The Gold Standard?

[therealjjj77]

Why would the Fed not want the economy to improve? I am not saying that the Fed and the banks did not make mistakes which compounded the problems because they certainly did, but there was no conspiracy to drive the United States into a depression or to extend it. When they should have been expanding the money supply, they allowed it to contract. When people started trying to get all their money out of the banks and convert it into gold, the Fed did not provide the banks with the money to meet the withdrawl demands (that is why there is a reserve requirement today- forcing banks to hold a certain percent of their deposits instead of loaning out all of them). The depression was world- wide. We had depressions before and after the creation of the Fed but no significant ones in the last 60 years.
http://www.amatecon.com/gd/gdoverview.html

You certainly seem to believe they had your best intentions at heart. I commend you for that. However, I don't believe so. Did Rockefeller, who was also one of the officers for the Federal Reserve, have our best intentions in mind when supplanting the Council on Foreign Relations here in the U.S.? How about Rothechild, when he said, "Give me the control of the credit of a nation, and I care not who makes the laws."?

And again in 1912 a year before the charter of the Federal Reserve:

"The few who could understand the system (cheque, money, credits) will either be so interested in its profits, or so dependent on its favours, that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests."

If you feel that this kind of system is in your best interest, by all means, feel free to think so. Ignorance is bliss.

 

[Zippyjuan]

And you seem certain that the Fed is out to destroy the US economy so that they can make money. On this we can agree to disagree. That is fine. I don't subscribe to this conspiracy theory. If inflation is good for the Fed so that they can take money from us, why is it not higher? They could certainly easily make it so if that was their goal. The last 30 years have seen the lowest average rate of inflation in our history. The Fed does not always get the supply of money exactly right and like anything run by men, it can be subject to misuse but it has been the best system we have tried so far. People here confirm that the gold and silver backed monies were also subject to manipulation. Only a true barter system can avoid that but I doubt anybody wants to use that.

 

[therealjjj77]

And you seem certain that the Fed is out to destroy the US economy so that they can make money. On this we can agree to disagree. That is fine. I don't subscribe to this conspiracy theory. If inflation is good for the Fed so that they can take money from us, why is it not higher? They could certainly easily make it so if that was their goal. The last 30 years have seen the lowest average rate of inflation in our history. The Fed does not always get the supply of money exactly right and like anything run by men, it can be subject to misuse but it has been the best system we have tried so far. People here confirm that the gold and silver backed monies were also subject to manipulation. Only a true barter system can avoid that but I doubt anybody wants to use that.

Well, that's fine if you don't wish to believe what one of the owners of the Federal Reserve has said.

To sum up why they keep inflation at a manageable level:

First, they don't care about owning Federal Reserve Bank notes. They know those are worthless. What they wish to do is own all or most all of the real money and property. That means owning the allodial titles on all land, the MSOs on all vehicles, all U.S. gold, and all people who are U.S. citizens. This is used as collateral by the U.S. Government, and by the States, and by the municipalities every time they borrow money from the Federal Reserve and once they have all of the collateral, they only need to require payment from our government to send the currency into collapse(another Great Depression) in which they seize all of the assets and infuse the U.S. into another form of government that furthers their globalist efforts.

Don't be surprised when this happens and say you didn't see it coming.

 

[Cholo]

Hard assets not gold - everyone please watch the Candidates@google youtube vid

 

[Tom228]

Here's a Interview of Milton Friedman

He's with the President of the Dallas Federal Reserve, Richard W. Fisher

http://pointers.audiovideoweb.com/stcasx/il83win10065/friedmaninterview.wmv/play.asx

Here's a speech by Richard Fisher: It's really long so here's in the link to it.

http://dallasfed.org/news/speeches/fisher/2008/fs080207.cfm

I know most if not all of you will not read it since it does defend the Central banking system.

I will say; I find it a bit humorous that just about everyone here thinks the Fed is an evil institution out to destroy America.

