RE: Re: RE: Re: RE: Re: Gold

["David Shemano" <dshemano@xxxxxxxxxx>]

In reply to Jim Devine:

Instead of engaging in a specific point-counter-point, let me make a series
of comments and ask a couple of questions that are generally responsive to
your statements.

1.	What is the evidence that the gold standard had anything to do with the
economic contraction in the 1930s?  Please explain the casual link and how
not having the gold standard would have avoided the contraction.

2.	More generally, what is the harm of the gold standard?  In response to
one of your questions, I make no claim that maintaining a gold standard will
do anything else other than provide the benefit of maintaining a constant
unit of account (i.e. avoid the problems created by monetary deflations and
inflations).  Maintaining a gold standard will not prevent the problems
created by errors in fiscal policy, war, natural disaster, etc.

3.	With respect to the mechanics of the gold standard, as I have said
previously, there is no requirement that a government own a single bar of
gold or make the dollar convertible to gold to effectuate the policy--
simply that the currency authority publicly accept and act on the assumption
that if the gold price is increasing, that is a sign that too many dollars
are being created and visa versa.  If the currency authority has good reason
to believe that a decrease in the price of gold is the result of an unusual
increase in the gold supply, the currency authority can announce that belief
and announce an adjusted dollar-gold price,

4.	You say that a gold standard would likely be deflationary.  Why?  Imagine
three assets in an economy: (1) dollars, (2) gold, (3) all other goods and
services.  For the price level, overall, to remain constant in a growing
economy, the number of dollars would have to increase proportionally to the
increase in overall goods and services.  If the dollars did not, there would
be a monetary deflation.  One of the benefits of gold as a currency marker
is that its annual supply increase is roughly the same as all other goods
and services -- a couple of percent, and that the demand for gold for
non-currency purposes is relatively stable.  Therefore, as the gold supply
increases annually, there would also be an increase in the money supply, all
things being equal.

5.	What did William Jennings Bryan say about gold?  Was he for money
untethered to a metal?  Arguing about Bryan and the post-Civil War era is
like arguing about the Great Depression -- there are two sides to the story.
If you want the gold standard side, I will be happy to provide it.

6.	What is the "business cycle?"  It is probably unrealistic to ask, but
please provide me a short and concise description of what you are trying to
describe.

7.	Debating the 90% tax rate is another thread of its own.  As you
acknowledge, if affected very few people.  In addition, precisely because of
the rate, the tax code was riddled with loopholes.  Do you have any evidence
that a 90% tax rate collected more money from those affected than a 30% rate
would have?  How about a comparison of the 90% rate and the 70% rate
instituted in 1964?

8.	You state that I conflate "monetary inflation" with "actual inflation."
What do you mean?  Under a gold standard, prices of individual goods and
services will rise and fall in response to shifts in supply and demand
curves, but they will not rise because of an increase in the unit of
account.  What am I conflating?


David Shemano