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Comment by CryptoPunk | Hacker News Reader

>>You can't run an economy on a fixed-supply currency. We've tried in the past.

1. This is simply not true. The gold standard did not fail. It became inconvenient to political agendas. There were no economic deficiencies in the gold standard era.

2. The crypto world is multi-currency, so you can't draw lessons from a uni-currency past that apply to it.

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Counter point, what gold really fixed? From a google search:

"Between all of the gold sources in the world, current estimates suggest that roughly 2,500 to 3,000 tons of new gold is mined each year. At present, experts believe that the total amount of above ground gold in the world stands at just over 190,000 tons."

So then we're in a situation where people are arguing that deflationary cryptocurrencies won't work, because the deflationary gold standard didn't work, when in fact the gold standard was inflationary and worked.

The gold standard did fail. The main problem with a fixed supply currency is that an economy can't grow - GDP can't increase. Things like the Internet created wealth by growing the GDP and "creating" money. If you have a fixed-supply currency you can't create money. Globally, GDP would be a zero-sum game, someone's increase would mean someone's decrease. Wars have been fought for less.

GDP also depends on the velocity of currency, not just on the supply. If people spend a lot of the supply each year, the GDP is high, otherwise it is low.

And if you "grow" an economy by increasing the number of monetary units, you can't create wealth, because wealth is not money. It just splits the same goods and services into more units.

Printing money benefits whoever gets to spend them first, before the consequent inflation hits (all other things being equal). It re-slices the pie by making all pieces smaller (including the ones people have saved up for, say, retirement).

Paradoxically, a good economy should drive prices *down* ( Moore's law should apply everywhere). As technology and processes improve, it should become easier to offer the old products and services, allowing for more sophisticated ones to appear.

>>The gold standard did fail. The main problem with a fixed supply currency is that an economy can't grow - GDP can't increase.

Economic and wage growth rates during the gold standard were excellent, so no, it did not fail, regardless of what this widely disseminated and overly simplistic model, that you're presenting now, claims.

I recommend George Selgin's debunking of common myths about the gold standard:

https://www.alt-m.org/2015/06/04/ten-things-every-economist-...

No they didn’t! Economic growth was anemic compared to what we’ve seen since we left the gold standard. Not to mention the economic panics that occurred every few years - “ From 1880 to 1933, there were at least 5 full-fledged banking panics: 1893, 1907, 1930, 1931, and 1933. Including the savings and loan crisis of the 1980s, in the past half century, there have been two.”

— https://www.moneyandbanking.com/commentary/2016/12/14/why-a-...

The graph in the web page you linked to shows the rate of GNP growth was higher in the gold standard era, so you're baselessly claiming the growth was "anemic".

And this is especially impressive given the auto-catalytic nature of technological progress, which has steadily caused the pace of technological innovation to pick up. That the gold standard era was able to outperform the fiat era in GNP growth rate, despite occuring during a more primitive technological era where these autocatalytic effects were less pronounced, would suggest that era's policies were exceptionally conducive to economic development.

The rest of the claims in that paper are debunked in the article I linked above.

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