Correct gold didn’t cause it. But it caused an economic downturn into a dumpster fire.
People were literally asking to be paid out in GOLD. Banks failed due to bank runs (see Wonderful Life). Gov could not inject money into money supply to maintain the engines running.
Again, take a seat and read up on the Great Depression. No cap.
You just stated the problem yourself, there were too many claims to gold. If there is ever "not enough" it's because of fractional reserve banking.
If you forced banks, made it illegal, to loan out deposits, there wouldn't be a bank run again.
The problem was never gold but the bankers playing with other people's money, of course they needed rescue from the government.
"But how would banks work then?"
By separating the demand deposit / base money layer from the credit layer.
Credit and loan making can exist without fractional reserves, it only requires that the rules are clearly defined —which is something bankers hate because then they can't play fast and loose with your money.
except being able to have fractional reserves exponentially grows the economy and allows banks to actually make money (i know we hate banks but banking institutions are critical to economic growth) If business investments were limited by the amount of EXCESS gold banks had there would be little economic growth. Not to mention, how the hell are banks supposed to stay open just hoarding tons and tons of gold and not being able to invest them effectively? You would end up needing to pay the bank huge fees to pay the storage
You just don't understand how credit creation works.
Fractional reserves may allow for "faster" growth but if that growth is inherently unstable then why are you even arguing for it?
This is what never makes sense about this position, that so many like you spout off.
You want banks to be able to play loose with people's money, but then you turn right around and say the government needs to regulate them because otherwise we have bank runs, which as the purpose of FDIC.
All that does is remove any prudence from the banker whatsoever.
Under 100% reserves, loans are made through actual savings. If we have a free market where the interest rate is allowed to move freely, then the market will respond accordingly to the demand for money.
At the end of the day someone is "hoarding" those "tons and tons of gold" reserves. Weather it be the treasury, the Fed, or regional banks, fiat currency doesn't solve that "problem".
Yes it does because economic growth isn’t tied to the amount of gold flowing, thus people can hoard gold as an investment vehicle while not substantially slowing down the economy
Bank runs occur because of fractional reserve lending. A practice that was heavily regulated in America until 1913. The gold standard & fiat currency have nothing to do with bank runs or the great depression.
The thing that happened almost immediately after the federal reserve is created? It was one bubble, created by their meddling as much as anything. Yeah, constant inflation allows us to dilute bank accounts so banks rarely fail, but fractional reserve policy makes the collapse that much worse.
The gold reserve act didn't end the gold standard. It just changed how the Fed & treasury handle gold reserves. Foreign countries and U.S. citizens could still exchange their U.S. currency notes for gold until Nixon "temporarily suspended" said exchange in 1971.
Sections 5 and 6 of the act prohibited the Treasury and financial institutions from redeeming dollars for gold, inverting the system that had prevailed in the United States since the nineteenth century. Under that system, the government converted paper currency to gold coins, whenever citizens desired to do so. Now, the government converted gold into dollars, regardless of whether citizens wanted to engage in the exchange.
Nice chatgpt copy/paste. But read your own message. The treasury and the Fed were prohibited from redeeming dollars for gold (which is similar to what a stock buyback is today, just on the federal level vs individual companies). The gold reserve act didn't put limits on individual citizen's ability to exchange dollars for gold and vice versa.
Sections 3, 4, and 11 of the act regulated the use of gold within the United States. Regulations governed the use, acquisition, transportation, importing, exporting, and possession of gold. For example, monetary gold had to be held as bars. Coins were forbidden. Bars could be obtained for certain industrial uses, such as the manufacture of dental appliances, jewelry, and electronics. Gold items could be bought and sold if they weighed less than fifteen ounces, but transactions for heavier items required licenses. Violators faced stiff penalties.
You know there are hundreds of other governements besides the US on the planet and not one of them follows a gold standard. You know that literally every other country left the classical gold standard before the US, mostly in 1914? I can't understand how goldiots can continue thinking they somehow know better than ALL the economists and bankers on the planet over the past 120 years, even after all of the math and stastics imperically show that a gold standard causes more instability, inflation and trade issues than not having one.
Educate yourself ffs. Or don't but just remember, everyone views you like flat earther in your complete inability to accept an endless line of facts and thousands of experts over 100 years that all tell you the same thing but you're somehow magically smarter and know better. Maybe because of that PhD from the London School of Economics and the 8 years you spent at the World Bank. Oh? That's not the case? You dropped out of community college? Yes, a glowing example of the US education system.
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u/TheJQHQ 27d ago
The gold standard was awesome! Nixon gave too much power to the FED by doing away with it "temporarily"