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The article begins with the idea that the causes of the Great Depression are not known or too numerous to pin down. It then continues by claiming that "recent s

by aazaa 5y ago

The article begins with the idea that the causes of the Great Depression are not known or too numerous to pin down. It then continues by claiming that "recent scholarship has resulted in striking agreement on the reason for the crisis." The cause of the Great Depression was the gold standard, according to the article: > ... The constraints of the gold-standard system hamstrung countries as they struggled to adapt during the 1920s to changes in the world economy. ... Central bankers continued to kick the world economy while it was down until it lost consciousness. What this article ignores, like countless articles before and since, is the Roaring 20s. Articles like this treat the Great Depression as an event that hit the US economy out of the blue. But even superficial study of the ten years prior reveals something obvious: a massive, compounding, technology-fueled asset bubble. The article also ignores the event that kicked off the Roaring 20s: the depression of 1920-1921: https://en.wikipedia.org/wiki/Depression_of_1920–1921 https://en.wikipedia.org/wiki/Depression_of_1920–1921 This depression resolved itself under a gold standard regime and with minimal intervention by the Federal Government and Federal Reserve. 50 years ago the US abandoned the last vestiges of the gold standard. Today we find ourselves in the middle of a technology-fueled asset bubble. The US president talks, without a hint of embarrassment, about the need to borrow to continue to service debts. This is, of course, the very definition of a Ponzi scheme. Whatever this comes to, we won't have the gold standard to kick around. It's been out of the picture for decades. What happens when the world's governments decide to outdo each other on how much currency they can conjure into being?

vvoaterr 5y ago
Anybody is welcome to download the Robinhood app, and buy FAANG/FAGMAN stocks with all your disposable income. Then you, too, will be contributing to the leading cause of the next "Great Depression", plus, you'll come out of it having become quite Rich. You're welcome.
- txru 5y ago
  > FAGMAN ... So do you use that often in polite company...?
mabub24 5y ago
In many ways, the concept of "printing money" is too simplistic to describe how the banking system and monetary systems interact with each other, especially once you get your head around the fact that money is (almost always) "created" endogenously through the expansion of balance sheets. You can't just think like a customer going to the bank; you have to think of it like a number of actors in a complicated network of credits and debits as well as global trade with imports and exports.
nicoffeine 5y ago
The gold standard was abandoned because it is a terrible idea for civilizations that have technologies like accounting systems and currencies that are difficult to counterfeit. Tying economic expansion to the ability to mine and store one type of element doesn't make any sense. There are countless asteroids out there with quadrillions of dollars of precious metals. Does that mean the first private company to create a currency "backed" by a claim to one of them is worth more than the US economy? No, of course not. The US economy produces food, shelter, water, goods, services, etc etc. It's worth far more than a chunk of atoms. Even if you could magically spirit those atoms into a vault somewhere, what do you do with them at that point? Modern monetary theory is doing just fine, and so are all of the nations issuing fiat currency, selling bonds and notes, building infrastructure, and providing fertile ground for markets to do interesting things. Nostalgia for the gold standard is just way for people to claim the superiority of economic theories that are simply not useful anymore.
- dnautics 5y ago
  > Modern monetary theory is doing just fine, How's that gap between the rich and the poor going? Look, the US was on the gold standard between 1850 and early 1900s, and not only recovered from a civil war, but ALSO freed all of its slaves AND went from a backwater country to a world superpower, and reduced inequality all at the same time. https://voxeu.org/article/american-growth-and-inequality-1700 https://voxeu.org/article/american-growth-and-inequality-170...
  - posix_me_less 5y ago
    The gap is reported to be increasing, but is that actually regarded as a problem by the ruling class? They may actually prefer this, as it gives them greater chunk of power and secures their position. In other words, the gap may be increasing and we don't like it, but this may very well be the intended "how is it going". One case in point: in 1970's, instead of giving employees their share of profits from productivity increases, the system gave them an easy way to get into debt instead (the credit card).
    - 5y ago
praxulus 5y ago
> This is, of course, the very definition of a Ponzi scheme. Most Ponzi schemes don't have the authority to levy taxes on the largest economy the in world, nor are they backed by the most powerful military force humanity has ever seen.
- newsclues 5y ago
  Does that mean modern monetary policy is not a Ponzi scheme because it has a nuclear military?
- kiba 5y ago
  No society can outrun living beyond their means, no matter how deep their reserves are.
  - JumpCrisscross 5y ago
    > No society can outrun living beyond their means, no matter how deep their reserves are Which is why we have inflation. No reserves needed. The price levels incorporate the distance between the means and the living.
VHRanger 5y ago
It's extremely HackerNews-ish of you to propose that the author of the article ignores your pet theory. The author of the linked article is Barry Eichengreen, widely recognized as the premier scholar of the Great Depression. The article references about 900 pages worth of other articles, believe me: your pet theory about the 1920's events is considered in the conclusion. They're not ignoring it because they read fewer books than you. > The US president talks, without a hint of embarrassment, about the need to borrow to continue to service debts. Governments don't work like a household. What matters is borrow costs and use of funds. If a government can borrow and the net growth generated is greater than the interest rate on the debt, it's a good thing to borrow. Like any business debt. A government can be in debt forever, the only thing that matters is borrowing costs and growth rate (and how the growth is generated see eg. Chinese real estate for malinvestment).
- dnautics 5y ago
  > Governments don't work like a household. That's right. If a individual accumulates too much debt, then the individual can choose to discharge obligations through bankruptcy resulting in loss of credit, or death of the debtor, and ultimately the lessor is on the hook for the risk, and those two parties with agency over the debt contract are the only two who directly must suffer consequences. (yes there is tangential collateral damage, like if there are dependents, but it's not a whole lot). If a government goes into debt, it externalizes the consequences of the spending to the public. "well, we vote for our representatives who spend". But that's not true. Suppose you were 16 (or, even more extremely: -1 years old), and couldn't vote against representatives voting for something stupid, like, say the US government invading Iraq. You are still on the hook for paying off the costs of those decisions. Sovereign debt is an end-run around the principle of "no taxation without representation", and it's in a much more morally questionable place. Or, you can choose to reject the principle of "no taxation without representation", which if you are happy to do that explicitly and publically I will shut up. Finally, the burden of amortizing sovereign debt is often achieved through the printing press, which in the long run causes inflation. Households usually can't do this. This disproportionately hurts the poor, so that adds onto the moral objection to sovereign debt.