Here's more info on why the gold standard is not favorable:

http://www.econbrowser.com/archives/2005/12/the_gold_standa.html

 

[therealjjj77]

Here's a Interview of Milton Friedman

He's with the President of the Dallas Federal Reserve, Richard W. Fisher

http://pointers.audiovideoweb.com/stcasx/il83win10065/friedmaninterview.wmv/play.asx

Here's a speech by Richard Fisher: It's really long so here's in the link to it.

http://dallasfed.org/news/speeches/fisher/2008/fs080207.cfm

I know most if not all of you will not read it since it does defend the Central banking system.

I will say; I find it a bit humorous that just about everyone here thinks the Fed is an evil institution out to destroy America.

Here's more info on why the gold standard is not favorable:

http://www.econbrowser.com/archives/2005/12/the_gold_standa.html

When you've got a ton of the profits from the federal reserve bank being used to fund fiat money research, then of course they're going to have many arguing points. However, their arguing points DO NOT hold water.

In the last link you listed, here was his arguing points:

Point #1: The government sets up a gold standard and then goes off it thereby creating fiscal problems.
"Except that it really isn't-- the dollar is only as good as the government's credibility to stick with the standard. If a government can go on a gold standard, it can go off, and historically countries have done exactly that all the time. The fact that speculators know this means that any currency adhering to a gold standard (or, in more modern times, a fixed exchange rate) may be subject to a speculative attack."

Problem with Point #1: Though this may be true in some cases, this is like stating that we shouldn't have schools because some teachers have sexual relationships with their students. Terrible arguing point. In fact, in the U.S. we stayed on a gold standard for a very long time and it worked great for us while we were on it. Within two years after the Constitution was written, the economy went from terrible, on the Continental Dollar, to awesome on a gold standard. In fact, tax revenues(from imports/exports) were much higher then anyone in Congress at that time could have dreamed of.

Point #2: This lack of trust in a government to adhere to the Gold Standard is a "recipe for distaster".
"I argued in a paper titled, "The Role of the International Gold Standard in Propagating the Great Depression," published in Contemporary Policy Issues in 1988, that counting on a gold standard to enforce monetary and fiscal discipline in an environment in which speculators had great doubts about governments' ability to adhere to that discipline was a recipe for disaster."

Problem with Point #2: The real disaster was over-inflating of the currency by the Federal Reserve all throughout the 20s with 24 hour call loans, and then calling them all in at once and the government paying back part of it's debt. What this essentially did was decrease the money supply by upwards of 1/33 of what it was prior because of the fractional reserve monetary policies of the Federal Reserve Bank. During that time it was more profitable to hold over-inflated stocks then holding onto gold. So most people had turned their gold into stocks and then when the Great Depression happened, the Federal Reserve held most of the gold.

So people just didn't have enough money to hire, buy and sell. So they started going back to using gold(what was left of it) and then the prices were deflating back to the levels they originally were prior to WW1. But then in 1933 FDR put out an executive order to seize all of the gold. You would be fined up to $10,000 if you were holding gold. This made the Great Depression even worse. Then people had no currency until they got some form of money through the welfare hire program that ensued.

Then he proceeds to show charts and graphs in an attempt to support his theory without actually breaking down the "why". "Look, see! Fiat money waved it's magical wand and all was well!"

What he fails to explain is why the growth of the countries that returned to a gold standard, after they readjusted their prices, began to grow their GDP much faster then those who went off the gold standard. Look at the first of his charts and then the last of his charts. Particularly at the year 1936. Also, I doubt this is adjusted for inflation/deflation. So while the gold standard caused prices to deflate back to their normal levels, the GDP would seem to be decreasing. On the other hand, while the countries that went to a fiat money system, would seem to be seeing an increase in GDP simply because of the effects of inflation from this system. In reality, though, there was little or no increase at all when inflation is taken into consideration.

 

[RonPaulalways]

The last 30 years have seen the lowest average rate of inflation in our history.

No it hasn't, the last 30 year has seen the HIGHEST average rate of inflation in 90 years.

 

[Jay Bee]

Thanks Gilby, therealjjj77 for your persistence. There was a post back in the thread charting the gold holdings that each country has but…

If what this site http://cafr1.com/TheRock.html claims is true, then our country’s gold was pledged to the FED in 1963 at $43.00 per ounce. The author claims as it was also pointed out in this thread, there should be consideration also of the commodity index which includes; grains, metals, produce; domestic stock; energy; etc. “ Here it will not be the golden rule but the productivity value of the countries commodity production.” He references RP’s plan 4th paragraph from the bottom.

