I am aware of today's inequality (e.g., I read Piketty back when he was making a splash). But the critique is that Greenspan argued gold standard = less inequality and that fails on the historical record.
If we want to talk about the causes of the 'New Gilded Age' that's something else. As a general starting point I'd begin with:
Gold Standard is probably a force that acts against inequality but the forces pushing inequality today are just much stronger. Technology that creates winner take all markets and incredible leverage with few people being one.
> Gold Standard is probably a force that acts against inequality […]
Is there evidence for this?
During the Gold Standard era there were many periods of deflation, which is bad for people with debt: back in the day this was often farmers, nowadays it'd be anyone with student loans or a mortgage.
1) Deflation causes debt to become more expensive. Inflation causes your money to become worth less. There's a simple solution to debt becoming more expensive, but no practical solution to you getting a pay-cut every year, especially when a sizable chunk of people don't even realize they're getting a pay-cut and don't want to be unthankful for a "raise." That issue alone already causally explains much of the rise in inequality. Cut people's wages in a stable or deflationary system and there will be hell to pay. Cut them in an inflationary system and they say thank you.
2) Changes in the past are exaggerated. The Fed did a study some time back estimating CPI levels since 1800. [1] They found that from 1800 to 1950 the CPI never shifted more than 25 points from the starting base of 51, so it always stayed within +/- ~50% of that baseline. That's through the Civil War, both World Wars, Spanish Flu, and much more.
It's even more interesting to contrast this from 1971 onward. 1971 is when Bretton Woods ended and the government was given a free hand to start 'printing money' so to speak, and inflation became the new policy. Since then the CPI has increased by more than 800 points, 1600% more than our baseline. So if the 'Gilded Age' saw deflation of ~30% over some decades, what will historians in the future call an era of thousands of percents of inflation over some decades?
> 1) Deflation causes debt to become more expensive. Inflation causes your money to become worth less. There's a simple solution to debt becoming more expensive, but no practical solution to you getting a pay-cut every year, especially when a sizable chunk of people don't even realize they're getting a pay-cut and don't want to be unthankful for a "raise." That issue alone already causally explains much of the rise in inequality. Cut people's wages in a stable or deflationary system and there will be hell to pay. Cut them in an inflationary system and they say thank you.
You don't cut people's wages in a deflationary system, you just cut people.
That's true even in the short term, but if the deflation is expected to be sustained, you might as well cut all of them, because if you turn all your assets into hard currency your purchasing power increases every year, whereas if you take the risk of actually hiring people to make stuff during a period of sustained deflation then it might not and on average you have to get them to make more stuff for less money simply to maintain the amount of money you started off with...
There is a simple solution to debt being expensive, but that simple solution involves paying wealthier people a greater proportion of their income to have somewhere to live. Remarkable how people can act like this is favourable to workers and yet pay rises (an inflationary phenomenon!) are bad for them....
You're engaging in a pretty common fallacy by taking the contemporary standard, in a world full of wild inflation and funny money, retroactively applying it backwards, seeing [correctly] that it wouldn't work, and thus concluding that funny money is needed. But you need to consider the impacts of the funny money itself.
One fundamental difference is that inflationary systems incentivize the hoarding of 'things', like housing, as a means of escaping inflation. This is because the price of 'things' will always increase with inflation. But in stable or deflationary systems there's no inflation to hide from and the price of 'things' is stable or can even decrease over time, so there's no longer a hoarding incentivization for 'things.'
So you can see a visible impact of this in housing prices. In the 50s a typical house used to cost about 2 median salaries. [1] Go further back in time and you're down to 1 median salary. In modern times, we're at historic highs of a median home costing 5x a median salary, and in desirable locations like western California it even gets up to 12x local median salary for a median home. [2] That's median, not Beverley Hills.
