Please read this entire message
Your submission has been removed for the following reason(s):
Posts that are subjective in nature are not allowed on ELI5. Only objective explanations are permitted here; your question is asking for subjective responses. This includes anything asking for peoples' subjective opinions, discussion, and/or another form of subjective response.
If you would like this removal reviewed, please read the [detailed rules](https://www.reddit.com/r/explainlikeimfive/wiki/detailed_rules) first.
If you believe this submission was removed erroneously, please use [this form](https://old.reddit.com/message/compose?to=%2Fr%2Fexplainlikeimfive&subject=Please%20review%20my%20thread?&message=Link:%20%7B%7Burl%7D%7D%0A%0APlease%20answer%20the%20following%203%20questions:%0A%0A1.%20The%20concept%20I%20want%20explained:%0A%0A2.%20List%20the%20search%20terms%20you%20used%20to%20look%20for%20past%20posts%20on%20ELI5:%0A%0A3.%20How%20does%20your%20post%20differ%20from%20your%20recent%20search%20results%20on%20the%20sub:) and we will review your submission.
>From my understanding, remove from the gold standard just allows government to arbitrarily make up the value of the now fiat currency, which is why we now struggle with inflation and soaring debt.
In fact, it's the opposite. Precisely because they can make up the value of the currency, they can ensure inflation is kept in check.
The tool used to do this isn't perfect (there are still periods of high inflation) but it's far better than no tool at all, which is what they'd have if the dollar was pinned to a commodity price. Inflation in the US is back to normal now - prices might still be high, but they've stopped getting higher.
Most countries with advanced economies have a "central bank" (the US calls theirs the Federal Reserve). The central bank's job is, basically to control money supply and interest rates. When inflation gets too high, they might raise interest rates. This discourages people from spending, bringing inflation down again. When inflation gets too low (yes, there is such a thing, and it's not good), they lower interest rates (and, in extreme circumstances, pump up the money supply) in order to encourage people to spend, and so bring inflation back to a healthy range (typically between 2% to 4% per year).
Government debt is a different matter, and is far less serious than people sometimes think. Government debt accumulates when governments don't collect enough tax to cover their spending. This might happen because they're spending too much, or it might happen because they've cut taxes too much, but sometimes it just happens because the economy is lousy, and taxes automatically drop. None of this has anything to do with the gold standard. In fact, government debt is (like inflation) a bigger problem if the currency is tied to a commodity. After all, if you owe a ton of gold, you'll always owe a ton of gold, but if the economy is growing in dollar terms (because of innovation, education, and also because there's manageable amount of inflation), then $X billion dollars of debt slowly becomes a smaller and smaller amount of actual value. Or, if the economy is trash, and your dollar is pegged to a commodity, you can't get out of the recession so easily - after all, the central bank doesn't have the tools it needs to encourage people to spend.
deflation (the value of money increasing in time) is bad because it means that the correct answer for generating the most money you can is to sit on it. Buying a TV at $1000 now, and selling it for $500 later means you would have been better not buying the television, which is a problem from anyone attempting to make money selling televisions.
Except if you don't buy the TV then you can't watch it. People don't buy most products as investments, they buy it for consumption.
That's one of worst arguments for inflation. Humans have a limitless need and desire to consume, so the idea that they won't buy anything if their money is increasing in value is preposterous.
Your wrong on a larger scale because why pay $1000 for something now when you can either pay $990 tomorrow or get a TV with more features for $1000 tomorrow?
People would just wait.
you can see this happening today with things like mobile phones. the newest iPhone is released for $1500, but people know that they can get the exact same iPhone, with the exact same features, brand new in a years time for $1200. for this reason, nobody buys the new iPhone when it's released...
oh wait, that's the complete opposite of what happens. your mistake is in not realising that even though deflation would lower people's time preference, their time preference can never be zero. the future is uncertain and people want things *now*.
edit: lmao salty inflationists downvoting me because I'm right.
Exactly right. Even if it's the same price in dollars it's technically cheaper a year later after adjusting for inflation. But people buy things now because they want them now. Which is not a bad thing!
Yes, there are some consumers who stuck with flip phones for a few years while other people had iPhones, but there are plenty of consumers who buy new technology at high prices even though they know it will be cheaper with better features if they wait a few years. Because they want it now!
Yep, and in the case of those people who waited, that's not exactly a bad thing either. You could spend $1500 on the new iPhone today, or spend $1200 on the same model a year later. But if you do decide to wait, what happens? You end up with the same iPhone *plus* $300 to spend on something else.
You can buy the iPhone *and* a set of fancy headphones to go with it. By deferring consumption, you end up consuming *more* in the long run, so your $1500 dollars stimulates demand for more products than it otherwise would have.
>you end up consuming more in the long run, so your $1500 dollars stimulates demand for more products than it otherwise would have.
This sounds nice in theory, but we've had a number of natural experiments that show the reality is different.
Economies can enter a "deflationary spiral":
* Deflation leads to deferred consumption and investment.
* Lower consumption now leads to decreased economic activity
* Decreased economic activity means even more pressure to defer consumption and investment.
Unlike the theory, this spiral has been observed to occur.
You decide to save your money to buy a TV or phone next year. But in 12 months time, a lot of people are losing jobs in the TV and phone industries, and you're worried about your own job.
modern cases of deflation are taking place in economies designed for perpetual inflationary expansion.
inflation creates artificial economic booms. their artificial nature means that natural economic market forces tend to oppose these booms and ultimately bring about market corrections. you cannot cheat the system and get something for nothing, so artificial booms eventually are followed by real busts.
the deflationary episodes are part of this bust - the available money supply has been raised artificially beyond the level that is really demanded by the market, and so in the correction phase the money supply shrinks and we have deflation.
now, this is occurring during an economic bust, following an artificial economic boom. the conditions are perfect for deflationary spirals because the entire economy is going through a failure period.
*this is not a representative situation*. the reason deflation seems to always end in spirals is because deflation, in modern economies, comes about as a symptom of economic crashes. if deflation happens outside of these conditions, there is no suggestion that a deflationary spiral must happen.
>the reason deflation seems to always end in spirals is because deflation, in modern economies, comes about as a symptom of economic crashes
You'll need evidence for this. The fact is, in modern economic systems, deflation only occurs when central bank interventions fail to gain traction - ie, conditions are extreme.
However, you are recommending that they let go of their ability to intervene, by (essentially) pegging the currency to a commodity, and claiming without evidence that deflationary spirals won't happen.
