At least you cant change inflation on a whim there (aside from on chain governance votes, but at least those are transparent and done by holders)
https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929
https://en.wikipedia.org/wiki/Executive_Order_6102
The US went off the gold standard in 1933 because of the crash of 1929, which (obviously) happened under the gold standard. It was part of an extreme but ultimately successful project to re-mobilize the economy. Although the dramatic federally-directed transformation seems to have left a lot of scars on US politics.
Bubbles are only bad if people are deceived, because the proper way of riding a bust out by doing nothing (creative destruction) is too painful and may lead to political extremism.
https://www.brookings.edu/blog/ben-bernanke/2016/01/07/the-d...
That doesn’t sound right.
https://en.wikipedia.org/wiki/Business_cycle#Proposed_explan...
“It is difficult to get a man to understand something when his salary depends upon his not understanding it.”
So far no one has been able to provide real proof or empirical evidence, only theories from assumptions we know are not accurate.
Money is just paper. It holds no intrinsic value. The value exists in the economy of the US. Holding onto USD does not contribute to the economy of the US. So what's wrong with devaluing it? If money were to appreciate you would get value out of nothing. People would start competing for the value out of nothing until there is no real economy anymore.
(I'm slightly surprised that HN isn't amenable to the hydraulic control theory of the economy, and the relatively simple maths behind central bank control of rates which has been hugely successful at driving down inflation)
We had a boom period with fracking recently. People and businesses rushed to get a piece of the action. The majority of those people are going to leave and take their money with them causing a localized bust.
Boom bust cycles are not related to a gold standard existing or not. However, with fiat currency, boom bust cycles can apply to the entire national economy, not just one location.
The Great Depression 1929 (Gold was so blamed for this depression, that Roosevelt made it illegal to hold more than a few ounces of gold to "solve" the depression).
Moving further back: The Panic of 1873 (which eradicated the Silver standard). Panic of 1893 was also tied to a gold-panic. Black Friday (1869) was another gold-related panic, but luckily the US wasn't on the Gold Standard at that time.
Black Friday 1869 - This one is funny. A return to a gold standard to restore the economy and pay off Civil War debt combined with a conspiracy of a few individuals to corner the gold market. (https://en.wikipedia.org/wiki/Black_Friday_(1869)#History)
Panic of 1873 - result of government subsidizing railroad expansion that speculators jumped on to make a buck (https://en.wikipedia.org/wiki/Panic_of_1873#Factors)
Panic of 1893 - The economic policies of President Benjamin Harrison have been characterized as a contributing factor to the depression. (https://en.wikipedia.org/wiki/Panic_of_1893#Causes)
Great Depression 1929 - Many hypothesis of cause. One of which is the 1920s expansion of money supply and 1928 contraction of money supply. (https://en.wikipedia.org/wiki/Great_Depression#Causes)
In all of these cases people were trying to get out of paper and into gold to protect their wealth. That is until Roosevelt used the 1929 Depression as an excuse to steal the wealth of Americans.
Noticeably: the Bank Run, which simply doesn't happen anymore under our current standards of money. Practically speaking, we've solved the traditional bankrun problem.
The issue with Gold is that it is inflexible. Banks will take it upon themselves to expand the monetary supply (see how Tether, USDC, and other cryptocoins are expanding the supply of cryptocoins in the BTC market). You don't need a government to inflate the money supply: the market actors will do that on their own. Remember that "Bank Notes" in the 1800s were non-centralized and issued by individual banks (ex: "Canal Bank 5 Dollars")
For you to blame the government for what the market does naturally is... a mistake. Banks will be banks: they'll hold money, they will reserve some, and try to turn that money into more money by lending it out to other parties. When done with physical Gold, everything collapses during a crisis.
When done with fiat, we have the ability to control the money supply as needed, to soften the blow of the crisis.
---------
These bank-runs of the 1800s and early 1900s on the Gold Standard (or Bimetal standard: gold + silver) were both solved by the same mechanism. The modern fiat money system and fractional reserve banking (where banks are regulated to only do this re-lending thing to levels we can keep track of).
The benefit of gold is that it is inflexible. To expand the monetary supply more gold is required, or debt against the stock of gold is taken on. There is a limit to the amount of expansion that can happen with a gold standard. That is a good thing. It protects the wealth of people from inflationary policies of government. With fiat we have a dollar that purchases 1/21st of what it did in 1933.
Banks will be banks but they also want to keep customers and stay in business. A single bank failing due to their bad practices is preferable to an entire nation failing for the same reasons.
I maintain that government is the cause of these crisis. All businesses, including banks, operate in an environment created by government. When the government removes the risk of a market with subsidies or easy credit, businesses and banks make riskier investments. When those risky businesses and loans fail a bust happens. Can this happen without government? Sure, but the scope is limited.
Fractional reserve banking causes collapse during a bank run crisis. When all depositors come to collect their money the bank just doesn't have it. It doesn't matter what the base money is. Had full reserve banking been practiced a bank run would not ever have been an issue.
This is wrong. Banks can issue bank notes that on paper say that they're worth gold, but are in actually just banknotes.
This expands the monetary supply (or shrinks it, when the reverse happens like in 1929). I don't see how there's any limit what so ever (today: this still happens with stocks like AMC: who are continuing to print AMC stocks and raise money as much as they want)
> Banks will be banks but they also want to keep customers and stay in business. A single bank failing due to their bad practices is preferable to an entire nation failing for the same reasons.
Not for the town that Bank was part of. And when many small banks fail at the same time (such as in these historical "panics" from the 1800s or early 1900s), you have a nationwide depression.
Just because they're small doesn't remove the fact that they're correlated. Indeed, greater economic trends continue to affect small banks: causing all of them to surprisingly panic simultaneously across large sections of the country.
Again: 1929 disproves your thesis entirely. The US banking system wasn't a single entity back then. Lots and lots of little banks failed simultaneously. That's why we invented FDIC insurance.
https://en.wikipedia.org/wiki/Bank_of_United_States
Note: Bank of United States was a private bank / company. Its collapse was one of the biggest, kicking off the Great Depression.
You can't change inflation on a whim right now either or put another way a government can get rid of a blockchain based system just as easily.