So yes, in modern times you need endless funny money to do achieve even basic societal things, like owning a roof over your head. But that's because of the funny money. And this is before we get into realities like the fact that when the government 'prints' a trillion dollars, most all of that is going to end up in the pockets of the wealthiest of society giving them even more money to speculate with, driving prices up even more. And much more, there are endless self feedback mechanisms that have left us in a vicious cycle that's probably inescapable at this point.
Real wages are up 14% over the past 47 years [3], and we now have a trillionaire. That's inflation for you. What do you think they'll call this era in the future?
> But in stable or deflationary systems there's no inflation to hide from and the price of 'things' is stable or can even decrease over time, so there's no longer a hoarding incentivization for 'things.'
Here's how things worked in the early 20th century: Let us say a farmer had taken out a mortgage in 1928, and let us say his mortgage payment was US$20 (equivalent of 1 oz. of gold). In May 1929 he would have had to have sold 114 pounds of cotton to earn $20 (or 18 bushels of wheat, 23 of corn, 44 of oats). By May 1932 he would have had to sold 369 pounds of cotton (or 38 bushels of wheat, …):
If he had 4 farm hands and paid each $5 (total $20), that's a lot more crops that need to be sold to cover payroll.
And it would have been the same for selling any good or service: a company that makes widgets needing to pay the same wages: sell more widgets to cover payroll, or reduce payroll (per head, or total heads).
Falling prices may seem good from a buyer/consumer point of view, but there's also the seller/supplier side of the equation.
I don't think assessing data during the Great Depression is meaningful. It's in the same way that I wouldn't look at data from the ever-recurring crashes/bubbles in modern times to critique things, outside of the frequency of those events themselves.
But, that said, your overall point is perfectly reasonable, but does something the other poster also did in that you're taking present times and retroactively applying it, when that's not really accurate. For instance this [1] is from the 1910 census. There were about 3.95 million farms operated by owners and about 66% of them were owned with no mortgage. Page 8 / table 7. And that was at a record high for the time owing to the increasing trend of becoming a debt riddled society. Go back not that much further in history and near to 100% of farmers owned their farmers, free and clear.
Modern times incentivizes going deep into debt, past times disincentivized it. I think it's becoming fairly clear that a debt driven society is unsustainable, largely because it requires infinite exponential growth to sustain itself. We swapped to a completely free floating currency only in 1971, after defaulting on our debt obligations under Bretton Woods. And that's also when the digitization expansion started taking off, which drove decades of unimaginable growth, making that infinite exponential growth seem briefly viable. But now that growth phase is slowing. We need either LLMs or space to trigger another exponential growth phase. If they don't, then there's going to be rough seas ahead.
> One fundamental difference is that inflationary systems incentivize the hoarding of 'things', like housing, as a means of escaping inflation. This is because the price of 'things' will always increase with inflation. But in stable or deflationary systems there's no inflation to hide from and the price of 'things' is stable or can even decrease over time, so there's no longer a hoarding incentivization for 'things.'
It would incentivise the hoarding of currency instead. Holding or investing in anything else is, on average, a losing bet in a sustained deflation.
By definition, deflation is people choosing not to contribute to production obtaining increasing returns on doing and risking absolutely nothing at the expense of those who do contribute to production working harder or taking more risks to serve them. You're accusing me of "engaging with a pretty common fallacy" whilst arguing against a tautology.
> So you can see a visible impact of this in housing prices. In the 50s a typical house used to cost about 2 median salaries. [1] Go further back in time and you're down to 1 median salary. In modern times, we're at historic highs of a median home costing 5x a median salary, and in desirable locations like western California it even gets up to 12x local median salary for a median home. [2] That's median, not Beverley Hills.
That's the supply and demand of housing, as well evidenced by the large disparity of house price changes. Deflation does not incentivise building more houses (quite the opposite actually). In practice, it just means you pay higher mortgage rates and end up with a house that isn't worth anywhere near as much as your mortgage repayments, or you rent - both of which involve more of your lifetime income being transferred to richer people.
> Real wages are up 14% over the past 47 years [3], and we now have a trillionaire.