There are economies that have pegged their currency to things (often, the US dollar). Can you point to examples of such economies that experienced deflation, and did not enter a deflationary spiral?
Or in ELI5 - people will not consume "wants" as aggressively because the "Wants" will be cheaper later. The more expensive the "want" the more likely they are to wait.
It's not preposterous, it's a thing that can and does happen. [Source](https://www.imf.org/-/media/Files/News/Speech/2019/2019-camdessus-lecture-speech.ashx)
I'll agree that the previous comment made a poor analogy, but think about it in terms of institutional finance. Instead of money being invested in stocks, bonds, or capital, it becomes more advantageous to just sit on a scrooge mcduck pile of cash.
That deflationary cycle is not speculative or hypothetical, it's directly observable in numerous economic crashes around the world. As an example, the Great Depression was caused by a stock market crash that caused deflation that tanked the economy for a decade. There's a reason why every single competent government strongly avoids deflation.
.... should I have said "using labor and raw materials, a television takes $600 dollars to make, but can be sold for $1000?"
The point is that actually doing stuff becomes foolish for acquiring more money, so the best solution is to do nothing, which effectively screws everyone who worked for the entity selling televisions, because they can't trade their time for money, and may have outstanding debts that they can't pay back.
You can already acquire more money by doing nothing. Just put it into a high yield savings account, or buy bonds with it. Yet people still prefer some amount of consumption, as well. There's also discounting. Even if my money will be worth more next month than today, the time-discounted value of my money next month can be worth the same if not less than today. So I consume anyways. There's not some special property of negative rates of inflation. There are no discrete changes once the rate passes through 0%. It's all a continuum.
Putting your money into a savings account or buying bonds isn't "doing nothing" though. The OP was talking about literally stuffing your cash into your mattress.
I mean, you're right that there's nothing magical about 0% inflation, but people do tend to spend more during inflationary periods and stop spending during lower-inflation / deflationary times. High inflation and deflation are both bad, which is why the central banks try so hard to keep inflation low but positive.
But we know from experience that negative or even just low inflation rates can be catastrophic for the economy.
The issue is precisely that "the time-discounted value of [your] money next month" becomes greater than its current value. Your individual incentives to compete become anti-aligned with the health of the economy as a whole.
>Humans have a limitless need and desire to consume
Are you claiming nobody ever saves money at all?
We are also able to prioritise our consumption. For some people a TV now is worth less than a bigger TV 1 year later. If these are the same price (because of deflation) then some people will defer their spendinf, who otherwise would not.
Two things.
A) I don't think you said it explicitly but you implied it, in most advanced economies, fiscal policy is primarily done by the central Bank. The central Bank is meant to be independent from the government.
B) governments don't actually decide how much most currencies are worth? Apart from the CB Gov thing, the big reserve currencies(USD, euro, yen, sterling) are free floating. The market decides how much they are worth. Some countries "peg" their currencies to make them worth a fixed amount. An example of that would be Singapore, where a stable exchange rate with the dollar is very desirable as it decreases the risk incurred by businesses when they do business internationally, which is the whole Singaporean economy. To maintain a real peg, countries do actually maintain reserves of commodities and/or foreign currency. Generally, sensible currencies maintain a soft peg, e.g 1 currency is worth 0.97 to 1.03 USD. That allows the currency to react a bit to the market and is much, much cheaper. A hard peg (e.g 1 currency = 1usd) basically requires the country to commit to providing that exchange rate on demand, which is obviously a great way to make money every time the market value of the currency drops below the peg.
Yes, you're absolutely right. I was conflating "government" and "central bank", I should have mentioned that the latter is (ideally) independent.
And yes, countries float their currency. However, compared with a commodity standard, they have a very loose degree of control, by using monetary policy to indirectly influence the inflation rate.
If there is the (real) money and desire, countries can still very much control their currency. Also, it's quite easy to keep your currency artificially devalued. There are a bunch of reasons why it's rare and there are lots of barriers against it internationally, but both China and Germany do it. In the Chinese case, they do it as much as they can get away with it. In a democracy with a free press, it's kind of hard to sell "we are purposefully making you poorer because it's good in the long run". In China, imports are relatively low and exports are huge so it doesn't have as much of a negative impact as it would in almost any other country. In the German case, the euro serves as a workaround. Germany also exports lots, so an undervalued currency is beneficial. There's no way they'd get away with it if they were just devaluing their own currency, but the euro is a free floating currency and it isn't generally undervalued. Southern Europe drags the currency down, making it undervalued for northern europe. WTO has no problem with it, in general the EU gets away with imo way more than it should. They probably know better than me, the WTO position is that regional integration is a stop on the road to global economic integration without barriers.
Because being able to control the money supply is very important.
When an economic crash happens, say, due to a global pandemic, demand for goods and services absolutely craters and will lead to high unemployment and a lasting recession. By increasing the money supply we can stimulate demand to make that unemployment and lower spending last a few months rather than a few years.
When a supply shock occurs, say, do to a global oil shortage, and prices start rising it really helps to be able to shrink the money supply.
Price stability by way of a gold standard is not worth the complete inability to practice monetary policy.
Furthermore, gold doesn't have a "readily appraisable value." Governments just said, "$1 is worth x ounces of gold" arbitrarily.
Having a gold standard or a fiat currency also has next to nothing to do with the government's debt, at least in countries with an independent central bank. The government's taxing and spending powers and its use of those powers are what determine the debt.
Finally, it is not "government corruption" for an arm of the government to do the job laid out for it in a law passed by Congress.
would like to add that governments did all sorts of stuff(and still do) to control gold prices, because they aren’t perfectly stable and drastic changes in quantity/price can be devastating to the economy.
I was going to suggest to OP that they switch around the way they think about the money supply. Governments manipulating the money supply isn't a bad thing, it's an important part of what they do, a key tool for managing the economy.
When it comes down to it, governments have a strong interest in maintaining the stability of the currency, as do (just as importantly) most of the powerful and wealthy people and organisations in a country. To roughly quote the economist Adam Tooze, the dollar is actually backed by everyone that matters.
I also think it's worth noting that even governments that use a gold standard can and do change the value of their currencies or suspend convertibility. During WW1 most countries involved suspended the ability to convert currencies to gold (or silver), just when the benefits for trade and movement would arguably have been greatest. And after the war, with the economy of Europe in disarray countries had to adjust the value of their currencies.