by aazaa 5y ago

vvoaterr 5y ago

Anybody is welcome to download the Robinhood app, and buy FAANG/FAGMAN stocks with all your disposable income. Then you, too, will be contributing to the leading cause of the next "Great Depression", plus, you'll come out of it having become quite Rich. You're welcome.

txru 5y ago
> FAGMAN ... So do you use that often in polite company...?

mabub24 5y ago

In many ways, the concept of "printing money" is too simplistic to describe how the banking system and monetary systems interact with each other, especially once you get your head around the fact that money is (almost always) "created" endogenously through the expansion of balance sheets. You can't just think like a customer going to the bank; you have to think of it like a number of actors in a complicated network of credits and debits as well as global trade with imports and exports.

nicoffeine 5y ago

The gold standard was abandoned because it is a terrible idea for civilizations that have technologies like accounting systems and currencies that are difficult to counterfeit. Tying economic expansion to the ability to mine and store one type of element doesn't make any sense. There are countless asteroids out there with quadrillions of dollars of precious metals. Does that mean the first private company to create a currency "backed" by a claim to one of them is worth more than the US economy? No, of course not. The US economy produces food, shelter, water, goods, services, etc etc. It's worth far more than a chunk of atoms. Even if you could magically spirit those atoms into a vault somewhere, what do you do with them at that point? Modern monetary theory is doing just fine, and so are all of the nations issuing fiat currency, selling bonds and notes, building infrastructure, and providing fertile ground for markets to do interesting things. Nostalgia for the gold standard is just way for people to claim the superiority of economic theories that are simply not useful anymore.

dnautics 5y ago
> Modern monetary theory is doing just fine, How's that gap between the rich and the poor going? Look, the US was on the gold standard between 1850 and early 1900s, and not only recovered from a civil war, but ALSO freed all of its slaves AND went from a backwater country to a world superpower, and reduced inequality all at the same time. https://voxeu.org/article/american-growth-and-inequality-1700 https://voxeu.org/article/american-growth-and-inequality-170...
- posix_me_less 5y ago
  The gap is reported to be increasing, but is that actually regarded as a problem by the ruling class? They may actually prefer this, as it gives them greater chunk of power and secures their position. In other words, the gap may be increasing and we don't like it, but this may very well be the intended "how is it going". One case in point: in 1970's, instead of giving employees their share of profits from productivity increases, the system gave them an easy way to get into debt instead (the credit card).
  - 5y ago

praxulus 5y ago

> This is, of course, the very definition of a Ponzi scheme. Most Ponzi schemes don't have the authority to levy taxes on the largest economy the in world, nor are they backed by the most powerful military force humanity has ever seen.

newsclues 5y ago
Does that mean modern monetary policy is not a Ponzi scheme because it has a nuclear military?
kiba 5y ago
No society can outrun living beyond their means, no matter how deep their reserves are.
- JumpCrisscross 5y ago
  > No society can outrun living beyond their means, no matter how deep their reserves are Which is why we have inflation. No reserves needed. The price levels incorporate the distance between the means and the living.

VHRanger 5y ago

It's extremely HackerNews-ish of you to propose that the author of the article ignores your pet theory. The author of the linked article is Barry Eichengreen, widely recognized as the premier scholar of the Great Depression. The article references about 900 pages worth of other articles, believe me: your pet theory about the 1920's events is considered in the conclusion. They're not ignoring it because they read fewer books than you. > The US president talks, without a hint of embarrassment, about the need to borrow to continue to service debts. Governments don't work like a household. What matters is borrow costs and use of funds. If a government can borrow and the net growth generated is greater than the interest rate on the debt, it's a good thing to borrow. Like any business debt. A government can be in debt forever, the only thing that matters is borrowing costs and growth rate (and how the growth is generated see eg. Chinese real estate for malinvestment).

dnautics 5y ago
> Governments don't work like a household. That's right. If a individual accumulates too much debt, then the individual can choose to discharge obligations through bankruptcy resulting in loss of credit, or death of the debtor, and ultimately the lessor is on the hook for the risk, and those two parties with agency over the debt contract are the only two who directly must suffer consequences. (yes there is tangential collateral damage, like if there are dependents, but it's not a whole lot). If a government goes into debt, it externalizes the consequences of the spending to the public. "well, we vote for our representatives who spend". But that's not true. Suppose you were 16 (or, even more extremely: -1 years old), and couldn't vote against representatives voting for something stupid, like, say the US government invading Iraq. You are still on the hook for paying off the costs of those decisions. Sovereign debt is an end-run around the principle of "no taxation without representation", and it's in a much more morally questionable place. Or, you can choose to reject the principle of "no taxation without representation", which if you are happy to do that explicitly and publically I will shut up. Finally, the burden of amortizing sovereign debt is often achieved through the printing press, which in the long run causes inflation. Households usually can't do this. This disproportionately hurts the poor, so that adds onto the moral objection to sovereign debt.