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

[Joel Blau <jblau@xxxxxxxxx>]

Michael:

I don't thnk it should be pushed off list, but if it is, I'd like to be included.

Joel Blau

Michael Perelman wrote:

> David, I am not sure that anybody but you and Jim are following this
> discussion.  What you claim would be largely orrect in a world without
> any credit whatsoever.  Anyway, if this is not of general interest, maybe
> it could continue with you an Jim offlist?
>
> On Thu, Jul 12, 2001 at 06:59:44PM -0700, David Shemano wrote:
> > 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
> >
>
> --
> Michael Perelman
> Economics Department
> California State University
> Chico, CA 95929
>
> Tel. 530-898-5321
> E-Mail michael@xxxxxxxxxxxxxxxxx