Continuing the research,…

The following site has many, so many, pages of very interesting information from DURHAM HOLDING TRUST, Tias 12087 the Duly Constituted, Outstanding, Primary (Gold, Gold Coin, American Gold Dollars, Gold Bullion and/or Coin of the Realm) Creditor of the United States of America and ALL Debtor Nations... This link supports the return to the gold and silver standard backing our currency.
http://www.theantechamber.net/V_K_Durham/WhoTheTheysAre2.htm. However, there was a page I am trying to re-find which stated that this holding had a small percentage of U.S. gold, 34, or 43 percent, argh can’t remember exactly.

Also at the Durham site, there is a page I am trying to re-find which covers the events of fraudulent shipments of gold from the US to abroad over the ten years prior to Sept.11, 2001. I’ll keep looking for that particular page as well, there is just so much to go through at that site, although very interesting.

I don't subscribe to this conspiracy theory. If inflation is good for the Fed so that they can take money from us, why is it not higher? They could certainly easily make it so if that was their goal. The last 30 years have seen the lowest average rate of inflation in our history. The Fed does not always get the supply of money exactly right and like anything run by men, it can be subject to misuse but it has been the best system we have tried so far.

They had to ACT as if they were trying to help because there were long term goals to reach, so they’ve been building up to the finale.

Oh, if there isn’t a plan or agenda to control the population then how would you explain the first line on the Georgia Guidestones which were placed in the southern USA. http://www.crystalinks.com/gaguidestones.html
1. “Maintain humanity under 500,000,000 in perpetual balance with nature.” How do they propose to maintain this number?

The masses have been prone to controlling by the elites ever since there have been the masses. There are conflicts between those at the top of the population pyramid as well. “War in heaven” as some have described it. Somebody here quoted one of them as saying that by controlling the money, the law was irrelevant to them. It isn’t hidden truth or as some would say, it isn’t conspiracy because they have openly admitted it. Yet, some of the people refuse to believe. The theory on that is because people have been conditioned to not believe.

 

[Zippyjuan]

No it hasn't, the last 30 year has seen the HIGHEST average rate of inflation in 90 years.

Perhaps you have different inflation figures than I have seen Maybe you could share them with us. Rates of inflation (percent increases). Here is one source I have used. I do note that you say last 90 years, why not make it 100 years? Both would include the hyperinflation of the teens and 1920's which is the highest we have seen in this century. I will concede that we did have a period of high inflation in the 1970's, but even that was not as high as that seen during WWII or the decades prior- which were under a gold standard. Back up your position.

The collapse of the dollar has been predicted for decades. We do face issues which put downward pressure on the ecomomy today but as I have said a few times now, the problems are policy issues not related to the sort of money that we have all agreed (well, 99% of us have agreed) to use as a medium of exchange for goods and services. Gold has not and will not prevent them from happening. I apreciate the passion you have on the issue. I have heard theory but not any historically supported data of how things were better under the gold standard. Those periods where the gold standard failed to lead to lower inflation (such as during wars or the 1920s or the Great Depression) raise the point that the standard failed because people (government) manipulated it. Or that this period does not count because it was not a true gold standard. That is exactly the point- the gold standard is not immune from manipulation. Other factors (which you point out even more of) contributed to what went on in the economy other than using a gold standard.

I have also conceded that the Fed did a terrible job prior to and during the Great Depression.


We spend too much money we do not have. That is a far bigger threat to our economic security than trying to tie our currency to gold. Fiscal responsibility has left the building long ago. Both a gold standard and fiat money have their good and bad points. Neither is perfect. Both can be subject to manipulation. In a time of crisis, fiat money gives the government more flexiblity to deal with it and lessen the impact of the crisis if they respond properly and in a timely manner.


I have no idea what that Georgia sculpture has to do with anything.

The great Libertarian Milton Friedman (often cited by Ron Paul supporters) says that a gold standard is anti- libertarian. http://www.reason.com/news/show/118175.html

I do believe that every individual should be free to own, buy, and sell gold. If under those circumstances a private gold standard emerged, fine—although I make a scientific prediction that it’s very unlikely. But I think those people who say they believe in a gold standard are fundamentally being very anti-libertarian because what they mean by a gold standard is a governmentally fixed price for gold.