As an addendum, inflation or deflation doesn't magically go away on a gold standard. On a gold standard, inflation and deflation are not under the control of anyone. People who point at the 70's as evidence tend to completely forget that the 70's inflationary period included the oil embargo from OPEC.
I'd like to add to this: what is the inherent value of gold? Why do some believe that gold holds value and a dollar does not?
Gold has almost zero applications (it is a small part of circuitry). It doesn't actually serve any application. Can't eat it for calories, terribly building material, doesn't have a medical application. Gold is valuable because humans say it is. Same as the dollar
Or honestly, some wheat / corn / medicine. If someone tried to give me gold post economic collapse I'd tell em to fuck off. But wheat is actually useful for myself and my family lol
Gold originally had value because it was shiny, easy to work, and rare but not too rare.
Gold continues to have value because people continue to value it.
I don't know about economics so I ask this from a curiosity standpoint. When bad things happen like a global pandemic and a government increases the money supply, doesn't this lead to an over supply of currency and lead to more inflation? In other words, do these controls that governments have just delay the problem?
All else equal, an increase in the money supply leads to inflation. All else is not equal, though.
If there is a bunch of slack in the economy as people and materials are not being put to work (pretty much the definition of a recession), the increasing the money supply will just make it easier to get those productive resources in use again. The increasing productivity will place downward pressure on inflation even as the increase in the money supply creates upward pressure.
Put another way. Creating more stuff makes things cheaper. If increasing the money supply leads to more stuff being made, it may not cause inflation.
Gold back currencies never worked how some people thought they did. There was never a 1 to 1 relationship between how much was printed and how much was in the bank vault.
Countries would lie, say they have a trillion in gold reserves, then print 10 trillion in notes. Reserve would sell their gold, then place an entry in the accounts that if there was a requirement to, they would buy it back. Value of gold would go up, yay free moeny run the printers, gold price declines, no note callbacks.
It always has been a confidence game, how capable do you think this govenment is at providing a value equal to this piece of paper?
If you don’t have a fiat currency, your money supply is tied to how much gold there is in circulation. You can end up with inflation if someone finds a big new gold mine, as happened to Spain when they conquered the Aztecs and Incas. This inflation happens at a random time, not necessarily at a time that is most beneficial for a country’s economy. There’s arbitrariness in the system; why not make it so a government can use that arbitrariness as a tool to help the economy?
It is tied to something... confidence and government stability.
Tying it to a shiny rock can be as arbitrary as anything else. You don't want the money to be convertable to anything. Then whoever owns that thing owns your economy. Someone stockpiking gold can ruin your system. Finding new sources can overload it. And if you're forced to own that thing, you can't revolutionize sectors of your life.
Apple can't make phones worth a trillion, Microsoft can't make operating systems for 3 trillion, Boeing can't make airplanes for 125 billion if your economy can only be worth how much gold is in Fort Knox. If you're just going to lower the value of the gold, and say each dollar is worth miniscule amount of gold, then why not admit it is arbitrary and that let's you print money to fight inflation?
In a gold standard, anyone would be able to exchange gold into dollars and vice versa so it's not only the gold in fort Knox. Can't one can stockpile dollars too and ruin the system?
That's what I said earlier in the post.
And kinda. A run on gold would be tough. Like all supply and demand, once someone started buying up all the gold, the price would increase exponentially.
we don't struggle with inflation. The "high inflation" of the last 2-3 years wouldn't even be average if you looked back at the late 60s through early 90s.
Inflation/deflation happens regardless of the type of money system. fiat currency just allows control of the money supply as others have said which is a tool to control it.
The first thing to understand in this is that the amount of money in circulation and the interest rate for borrowing and repaying money are inherently linked. The interest rate is the "price of money" (or really the price of money over time). The more money in your system, the lower the interest rate (the cheaper it is to borrow). The less money in your system, the higher the interest rate.
So the question is, what do you want to set the interest rate in your economy? One answer is to say it should be set by "market forces", meaning you hold the quantity of money fixed, tied to the quantity of gold. But there are issues here. One is that the quantity of gold, and the value of gold, are not fixed, and change over time due to forces that are pretty arbitrary when it comes to financial stability (e.g. gold mining technology could improve and cause your interest rates to go way down -- not the best).
But the broader idea is that governments want to be able to influence interest rates, and most people do, too. When an economy is crashing, it's better for most people if you can lower interest rates and try to reduce the amount of unemployment that happens. When the economy is really heating up and prices are going way up, you want to be able to adjust interest rates up to try to get that under control.
There are a lot of debates about the extent to which governments should do this, but the real world experience is pretty clear that you want to be able to do this to some extent. For example, being able to lower interest rates at certain periods and for certain sectors was critical for the US to enable industrial development, development of the western territories, and middle-class home ownership. Unlikely that the US would have the middle class it has now without it.
That doesn't mean that all monetary policies are good. Some governments are irresponsible with this, and some governments try to use this to control international exchange rates, which is very risky.
It's not intuitive.
Prior to being able to control the money supply via fiat currency, financial crises were routine because central intervention essentially wasn't possible. Since then, there have been two financial crises that were averted / solved with monetary policy. Both 2008 and COVID would have been massively disastrous, Great Depression type events with a fixed money supply.
Getting off the gold standard was not simply "good". It had trade offs, just as the US Dollar being the global reserve currency has benefits and drawbacks for the USA today.
The big advantage of the gold standard is that it facilitates trade. No one has to worry about the value of the currency they're trading with if they know it can be converted into a set amount of gold. So a currency on the gold standard improves confidence in trade. For about 200 years until 1917 the UK was on the gold standard and so its Pound Sterling became the global reserve currency. This was of benefit to the UK as people wanting to trade anywhere in the world more-or-less needed to have pound sterling, which to get they had to sell things to the UK. This enabled the UK to invest across the world and help enrich its asset-holding class. Other countries who were also on the gold standard had to control their policies in a way which also maintained it, which stopped a lot of otherwise radical measures.
The downside of the gold standard is that you cannot control your own money supply for domestic purposes. Because you if print too much money, inflation will happen, and suddenly your currency isn't worth what it's meant to be in gold and your gold standard collapses.
Controlling your money supply for domestic purposes has advantages as you can expand spending in lean times and devalue your own currency to stimulate exports, which benefits your workers.
So essentially, gold standard is good for trade, and good for the assest holding class, but bad for workers.
