[DcifrThs]

Borodog,

we've been through this again and again. and i must say that i do agree with you in terms of many aspects of what you say. i'd venture to say i agree with most if not all of what you say.

i would like to point out though, in as kind a way as possible, that i do not think you read what i stated in one major section of your post.

i said :

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eventually the gold system as we know it today and recently cracks b/c the policy needed to avoid a devaluuation (or revaluation) is the opposite of what is "needed" for the economy.

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then i clarified:

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by "needed" above i meant when the economy slows significantly and the money supply is fixed,

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bold added.

then you responded with:

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This is false. During the 16 years from 1880 to 1896, after the US finally went back on the (FRB flawed) gold standard, the economy grew tremendously, completely outpacing the money supply; the economy grew at 5-7% annually, while prices dropped 1-2% per year. Other periods in the 1800s show the same trend, but the data is very noisy, as there were several wars, central banking schemes, and always FRB muddying up the waters.

The main thing you need to understand to debunk the "fixed money supply slows the economy" myth is theory. When productivity increases, the generally falling price level affects inputs as well, and there is no problem for firms to remain profitable. Just look at the computer industry, which has remained incredibly profitable for decades in the face of *plunging* output prices. There is no magic that prevents this from happening in all industries, rather than in only some random subset of them.



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i believe you misspoke here because i definitely never said the economy CANT grow when the monetary system is tied strongly to gold.

i know i didn't say that i believe the myth in bold above.

you then say

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The next thing to understand is that even under a 100% reserve non-FRB gold standard, the money supply is not fixed! If the economy grows faster than the gold stock, then the value of producing an ounce of gold increases, and more gold comes out of the ground. If economic growth is slower than gold production, the value of producing more ounces falls, and the marginally productive mines will be shut down. In the long run, the return on producing gold must equal the general level of return in the economy. Hence the money supply in a 100% reserve gold standard could *never* get "out of whack" with the economy.


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i've started to buy into this and agree with the logic.

thanks,
Barron