 

[therealjjj77]

Perhaps you have different inflation figures than I have seen Maybe you could share them with us. Rates of inflation (percent increases). Here is one source I have used. I do note that you say last 90 years, why not make it 100 years? Both would include the hyperinflation of the teens and 1920's which is the highest we have seen in this century. I will concede that we did have a period of high inflation in the 1970's, but even that was not as high as that seen during WWII or the decades prior- which were under a gold standard. Back up your position.

The collapse of the dollar has been predicted for decades. We do face issues which put downward pressure on the ecomomy today but as I have said a few times now, the problems are policy issues not related to the sort of money that we have all agreed (well, 99% of us have agreed) to use as a medium of exchange for goods and services. Gold has not and will not prevent them from happening. I apreciate the passion you have on the issue. I have heard theory but not any historically supported data of how things were better under the gold standard. Those periods where the gold standard failed to lead to lower inflation (such as during wars or the 1920s or the Great Depression) raise the point that the standard failed because people (government) manipulated it. Or that this period does not count because it was not a true gold standard. That is exactly the point- the gold standard is not immune from manipulation. Other factors (which you point out even more of) contributed to what went on in the economy other than using a gold standard.

I have also conceded that the Fed did a terrible job prior to and during the Great Depression.


We spend too much money we do not have. That is a far bigger threat to our economic security than trying to tie our currency to gold. Fiscal responsibility has left the building long ago. Both a gold standard and fiat money have their good and bad points. Neither is perfect. Both can be subject to manipulation. In a time of crisis, fiat money gives the government more flexiblity to deal with it and lessen the impact of the crisis if they respond properly and in a timely manner.


I have no idea what that Georgia sculpture has to do with anything.

The great Libertarian Milton Friedman (often cited by Ron Paul supporters) says that a gold standard is anti- libertarian. http://www.reason.com/news/show/118175.html

First, you said we were on a gold standard. We were not. To be truly on a gold standard requires that there be no money printed that is not backed by the same amount of gold in reserves. In other words, the only amount of money in society is equal to the amount of gold it represents. The government and the banks did not keep to this as the government had the federal reserve print out more bank notes then they had gold to represent and banks were allowed to perform fractional reserve banking. This led to inflation of the dollar and a disparity in the price of gold relative to the dollar, to what it was regulated to be redeemable for. And so you could not redeem your dollar for gold because of this dishonesty on the banks and governments part.

Second, you say we spend too much money and you have implied your favor toward the federal reserve bank. Is it not clear that the federal reserve bank along with our government has encouraged mal-spending habits and punished those who save or spend within their means? In fact, that is the very reason they claim they are doing things this way, to encourage consumer spending to get more taxes so government can spend more.

With a true gold standard, the government has to live within it's means and cannot go outside of that boundary. It does not have the collateral to do so.

Finally, regarding the quote of Milton Friedman, it needs to be understood that the U.S. government with the establishment of the Constitution, became bound in it's spending and currency it could use. The rules were not for the general population. The rules were for itself. The general population could use that currency if they so choose. However, it put a constraint on the government, not the free market. The government had to be honest with it's debt and currency. That's all that the Constitution did.

 

[Jay Bee]

The Guidestone is testament of the controlling elite, which you said was hard to believe. Therefore, the following evidence is the last I will present in this thread.

With-in the quote below found in a response to an article here http://www.bradblog.com/?p=5544. (about halfway down the page) Comment #115. The elitist quote apparently was from a 2002 publication of the International Currency Review a very expensive subscription report. When I searched the ICR and Christopher Story, the editor, I found the Durham articles. Apparently Story was defending Leo Wanta and Durham was not, which is beside the point of the quote below.