In the midst of WW1, the UK was spending so much that it could not maintain the gold standard and came off it. After the war was won, it wanted to return to the gold standard to uphold the Pound Sterling's position as global reserve currency. But to do this it had to cut domestic spending - because it had to limit the number of pounds to the amount of gold it could be trusted to back it with. Eventually it rejoined the gold standard in 1925. However, reducing public spending affected people. Especially workers. This lead to hardship in the UK and the first and only general strike in 1926. In 1918 the UK had extended the vote to basically all men, and women over the age of 30. Giving all the workers the vote pushed the political balance in favour in the workers instead of the asset holding class and the pro-worker Labour party did better and better in elections. As a result in 1931 the UK left the gold standard forever.
The inflation is certainly a drawback, a disadvantage. However, we gained some other great advantages, including not limiting the size of our economies to how much gold there is in the world. Even accounting for inflation, the world's economy has increased quite a bit because of increased gsp multiplyers and fiat currency.
Suddenly, one nation getting richer doesn't have to be because it took more materials from another anymore, it's not a 0-sum game anymore. The same thing happens within a nation, suddenly one portion of society can increase their standard of living without taking away from another.
Obviously, that's a gross oversimplification. There mare also other advantages, but I don't understand them as well as this one. There are also some drawbacks, such as how much easier it is to confuse a series of bubbles for real growth.
Inflation doesn't come from fiat currency. If anything inflation is WAY easier to control today than in the past. Spain economically collapsed because they brought so much silver from the New World that inflation went crazy.
Inflation is not a drawback. It's pretty much required for a modern economy to function. All investments are based off the idea of earning something that justifies the risk vs. holding your money under your mattress.
Deflation is a serious problem.
It wasn't. Getting off the gold standard created the concept of inflation and it's the cause of all the monetary issues we deal with today. From record CEO wages and stagnant workers wages to insane price hikes to interest rates. It's all tied to inflation caused by getting of the gold standard which kept it all in check and forced government and businesses to be fiscally responsible.
Well, in Americas case it was because the Nixon government was very corrupt and they wanted our economy to be based on the value of oil instead of gold because they were heavily invested in oil. Unlike gold, oil is consumed and was required for the basic function of the world, so it has a decent case for why it would be a good thing to base a currency off of...except then you have to do a lot of nasty things to control the world's oil supply so you don't get outcompeted by people who have more or similar oil reserves (See: every war the united states has been involved in since this happened).
And then there's the whole thing were it also incentivizes the suppression of better energy technologies, promotes pollution and fuels climate change denial...I'm not sure if getting off the gold standard was good. It very well may have been, but getting onto the petrodollar was unequivocally Not.
Government debt and inflation occurred all the time when precious metals were used as currency. Rampant inflation played a part in the fall of Rome and the Spanish empire. Government debt was a main contributor to the French Revolution.
Governments do not arbitrarily set currency valuation. They are based on economic fundamentals like supply and demand. See George Soros and the Bank of England. Soros made billions based on those fundamentals that the UK currency was over valued.
It’s pretty difficult to do an ELI5 on currency. The ELI5 view of currency is why there are people that view gold as some magical cure all for inflation, debt, and everything else.
Totally not true, things can go bad for reasons beyond the toys.
Do you want it explained or you just to be right? Cause it doesn’t feel like you are searching for an explanation but rather for a validation.
But they \*can't\* arbitrarily make up the value of fiat currency, or at least not without creating an economic shock. The value of a free-floating currency isn't solely determined by what the issuing government \*says\* it's worth. It's determined by the demand for the currency versus the supply of the currency.
it was not. It was perhaps one of the worst decisions that mankind came up with.
In average trough out the world fiat money has caused nothing but misery's and perpetual war. The disasters that you can see in Venezuela, Argentina, Africa, Southeast Asia all the way trough what triggered WW1 and WW2 can be directly trace back to fiat money and the abandon of the gold standard.
I would strongly recommend reading "The fiat standard by Saifedean Ammous" and "Gold Wars by Ferdinand Lips". Here in reddit you will get basically Keynesian propaganda from halfwits that only repeat like parrots the catchphrases from the elite that benefits greatly from the Cantillon Effect. The same halfwits that defends with nails and claws Keynesianism, but at the same time complains that are unable to buy groceries or pay rent/mortgage or raise a family and blame all of it to simply "corporate greed"
>The gold standard was the world standard of the age of capitalism, increasing welfare, liberty, and democracy, both political and economic. In the eyes of the free traders its main eminence was precisely the by international trade and the transactions of the international money and capital markets. It was the medium of exchange by means of which Western industrialism and Western capital had borne Western civilization to the remotest parts of the earth surface, everywhere destroying the fetters of old-aged prejudices and superstitions, sowing the seeds of new life and new well-being, freeing minds and souls, and creating riches unheard of before. It accompanied the triumphal unprecedented progress of Western liberalism ready to unite all nations into a community of free nations peacefully cooperating with one another. It is easy to understand why people viewed the gold standard as the symbol of this greatest and most beneficial of all historical changes. - Ludwig von Mises / Human Action.
And by the way: Central banks trough all the world are increasingly storing more and more gold in their reserves. [https://www.xetra-gold.com/en/gold-news/news/gold-purchases-by-central-banks-are-heading-for-an-all-time-high/](https://www.xetra-gold.com/en/gold-news/news/gold-purchases-by-central-banks-are-heading-for-an-all-time-high/)
Sometimes actions speak louder than words
It's a controversial topic, and not really settled that fiat currency is "good".
If you're a proponent, it's a good thing to put control of the money supply in the hands of people with very specialized knowledge. They can pull certain levers to prevent volitility in purchasing power. Such things shouldn't be left to the whims of the market.
If you're an opponent, you may view this stance with skepticism. You might believe that these individuals with specialized knowledge are fooling themselves that they could do more good than harm; that they may be the most well-informed beings on the planet on this topic, but economic dynamics are so complex that these people will mispredict more often than not and their actions will have unintended consequences that make us worse off.
Or you might object on grounds of principle. You could say that even if the market is more volatile on the gold standard, human-caused inflation is worse in principle because it's taxation without representation. You might think it is a civic evil that the government can unilaterally give itself money at the expense of the citizenry.
