wide view of property as an investment - not only the US but especially in Canada. Buy as much property, for as much government subsidized debt, as you as an individual can afford.
Yes, we know that.
But you are missing the point of Monetary Policy.
During a crisis for example, we need to 'reallocate' financing faster than the system will allow for it.
A huge natural disaster that hits an otherwise productive economic centre may mean there is never any recovery, because everyone is unwilling to re-invest.
But if the government steps in with $50B in investment, not only does that spark rebuilding directly, but is also brings back investment.
War is another example: if you're invaded, the economy won't react quickly enough to form some kind of physical defence force. That's why you have civic functions i.e. the Army, which needs direct investment, maybe from lose monetary policy.
In normal times, the central bank can made adjustments much more quickly than the economy can react with higher or lower wages.
France/Spain lose competitiveness because their salaries might be too much. Nobody will accept a pay cut. But a little bit of loser monetary policy will take care of that.
Obviously, printing money doesn't cure anything, just like 'Making A Law' doesn't cure anything.
Monetary Policy can be abused just like the Treasury, just like the Judiciary just like Security Forces.
It's just a form of governance, that's it.
But using 'Gold' you lose the ability to have any governance and are guaranteed to fail during disaster like board that you nailed from your boat to the dock will break when the tide comes in. You'd use a rope in that scenario, i.e. 'monetary policy'.