For the benefit of knee-jerk 'smart fellows' whose minds are befogged by 'slides' and who will be inclined to accuse the Editor of International Currency Review of being a 'conspiracy theorist', the following statement by one of the leading globalist strategists, Mr David Rockefeller, published in 2002*, will no doubt come as a shock:

'For more than a century ideological extremists [sic] at either end of the political spectrum have seized upon well-publicised incidents such as my encounter with Castro, to attack the Rockefeller family for the inordinate influence they claim we wield over American political and over economic institutions. Some even believe we are part of a secret cabal working against the best interests of the United States, characterizing my family and me as "internationalists" and of conspiring with others around the world to build a more integrated global political and economic structure ? one world, if you will. If that's the charge, I stand guilty, and I am proud of it'.

The following quote was on the Home Page of ICR website but is no longer there. So I went to my e-mail and found where I had copied it January this year.

“World Reports Limited is operated entirely independently of all outside interests in order to realise the fullest potential of intelligence objectivity at this time of managed reporting, egregious disinformation, the arrogance of the Illuminati and of the intelligence communities, and the revolutionary dumbing-down process.”

 

[golf247]

Perhaps you have different inflation figures than I have seen Maybe you could share them with us. Rates of inflation (percent increases). Here is one source I have used. I do note that you say last 90 years, why not make it 100 years? Both would include the hyperinflation of the teens and 1920's which is the highest we have seen in this century. I will concede that we did have a period of high inflation in the 1970's, but even that was not as high as that seen during WWII or the decades prior- which were under a gold standard. Back up your position.

The collapse of the dollar has been predicted for decades. We do face issues which put downward pressure on the ecomomy today but as I have said a few times now, the problems are policy issues not related to the sort of money that we have all agreed (well, 99% of us have agreed) to use as a medium of exchange for goods and services. Gold has not and will not prevent them from happening. I apreciate the passion you have on the issue. I have heard theory but not any historically supported data of how things were better under the gold standard. Those periods where the gold standard failed to lead to lower inflation (such as during wars or the 1920s or the Great Depression) raise the point that the standard failed because people (government) manipulated it. Or that this period does not count because it was not a true gold standard. That is exactly the point- the gold standard is not immune from manipulation. Other factors (which you point out even more of) contributed to what went on in the economy other than using a gold standard.

I have also conceded that the Fed did a terrible job prior to and during the Great Depression.


We spend too much money we do not have. That is a far bigger threat to our economic security than trying to tie our currency to gold. Fiscal responsibility has left the building long ago. Both a gold standard and fiat money have their good and bad points. Neither is perfect. Both can be subject to manipulation. In a time of crisis, fiat money gives the government more flexiblity to deal with it and lessen the impact of the crisis if they respond properly and in a timely manner.


I have no idea what that Georgia sculpture has to do with anything.

The great Libertarian Milton Friedman (often cited by Ron Paul supporters) says that a gold standard is anti- libertarian. http://www.reason.com/news/show/118175.html

You're missing a key point. We were on a gold standard, but it was bastardized because banks could inflate as a result of fractional reserve banking. In my view, this is a huge problem as well. Any monetary system that allows banks to pyramid new credit on top of a small demand deposit will always be subject to panics and the associated bank runs. The currency type, gold or fiat, doesn't matter. If deposit banks were treated like warehouses for other fungible goods, meaning they cannot issue fraudulent receipts, then we would have far less problems. This is the failure of the pre-Fed gold standard.

One of the main arguments we hear about the need for fiat currency is that the money supply needs to be elastic. That's a joke. The value of a hard currency will go up and down depending on how much of it is in circulation vs. how much is being saved. The old fear of hording gold is a myth. If people are saving more than they're spending in a system with a fixed amount of currency, then the value of gold in circulation will go up and prices will go down. If people start spending more because of this, prices will go back up because there is more money being spent. This is the market at work because money in this system is a true commodity. Government and a central bank can only pollute the system when they try to control prices, via either direct regulations or money supply manipulation.