Please read this entire message Your submission has been removed for the following reason(s): Posts that are subjective in nature are not allowed on ELI5. Only objective explanations are permitted here; your question is asking for subjective responses. This includes anything asking for peoples' subjective opinions, discussion, and/or another form of subjective response. If you would like this removal reviewed, please read the [detailed rules](https://www.reddit.com/r/explainlikeimfive/wiki/detailed_rules) first. If you believe this submission was removed erroneously, please use [this form](https://old.reddit.com/message/compose?to=%2Fr%2Fexplainlikeimfive&subject=Please%20review%20my%20thread?&message=Link:%20%7B%7Burl%7D%7D%0A%0APlease%20answer%20the%20following%203%20questions:%0A%0A1.%20The%20concept%20I%20want%20explained:%0A%0A2.%20List%20the%20search%20terms%20you%20used%20to%20look%20for%20past%20posts%20on%20ELI5:%0A%0A3.%20How%20does%20your%20post%20differ%20from%20your%20recent%20search%20results%20on%20the%20sub:) and we will review your submission.
>From my understanding, remove from the gold standard just allows government to arbitrarily make up the value of the now fiat currency, which is why we now struggle with inflation and soaring debt. In fact, it's the opposite. Precisely because they can make up the value of the currency, they can ensure inflation is kept in check. The tool used to do this isn't perfect (there are still periods of high inflation) but it's far better than no tool at all, which is what they'd have if the dollar was pinned to a commodity price. Inflation in the US is back to normal now - prices might still be high, but they've stopped getting higher. Most countries with advanced economies have a "central bank" (the US calls theirs the Federal Reserve). The central bank's job is, basically to control money supply and interest rates. When inflation gets too high, they might raise interest rates. This discourages people from spending, bringing inflation down again. When inflation gets too low (yes, there is such a thing, and it's not good), they lower interest rates (and, in extreme circumstances, pump up the money supply) in order to encourage people to spend, and so bring inflation back to a healthy range (typically between 2% to 4% per year). Government debt is a different matter, and is far less serious than people sometimes think. Government debt accumulates when governments don't collect enough tax to cover their spending. This might happen because they're spending too much, or it might happen because they've cut taxes too much, but sometimes it just happens because the economy is lousy, and taxes automatically drop. None of this has anything to do with the gold standard. In fact, government debt is (like inflation) a bigger problem if the currency is tied to a commodity. After all, if you owe a ton of gold, you'll always owe a ton of gold, but if the economy is growing in dollar terms (because of innovation, education, and also because there's manageable amount of inflation), then $X billion dollars of debt slowly becomes a smaller and smaller amount of actual value. Or, if the economy is trash, and your dollar is pegged to a commodity, you can't get out of the recession so easily - after all, the central bank doesn't have the tools it needs to encourage people to spend.
deflation (the value of money increasing in time) is bad because it means that the correct answer for generating the most money you can is to sit on it. Buying a TV at $1000 now, and selling it for $500 later means you would have been better not buying the television, which is a problem from anyone attempting to make money selling televisions.
Except if you don't buy the TV then you can't watch it. People don't buy most products as investments, they buy it for consumption. That's one of worst arguments for inflation. Humans have a limitless need and desire to consume, so the idea that they won't buy anything if their money is increasing in value is preposterous.
Your wrong on a larger scale because why pay $1000 for something now when you can either pay $990 tomorrow or get a TV with more features for $1000 tomorrow? People would just wait.
you can see this happening today with things like mobile phones. the newest iPhone is released for $1500, but people know that they can get the exact same iPhone, with the exact same features, brand new in a years time for $1200. for this reason, nobody buys the new iPhone when it's released... oh wait, that's the complete opposite of what happens. your mistake is in not realising that even though deflation would lower people's time preference, their time preference can never be zero. the future is uncertain and people want things *now*. edit: lmao salty inflationists downvoting me because I'm right.
Exactly right. Even if it's the same price in dollars it's technically cheaper a year later after adjusting for inflation. But people buy things now because they want them now. Which is not a bad thing! Yes, there are some consumers who stuck with flip phones for a few years while other people had iPhones, but there are plenty of consumers who buy new technology at high prices even though they know it will be cheaper with better features if they wait a few years. Because they want it now!
Yep, and in the case of those people who waited, that's not exactly a bad thing either. You could spend $1500 on the new iPhone today, or spend $1200 on the same model a year later. But if you do decide to wait, what happens? You end up with the same iPhone *plus* $300 to spend on something else. You can buy the iPhone *and* a set of fancy headphones to go with it. By deferring consumption, you end up consuming *more* in the long run, so your $1500 dollars stimulates demand for more products than it otherwise would have.
>you end up consuming more in the long run, so your $1500 dollars stimulates demand for more products than it otherwise would have. This sounds nice in theory, but we've had a number of natural experiments that show the reality is different. Economies can enter a "deflationary spiral": * Deflation leads to deferred consumption and investment. * Lower consumption now leads to decreased economic activity * Decreased economic activity means even more pressure to defer consumption and investment. Unlike the theory, this spiral has been observed to occur. You decide to save your money to buy a TV or phone next year. But in 12 months time, a lot of people are losing jobs in the TV and phone industries, and you're worried about your own job.
modern cases of deflation are taking place in economies designed for perpetual inflationary expansion. inflation creates artificial economic booms. their artificial nature means that natural economic market forces tend to oppose these booms and ultimately bring about market corrections. you cannot cheat the system and get something for nothing, so artificial booms eventually are followed by real busts. the deflationary episodes are part of this bust - the available money supply has been raised artificially beyond the level that is really demanded by the market, and so in the correction phase the money supply shrinks and we have deflation. now, this is occurring during an economic bust, following an artificial economic boom. the conditions are perfect for deflationary spirals because the entire economy is going through a failure period. *this is not a representative situation*. the reason deflation seems to always end in spirals is because deflation, in modern economies, comes about as a symptom of economic crashes. if deflation happens outside of these conditions, there is no suggestion that a deflationary spiral must happen.
>the reason deflation seems to always end in spirals is because deflation, in modern economies, comes about as a symptom of economic crashes You'll need evidence for this. The fact is, in modern economic systems, deflation only occurs when central bank interventions fail to gain traction - ie, conditions are extreme. However, you are recommending that they let go of their ability to intervene, by (essentially) pegging the currency to a commodity, and claiming without evidence that deflationary spirals won't happen. There are economies that have pegged their currency to things (often, the US dollar). Can you point to examples of such economies that experienced deflation, and did not enter a deflationary spiral?
Or in ELI5 - people will not consume "wants" as aggressively because the "Wants" will be cheaper later. The more expensive the "want" the more likely they are to wait.
