<What I like most about it is that Greenspan explains how the gold standard, inevitably, causes boom and bust cycles -which don't necessarily coincide with Shumpeterian cycles of creative destruction. Thus, the rub is that bust cycles sink all boats, much as boom cycles raise them. I've seen too many people confuse booms with brains to think it's a good thing.>
What, more or 'worse' booms and busts than without gold standard?? That could be debated forever with no answer.
<Greenspan doesn't get into the fact that the gold standard is almost inevitably deflationary, due to the fact that the gold supply almost never increases as fast as the economy increases. Nor does he discuss the fact that if the gold supply increases faster than the economy, that's inflationary. Gold isn't any more magic than fiat money in that respect.>
Probably because it's all un-important.
<Those who would have us return to the gold standard don't deny that gold causes boom and bust cycles - they say boom and bust cycles are good things and/or inevitable. Nor do they deny that the gold standard is deflationary - they say that deflation is a good thing. >
You just contradicted yourself... if they're inevitable, gold doesn't "cause" them... which of course, it doesn't.
<Nor does he discuss the fact that central banks on the gold standard were no more willing nor able to allow a free market in gold than they are willing and able to allow a free market in money today. During World War I, all the combatant nations went off the gold standard, and printed fiat money, increasing the money supply on average 3 to 5 times - not counting Germany, which is a special case due to the hyperinflation. The same nations were back on the gold standard by 1925, and that's when the world started to slide into depression. It was seen in commodities first. By pegging the pound/gold ratio at the pre-war level, and the dollar/gold ratio at the pre-war level, England and the US forced their own economies into the worst deflation the world has ever known. The result is what we call the Great Depression. Nobel Prize economist Robert Mundell explains it quite well.>
The same thing could have happend without it... tight money, FEd "wring out speculation"...
DAK |