Now, as far as your Friedman quote is concerned, he's off base. In a true, 100% reserve gold standard, government doesn't really fix the price of gold. Instead, it simply defines a unit of measure of a specific weight of gold. For example, a dollar used to be 1/35 an oz of gold. Now, some will say, that's fixing the price at $35 per oz, but I don't agree. We're simply defining a unit of measure of gold. The actual prices of goods, while shown in dollars to the consumer, will fluctuate based on the value of gold in the market so there isn't any price fixing going on. This seems like splitting hairs over a technicality, but it's not. You have to shift your way of thinking to understand that buying goods requires X amount of gold. We just call that a specific number of dollars to make it easy to keep track of (the best option would be to just deal in ounces of gold and get rid of National currency monikers altogether)

 

[RonPaulalways]

Perhaps you have different inflation figures than I have seen Maybe you could share them with us. Rates of inflation (percent increases). Here is one source I have used. I do note that you say last 90 years, why not make it 100 years? Both would include the hyperinflation of the teens and 1920's which is the highest we have seen in this century. I will concede that we did have a period of high inflation in the 1970's, but even that was not as high as that seen during WWII or the decades prior- which were under a gold standard. Back up your position.

The average inflation of the last 30 years was higher than the average inflation of any other period. Here is a graph that demonstrates this:

Yes there were higher spikes in the 1910's and 1920's, but the average has been higher in this 30 year period than in any other 30 year period. Also the way the CPI was calculated was changed in the 1990's, so by the old standard, the measured inflation would have been even higher in this last 30 year period.

In a time of crisis, fiat money gives the government more flexiblity to deal with it and lessen the impact of the crisis if they respond properly and in a timely manner.

You do NOT want to give the government flexibility, because those who hold the reigns to government will use that flexibility to benefit themselves at the expense of the nation which is under the government.

The market is flexible enough. Gold production is flexible. Silver production is flexible. Higher prices encourage more gold/silver mining.

The great Libertarian Milton Friedman (often cited by Ron Paul supporters) says that a gold standard is anti- libertarian. http://www.reason.com/news/show/118175.html

I don't support a gold standard, but I think any precious metal standard is superior to this fiat currency monopoly that is imposed.

 

[Gilby]

The market is flexible enough. Gold production is flexible. Silver production is flexible. Higher prices encourage more gold/silver mining.

One of the problems many people seem to think that using gold or silver as money is that it results in excessive demand for them. While that somewhat may be the case, it's not excessive, in that gold and silver is not the only thing net worth can be held in. People can hold pretty much anything in value as their net worth. In fact, nobody should really hold gold and silver unless they will have a present or future use for it. I should be able to go to the bank and hold my assets in a wide variety of raw materials. If I am in an industry that uses lumber, I would probably be better off holding my assets in lumber. I contract with a client, they pay me in whatever assets that hold and I exchange those assets for what I need to complete the contract, and therefore limit my risk of price fluctuations that occur between the time of the contract and the completion of the terms of the contract. This can all be done on the world-wide securities market, or something similar. Gold, or silver, is simply an index, in which no government can manipulate it, and in which the people involved in the contract can agree upon. In a free market, we can agree to any index. We do not have that now, which is the problem (among many many others) with our fiat system.

 

[Zippyjuan]

To be truly on a gold standard requires that there be no money printed that is not backed by the same amount of gold in reserves.

Just to understand you, do you consider a gold standard one where each dollar is backed by the government holding one dollar's worth of gold? Different people here have offered differing definitions of a gold standard. Some have said it requires 100% backing some saying it could be any fraction (even 1 trillionth of an ounce to a dollar). If that is the case (100% backed) , you cannot have that in the US today. The annual Federal budget alone is almost the entire world's production of gold since man discovered it- some $3 trillion dollars at a price of about $800 an ounce.

Ronpaulalways- thanks for reposting the inflation chart I have been linking to. It is easier to see. I guess I haven't figured out how to include a picture in a post yet.
Let me provide you with a new one. A decade by decade look at inflation over the last 90 years. Maybe you could imbed this one for me. Thanks.
http://www.inflationdata.com/Inflation/images/charts/Articles/Decade_inflation_chart.htm
I may have gone back too far to say that the last 30 years have been the lowest average annual rate of inflation. Part of the 1980s was still unwinding down some of the 1970's inflation, but the decades since have been below the average inflation for the entire 1913 to 2006 period. In fact four of the last six decades have been below the average inflation of this century according to the chart. The average rates of some of the earlier decades may appear lower but that is because the economy swung wildly between high inflation and high deflation- not the sign of a stable currency or economy. The 1930' s were particularly lower due to the effects of the Great Depression. We have not seen the wild swings from inflation to deflation and back since about the second World War.