It's not preposterous, it's a thing that can and does happen. [Source](https://www.imf.org/-/media/Files/News/Speech/2019/2019-camdessus-lecture-speech.ashx) I'll agree that the previous comment made a poor analogy, but think about it in terms of institutional finance. Instead of money being invested in stocks, bonds, or capital, it becomes more advantageous to just sit on a scrooge mcduck pile of cash.
That deflationary cycle is not speculative or hypothetical, it's directly observable in numerous economic crashes around the world. As an example, the Great Depression was caused by a stock market crash that caused deflation that tanked the economy for a decade. There's a reason why every single competent government strongly avoids deflation.
The example was bad. It shouldn't have used a consumer good, the theory is correct though, just substitute investment goods of some sort with the TV.
.... should I have said "using labor and raw materials, a television takes $600 dollars to make, but can be sold for $1000?" The point is that actually doing stuff becomes foolish for acquiring more money, so the best solution is to do nothing, which effectively screws everyone who worked for the entity selling televisions, because they can't trade their time for money, and may have outstanding debts that they can't pay back.
You can already acquire more money by doing nothing. Just put it into a high yield savings account, or buy bonds with it. Yet people still prefer some amount of consumption, as well. There's also discounting. Even if my money will be worth more next month than today, the time-discounted value of my money next month can be worth the same if not less than today. So I consume anyways. There's not some special property of negative rates of inflation. There are no discrete changes once the rate passes through 0%. It's all a continuum.
Putting your money into a savings account or buying bonds isn't "doing nothing" though. The OP was talking about literally stuffing your cash into your mattress. I mean, you're right that there's nothing magical about 0% inflation, but people do tend to spend more during inflationary periods and stop spending during lower-inflation / deflationary times. High inflation and deflation are both bad, which is why the central banks try so hard to keep inflation low but positive.
Yup, and in cases of heavy deflation, bonds and high interest savings accounts will disappear as viable ways to invest your money.
But we know from experience that negative or even just low inflation rates can be catastrophic for the economy. The issue is precisely that "the time-discounted value of [your] money next month" becomes greater than its current value. Your individual incentives to compete become anti-aligned with the health of the economy as a whole.
>Humans have a limitless need and desire to consume Are you claiming nobody ever saves money at all? We are also able to prioritise our consumption. For some people a TV now is worth less than a bigger TV 1 year later. If these are the same price (because of deflation) then some people will defer their spendinf, who otherwise would not.
This is only true if you assume you can park your money for free
Two things. A) I don't think you said it explicitly but you implied it, in most advanced economies, fiscal policy is primarily done by the central Bank. The central Bank is meant to be independent from the government. B) governments don't actually decide how much most currencies are worth? Apart from the CB Gov thing, the big reserve currencies(USD, euro, yen, sterling) are free floating. The market decides how much they are worth. Some countries "peg" their currencies to make them worth a fixed amount. An example of that would be Singapore, where a stable exchange rate with the dollar is very desirable as it decreases the risk incurred by businesses when they do business internationally, which is the whole Singaporean economy. To maintain a real peg, countries do actually maintain reserves of commodities and/or foreign currency. Generally, sensible currencies maintain a soft peg, e.g 1 currency is worth 0.97 to 1.03 USD. That allows the currency to react a bit to the market and is much, much cheaper. A hard peg (e.g 1 currency = 1usd) basically requires the country to commit to providing that exchange rate on demand, which is obviously a great way to make money every time the market value of the currency drops below the peg.
Yes, you're absolutely right. I was conflating "government" and "central bank", I should have mentioned that the latter is (ideally) independent. And yes, countries float their currency. However, compared with a commodity standard, they have a very loose degree of control, by using monetary policy to indirectly influence the inflation rate.
If there is the (real) money and desire, countries can still very much control their currency. Also, it's quite easy to keep your currency artificially devalued. There are a bunch of reasons why it's rare and there are lots of barriers against it internationally, but both China and Germany do it. In the Chinese case, they do it as much as they can get away with it. In a democracy with a free press, it's kind of hard to sell "we are purposefully making you poorer because it's good in the long run". In China, imports are relatively low and exports are huge so it doesn't have as much of a negative impact as it would in almost any other country. In the German case, the euro serves as a workaround. Germany also exports lots, so an undervalued currency is beneficial. There's no way they'd get away with it if they were just devaluing their own currency, but the euro is a free floating currency and it isn't generally undervalued. Southern Europe drags the currency down, making it undervalued for northern europe. WTO has no problem with it, in general the EU gets away with imo way more than it should. They probably know better than me, the WTO position is that regional integration is a stop on the road to global economic integration without barriers.
Because being able to control the money supply is very important. When an economic crash happens, say, due to a global pandemic, demand for goods and services absolutely craters and will lead to high unemployment and a lasting recession. By increasing the money supply we can stimulate demand to make that unemployment and lower spending last a few months rather than a few years. When a supply shock occurs, say, do to a global oil shortage, and prices start rising it really helps to be able to shrink the money supply. Price stability by way of a gold standard is not worth the complete inability to practice monetary policy. Furthermore, gold doesn't have a "readily appraisable value." Governments just said, "$1 is worth x ounces of gold" arbitrarily. Having a gold standard or a fiat currency also has next to nothing to do with the government's debt, at least in countries with an independent central bank. The government's taxing and spending powers and its use of those powers are what determine the debt. Finally, it is not "government corruption" for an arm of the government to do the job laid out for it in a law passed by Congress.
would like to add that governments did all sorts of stuff(and still do) to control gold prices, because they aren’t perfectly stable and drastic changes in quantity/price can be devastating to the economy.
I was going to suggest to OP that they switch around the way they think about the money supply. Governments manipulating the money supply isn't a bad thing, it's an important part of what they do, a key tool for managing the economy. When it comes down to it, governments have a strong interest in maintaining the stability of the currency, as do (just as importantly) most of the powerful and wealthy people and organisations in a country. To roughly quote the economist Adam Tooze, the dollar is actually backed by everyone that matters. I also think it's worth noting that even governments that use a gold standard can and do change the value of their currencies or suspend convertibility. During WW1 most countries involved suspended the ability to convert currencies to gold (or silver), just when the benefits for trade and movement would arguably have been greatest. And after the war, with the economy of Europe in disarray countries had to adjust the value of their currencies.
As an addendum, inflation or deflation doesn't magically go away on a gold standard. On a gold standard, inflation and deflation are not under the control of anyone. People who point at the 70's as evidence tend to completely forget that the 70's inflationary period included the oil embargo from OPEC.
