OK, let me try this again: You can't measure dollar inflation by the gold price when the dollar is pegged to gold.
And, gold was pegged to $20/oz. Then at some point in the Depression, it was moved to $35/oz in a step function. It wasn't gradual.
And I argue that the actual value of gold wasn't $35/oz at the end of the gold standard. That's why the value shot up so quickly when the market was allowed to determine the price - because $35 was the wrong price on day one. There was a lot of inflation between 1935 and 1968 to catch up for that was not reflected in the $35 price, because $35 was never a market price.
How do I know that $35 was the wrong price? Because the US was bleeding gold. Other countries were buying gold from the US at $35, and the US could see that the official price was unsustainable.
If I had $35 US dollars I was entitled to an ounce of gold. The same amount would now buy 2% of an ounce of gold.
I'm more than happy to agree it is not a precise comparison. A lot has changed over the last 50 years. But even after leaving a reasonable allowance for that, someone arguing that the move off the gold standard would destroy the value of the dollar appears to be (100-2)=98% correct. If you like we can agree that the starting price was $150/oz in market prices, in which case we can agree they were 90% right.
The US government has an inflation policy; they explicitly want to reduce the value of the dollar at a rapid pace. The government is publicly on the record as thinking that is a good outcome. So maybe they would have destroyed the value of the dollar even if it was on a gold standard. That seems likely to me.
If someone was arguing that the unit of trade wouldn't be called the US dollar they were wrong. If they argued it wouldn't be used as the international unit of account they were very wrong. If they argued it would be quick then they are laughably wrong. By pretty much any other measure they were mostly right. Whether this was a bad outcome or not is debated, but given the collapse of real wage growth vs steadily growing productivity after 1970s I don't see how it can be argued that inflation is working. Working to do what, get everyone indebted to banks? High real GDP growth is good for the averages but hasn't done very much for real median wages for example.
> If I had $35 US dollars I was entitled to an ounce of gold. The same amount would now buy 2% of an ounce of gold.
If you had $35 US, you theoretically had the equivalent of an ounce of gold. You couldn't actually buy the gold, though, not until (IIRC) 1965.
> I'm more than happy to agree it is not a precise comparison. A lot has changed over the last 50 years. But even after leaving a reasonable allowance for that, someone arguing that the move off the gold standard would destroy the value of the dollar appears to be (100-2)=98% correct. If you like we can agree that the starting price was $150/oz in market prices, in which case we can agree they were 90% right.
Sure, I'd go with that. But that also means that there was (150-35)/150 = 77% destruction of the value during the time when we were nominally on the gold standard, but people couldn't actually use the dollars to buy gold.
If you wanted to argue that it wasn't a real gold standard when people couldn't use the dollars to buy gold, I would agree with you. I wouldn't even complain about "no true Scotsman", because the difference seems to me to be a crucial one.
> The US government has an inflation policy; they explicitly want to reduce the value of the dollar at a rapid pace. The government is publicly on the record as thinking that is a good outcome.
Well, they say they're targeting 2% inflation. To me, that's eroding the value of the dollar, but not "at a rapid pace" - I saw 14% inflation in the late 1970s. I will admit that even 2% inflation adds up rather shockingly when you look at 50 years, though.
> So maybe they would have destroyed the value of the dollar even if it was on a gold standard. That seems likely to me.
If they had a real gold standard, I don't think they could have - they would have hemorrhaged gold until they had none left, and then they would have had to give up the pretense. But a "gold standard, but you can't actually convert" let them inflate while pretending that they weren't.
> Whether this was a bad outcome or not is debated, but given the collapse of real wage growth vs steadily growing productivity after 1970s I don't see how it can be argued that inflation is working. Working to do what, get everyone indebted to banks? High real GDP growth is good for the averages but hasn't done very much for real median wages for example.
I see it like this: After World War II, there were cycles of prosperity and recession, but each cycle was at a higher rate of inflation than the previous (comparing the same points in the cycle, obviously). Then in 1979, the Fed changed strategy. Since then, each cycle has had lower inflation, but also a lower fraction of the population employed. I think (but cannot prove) that the lower fraction of employed workers has something to do with the lack of wage growth.
As to what the Fed should do differently... that's way past my level of understanding.
And, gold was pegged to $20/oz. Then at some point in the Depression, it was moved to $35/oz in a step function. It wasn't gradual.
And I argue that the actual value of gold wasn't $35/oz at the end of the gold standard. That's why the value shot up so quickly when the market was allowed to determine the price - because $35 was the wrong price on day one. There was a lot of inflation between 1935 and 1968 to catch up for that was not reflected in the $35 price, because $35 was never a market price.
How do I know that $35 was the wrong price? Because the US was bleeding gold. Other countries were buying gold from the US at $35, and the US could see that the official price was unsustainable.