 

[RonPaulalways]

For some reason I can't view the source that you linked, but from the graph I linked earlier, it's clear inflation has only became a long term phenomenon once the dollar came under the control of the federal reserve in 1913 (before there were very high levels of inflation, but they were followed by periods of extreme deflation, keeping the value of the dollar constant over the long term), and average inflation has been higher after 1971 (when the dollar totally abandoned the gold standard) than before.

The average rates of some of the earlier decades may appear lower but that is because the economy swung wildly between high inflation and high deflation- not the sign of a stable currency or economy.

I think those wild swings weren't unhealthy and lent for a more stable economy. I think it's far worse to have steady inflation and no periods of deflation, then very high inflation followed by very high deflation.

 

[Zippyjuan]

Rapidly changing rates of inflation leads to uncertainty and uncertainty about the future leads both individuals and businesses to be more cautious about their own spending and investments. If inflation is more predictable, then you see more activity in both spending and investment and thus more growth should be expected- all other factors being equal. If prices were up 10% one year, down seven percent the next and up 15% a couple years later, then a person or business does not have a reliable expected rate of return and so will tend to asume the higher recent prevelant rate. SInce a company will decide to invest or not invest based on their expected return (which includes inflation), either having high inflation to begin with or not being certain of what inflation will be during the period of their investment they will assume the inflation rate to be high and be less likely to make the investment due to lower projected real rates of return.

In 1918, the annual rate of inflation was 17.26%. By 1921 you had a deflation for the year of 10.85%. During the 1990's, inflation only ranged from 1.55% in 1998 to 5.39 in 1990. http://inflationdata.com/inflation/Inflation_Rate/HistoricalInflation.aspx?dsInflation_currentPage=7 This narrower band makes it easier to make longer range plans on production, hiring, and spending decisions leading to more economic activity and jobs growth than under greater uncertainty or periods of higher inflation. There are numerous articles available on the web supporting this. Milton Friedman was a major proponent of this theory.

 

[RonPaulalways]

I agree with that, but it's not just uncertainty we're measuring here but also inflation. Inflation has increased since the dollar unhinged from the gold standard. I don't think the added certainty in the rate of inflation is worth the increased inflation.

With a currency that keeps in value in the long term, even if it has to have periods of very high deflation to maintain its long term value, people feel more comfortable holding on to it rather than dumping it in over-priced assets like property.

 

[Gilby]

Rapidly changing rates of inflation leads to uncertainty and uncertainty about the future leads both individuals and businesses to be more cautious about their own spending and investments.

You need to study the business cycle and Austrian economics. The Fed manipulates the money supply, both contracting and expanding it to try to target it to a CPI. The problem with this is that this creates false signals in the marketplace. For example, the housing boom was caused by the false signal that loan rates should be low and therefore resources were viewed as plentiful. Almost everyone refinanced their homes (and used some cash they got out of it to spend) or bought new homes that exceeded what they could actually afford. This artificially created demand in the housing market and therefore a lot of resources were spent in this industry creating new homes. Now that we are realizing that people couldn't afford to live beyond their means, we have an excess of homes in the marketplace and an excess of resources in that industry, which means we see home prices fall and see massive layoffs in the industry.

In a free market, we would not have been encouraged to malinvest and instead we would see a quick readjustment of resources when an economic problem arose. If resources are plentiful, then prices are going to be lower and therefore the signals in the marketplace are to consume them, but when resources are scarce, the price for them will be higher and the signal in the marketplace is to conserve them. These natural signals allocate the resources to the uses that are needed most and therefore is the most efficient use of the limited resources.

Back to the housing boom, without the false signals from the Fed, all the resources that were dumped into the housing industry would have been used in other industries and who knows what economic advancements we would've seen elsewhere instead of the wastefulness we've seen in the housing market. We would not be having the downturn today and people would be employed in these other industries where their resources were better utilized.

 

[Truth-Bringer]

You need to study the business cycle and Austrian economics.

No doubt. Zippyjuan needs to do a lot less typing and a lot more reading on this site. He is stating positions straight out of the government school system and mainstream media.