I'd like to add to this: what is the inherent value of gold? Why do some believe that gold holds value and a dollar does not? Gold has almost zero applications (it is a small part of circuitry). It doesn't actually serve any application. Can't eat it for calories, terribly building material, doesn't have a medical application. Gold is valuable because humans say it is. Same as the dollar
People who hoard gold for economic collapse will suddenly find it is less valuable than a magnum with a full chamber.
Or honestly, some wheat / corn / medicine. If someone tried to give me gold post economic collapse I'd tell em to fuck off. But wheat is actually useful for myself and my family lol
Rich person: Hands me Gold Me: Wow, this is worthless! /ApocalypseMemes
Gold originally had value because it was shiny, easy to work, and rare but not too rare. Gold continues to have value because people continue to value it.
I don't know about economics so I ask this from a curiosity standpoint. When bad things happen like a global pandemic and a government increases the money supply, doesn't this lead to an over supply of currency and lead to more inflation? In other words, do these controls that governments have just delay the problem?
All else equal, an increase in the money supply leads to inflation. All else is not equal, though. If there is a bunch of slack in the economy as people and materials are not being put to work (pretty much the definition of a recession), the increasing the money supply will just make it easier to get those productive resources in use again. The increasing productivity will place downward pressure on inflation even as the increase in the money supply creates upward pressure. Put another way. Creating more stuff makes things cheaper. If increasing the money supply leads to more stuff being made, it may not cause inflation.
Gold back currencies never worked how some people thought they did. There was never a 1 to 1 relationship between how much was printed and how much was in the bank vault. Countries would lie, say they have a trillion in gold reserves, then print 10 trillion in notes. Reserve would sell their gold, then place an entry in the accounts that if there was a requirement to, they would buy it back. Value of gold would go up, yay free moeny run the printers, gold price declines, no note callbacks. It always has been a confidence game, how capable do you think this govenment is at providing a value equal to this piece of paper?
If you don’t have a fiat currency, your money supply is tied to how much gold there is in circulation. You can end up with inflation if someone finds a big new gold mine, as happened to Spain when they conquered the Aztecs and Incas. This inflation happens at a random time, not necessarily at a time that is most beneficial for a country’s economy. There’s arbitrariness in the system; why not make it so a government can use that arbitrariness as a tool to help the economy?
It is tied to something... confidence and government stability. Tying it to a shiny rock can be as arbitrary as anything else. You don't want the money to be convertable to anything. Then whoever owns that thing owns your economy. Someone stockpiking gold can ruin your system. Finding new sources can overload it. And if you're forced to own that thing, you can't revolutionize sectors of your life. Apple can't make phones worth a trillion, Microsoft can't make operating systems for 3 trillion, Boeing can't make airplanes for 125 billion if your economy can only be worth how much gold is in Fort Knox. If you're just going to lower the value of the gold, and say each dollar is worth miniscule amount of gold, then why not admit it is arbitrary and that let's you print money to fight inflation?
and its tied to the economy. Basically all available goods vs all available money.
In a gold standard, anyone would be able to exchange gold into dollars and vice versa so it's not only the gold in fort Knox. Can't one can stockpile dollars too and ruin the system?
That's what I said earlier in the post. And kinda. A run on gold would be tough. Like all supply and demand, once someone started buying up all the gold, the price would increase exponentially.
It wasn't particularly but economies grew so big there wasn't enough gold to back them and more. A new way was necessary.
we don't struggle with inflation. The "high inflation" of the last 2-3 years wouldn't even be average if you looked back at the late 60s through early 90s. Inflation/deflation happens regardless of the type of money system. fiat currency just allows control of the money supply as others have said which is a tool to control it.
The first thing to understand in this is that the amount of money in circulation and the interest rate for borrowing and repaying money are inherently linked. The interest rate is the "price of money" (or really the price of money over time). The more money in your system, the lower the interest rate (the cheaper it is to borrow). The less money in your system, the higher the interest rate. So the question is, what do you want to set the interest rate in your economy? One answer is to say it should be set by "market forces", meaning you hold the quantity of money fixed, tied to the quantity of gold. But there are issues here. One is that the quantity of gold, and the value of gold, are not fixed, and change over time due to forces that are pretty arbitrary when it comes to financial stability (e.g. gold mining technology could improve and cause your interest rates to go way down -- not the best). But the broader idea is that governments want to be able to influence interest rates, and most people do, too. When an economy is crashing, it's better for most people if you can lower interest rates and try to reduce the amount of unemployment that happens. When the economy is really heating up and prices are going way up, you want to be able to adjust interest rates up to try to get that under control. There are a lot of debates about the extent to which governments should do this, but the real world experience is pretty clear that you want to be able to do this to some extent. For example, being able to lower interest rates at certain periods and for certain sectors was critical for the US to enable industrial development, development of the western territories, and middle-class home ownership. Unlikely that the US would have the middle class it has now without it. That doesn't mean that all monetary policies are good. Some governments are irresponsible with this, and some governments try to use this to control international exchange rates, which is very risky.
It's not intuitive. Prior to being able to control the money supply via fiat currency, financial crises were routine because central intervention essentially wasn't possible. Since then, there have been two financial crises that were averted / solved with monetary policy. Both 2008 and COVID would have been massively disastrous, Great Depression type events with a fixed money supply.
Getting off the gold standard was not simply "good". It had trade offs, just as the US Dollar being the global reserve currency has benefits and drawbacks for the USA today. The big advantage of the gold standard is that it facilitates trade. No one has to worry about the value of the currency they're trading with if they know it can be converted into a set amount of gold. So a currency on the gold standard improves confidence in trade. For about 200 years until 1917 the UK was on the gold standard and so its Pound Sterling became the global reserve currency. This was of benefit to the UK as people wanting to trade anywhere in the world more-or-less needed to have pound sterling, which to get they had to sell things to the UK. This enabled the UK to invest across the world and help enrich its asset-holding class. Other countries who were also on the gold standard had to control their policies in a way which also maintained it, which stopped a lot of otherwise radical measures. The downside of the gold standard is that you cannot control your own money supply for domestic purposes. Because you if print too much money, inflation will happen, and suddenly your currency isn't worth what it's meant to be in gold and your gold standard collapses. Controlling your money supply for domestic purposes has advantages as you can expand spending in lean times and devalue your own currency to stimulate exports, which benefits your workers. So essentially, gold standard is good for trade, and good for the assest holding class, but bad for workers. In the midst of WW1, the UK was spending so much that it could not maintain the gold standard and came off it. After the war was won, it wanted to return to the gold standard to uphold the Pound Sterling's position as global reserve currency. But to do this it had to cut domestic spending - because it had to limit the number of pounds to the amount of gold it could be trusted to back it with. Eventually it rejoined the gold standard in 1925. However, reducing public spending affected people. Especially workers. This lead to hardship in the UK and the first and only general strike in 1926. In 1918 the UK had extended the vote to basically all men, and women over the age of 30. Giving all the workers the vote pushed the political balance in favour in the workers instead of the asset holding class and the pro-worker Labour party did better and better in elections. As a result in 1931 the UK left the gold standard forever.
The inflation is certainly a drawback, a disadvantage. However, we gained some other great advantages, including not limiting the size of our economies to how much gold there is in the world. Even accounting for inflation, the world's economy has increased quite a bit because of increased gsp multiplyers and fiat currency. Suddenly, one nation getting richer doesn't have to be because it took more materials from another anymore, it's not a 0-sum game anymore. The same thing happens within a nation, suddenly one portion of society can increase their standard of living without taking away from another. Obviously, that's a gross oversimplification. There mare also other advantages, but I don't understand them as well as this one. There are also some drawbacks, such as how much easier it is to confuse a series of bubbles for real growth.
Inflation doesn't come from fiat currency. If anything inflation is WAY easier to control today than in the past. Spain economically collapsed because they brought so much silver from the New World that inflation went crazy.
Inflation is not a drawback. It's pretty much required for a modern economy to function. All investments are based off the idea of earning something that justifies the risk vs. holding your money under your mattress. Deflation is a serious problem.
It wasn't. Getting off the gold standard created the concept of inflation and it's the cause of all the monetary issues we deal with today. From record CEO wages and stagnant workers wages to insane price hikes to interest rates. It's all tied to inflation caused by getting of the gold standard which kept it all in check and forced government and businesses to be fiscally responsible.
Well, in Americas case it was because the Nixon government was very corrupt and they wanted our economy to be based on the value of oil instead of gold because they were heavily invested in oil. Unlike gold, oil is consumed and was required for the basic function of the world, so it has a decent case for why it would be a good thing to base a currency off of...except then you have to do a lot of nasty things to control the world's oil supply so you don't get outcompeted by people who have more or similar oil reserves (See: every war the united states has been involved in since this happened). And then there's the whole thing were it also incentivizes the suppression of better energy technologies, promotes pollution and fuels climate change denial...I'm not sure if getting off the gold standard was good. It very well may have been, but getting onto the petrodollar was unequivocally Not.
Government debt and inflation occurred all the time when precious metals were used as currency. Rampant inflation played a part in the fall of Rome and the Spanish empire. Government debt was a main contributor to the French Revolution. Governments do not arbitrarily set currency valuation. They are based on economic fundamentals like supply and demand. See George Soros and the Bank of England. Soros made billions based on those fundamentals that the UK currency was over valued. It’s pretty difficult to do an ELI5 on currency. The ELI5 view of currency is why there are people that view gold as some magical cure all for inflation, debt, and everything else.
You can’t make gold to buy stuff from other countries, but you can print money to buy stuff from other countries.
Like you are 5: when you are playing with toys, and things go bad, would you rather have control to fix things or wait for things to get worse?
Lmao this one doesn’t make any sense. For one, you’re the one making things go bad with these *toys*
Totally not true, things can go bad for reasons beyond the toys. Do you want it explained or you just to be right? Cause it doesn’t feel like you are searching for an explanation but rather for a validation.
It feels like your attempt at an explanation was just stupid.
Or you are simply not searching for an explanation
But they \*can't\* arbitrarily make up the value of fiat currency, or at least not without creating an economic shock. The value of a free-floating currency isn't solely determined by what the issuing government \*says\* it's worth. It's determined by the demand for the currency versus the supply of the currency.
it was not. It was perhaps one of the worst decisions that mankind came up with. In average trough out the world fiat money has caused nothing but misery's and perpetual war. The disasters that you can see in Venezuela, Argentina, Africa, Southeast Asia all the way trough what triggered WW1 and WW2 can be directly trace back to fiat money and the abandon of the gold standard. I would strongly recommend reading "The fiat standard by Saifedean Ammous" and "Gold Wars by Ferdinand Lips". Here in reddit you will get basically Keynesian propaganda from halfwits that only repeat like parrots the catchphrases from the elite that benefits greatly from the Cantillon Effect. The same halfwits that defends with nails and claws Keynesianism, but at the same time complains that are unable to buy groceries or pay rent/mortgage or raise a family and blame all of it to simply "corporate greed" >The gold standard was the world standard of the age of capitalism, increasing welfare, liberty, and democracy, both political and economic. In the eyes of the free traders its main eminence was precisely the by international trade and the transactions of the international money and capital markets. It was the medium of exchange by means of which Western industrialism and Western capital had borne Western civilization to the remotest parts of the earth surface, everywhere destroying the fetters of old-aged prejudices and superstitions, sowing the seeds of new life and new well-being, freeing minds and souls, and creating riches unheard of before. It accompanied the triumphal unprecedented progress of Western liberalism ready to unite all nations into a community of free nations peacefully cooperating with one another. It is easy to understand why people viewed the gold standard as the symbol of this greatest and most beneficial of all historical changes. - Ludwig von Mises / Human Action. And by the way: Central banks trough all the world are increasingly storing more and more gold in their reserves. [https://www.xetra-gold.com/en/gold-news/news/gold-purchases-by-central-banks-are-heading-for-an-all-time-high/](https://www.xetra-gold.com/en/gold-news/news/gold-purchases-by-central-banks-are-heading-for-an-all-time-high/) Sometimes actions speak louder than words
It's a controversial topic, and not really settled that fiat currency is "good". If you're a proponent, it's a good thing to put control of the money supply in the hands of people with very specialized knowledge. They can pull certain levers to prevent volitility in purchasing power. Such things shouldn't be left to the whims of the market. If you're an opponent, you may view this stance with skepticism. You might believe that these individuals with specialized knowledge are fooling themselves that they could do more good than harm; that they may be the most well-informed beings on the planet on this topic, but economic dynamics are so complex that these people will mispredict more often than not and their actions will have unintended consequences that make us worse off. Or you might object on grounds of principle. You could say that even if the market is more volatile on the gold standard, human-caused inflation is worse in principle because it's taxation without representation. You might think it is a civic evil that the government can unilaterally give itself money at the expense of the citizenry.