The trillionaire is arguing the same position as you on currency. I'm sure he and the other billionaire funded think tanks attacking "fiat money" almost as strongly as they attack tax and regulation on billionaires and services for the poor do so because they care about giving the little guy more...
> By definition, deflation is people choosing not to contribute to production obtaining increasing returns on doing and risking absolutely nothing
Deflation results from not printing money. When the growth in the amount of stuff in the economy exceeds the growth in the amount of money in the economy - each dollar becomes worth more over time. That is deflation. Yeah you can sit on it and take it as passive gains. You can also use those gains in your spending power to achieve even greater things. It's up to the person.
As for the past having higher mortgages, this provides data on such from 1950. [1] "...the typical monthly mortgage payment [of] $54.31 for principal, interest, FHA mortgage insurance premium, hazard insurance, taxes and special assessments, and any miscellaneous items such as ground rent." 1950 median personal was $3300, so a house mortgage cost 20% of that. Current median personal income is $45k, so that'd be a mortgage on a new house of about $750 with tax/insurance/assessment/etc included in that. We can safely reject the claim that mortgages were higher.
However, your critique that your house would not be worth as much as you paid is 100% true. When things do not endlessly increase in value, going into debt to purchase them comes with a real cost. That is one of the many reasons prices were able to be kept in check. Housing becoming a vessel for speculation just inevitably drives their prices endlessly up while people actually trying to find a place to live and raise a family suffer for it all. This is all only magnified when you add the surplus of funny money. It being speculation or supply and demand are not somehow different things as you seem to be implying.
---
Basically I find most of all arguments about the past tend to be false or exaggerated, and not at all intentionally. We're all taught that economic policy in the past primitive and misguided, as true as the sky is blue and grass is green. Yet when you look at what people could buy in the past on a typical median salary, or the lifestyle it could provide - it almost sounds like make believe, and is way more than enough to make one wonder what went wrong? And I think currency policy is largely the answer to that question.
> Deflation results from not printing money. When the growth in the amount of stuff in the economy exceeds the growth in the amount of money in the economy - each dollar becomes worth more over time. That is deflation. Yeah you can sit on it and take it as passive gains. You can also use those gains in your spending power to achieve even greater things. It's up to the person.
It is, indeed up to the person. But if you offer billionaires risk free gains from turning their billions into cash and burying it in the ground (quite literally at the expense of everyone else having to work harder to make up for it), even the ones that are willing to invest or lend need to extract more out of the poor to make it worth their while.
Again, when it's tautological the policy you are advocating gives the idle rich risk free real gains at the expense of the working poor, it is impossible to argue with a straight face that the implications are beneficial for equity and growth...
> As for the past having higher mortgages, this provides data on such from 1950. [1] "...the typical monthly mortgage payment [of] $54.31 for principal, interest, FHA mortgage insurance premium, hazard insurance, taxes and special assessments, and any miscellaneous items such as ground rent." 1950 median personal was $3300, so a house mortgage cost 20% of that. Current median personal income is $45k, so that'd be a mortgage on a new house of about $750 with tax/insurance/assessment/etc included in that. We can safely reject the claim that mortgages were higher.\
I am not sure why you are pretending that this was a period of sustained deflation though. Au contraire, the large increase to housing supply in the 1940s coincided with CPI being much higher than recent averages, driven in part by a relaxation in monetary policy to support war financing and full recovery from the Great Depression.[1]
We're not interested in reinventing the 1950s though, we're interested in how to achieve deflation. Since monetary base growth has an inverse relationship with interest rates, eliminating it implies structurally higher base interest rates, which implies homebuyers pay more money to the bank for the same house (which is almost guaranteed to be worth significantly less than its financing costs). No amount of inaccurate historical claims is going to dress that up as a progressive move that will make housing more affordable.
> Yet when you look at what people could buy in the past on a typical median salary, or the lifestyle it could provide - it almost sounds like make believe, and is way more than enough to make one wonder what went wrong?
Seriously, you'd rather live in the 1950s where according to the report there's a 5% chance you don't have a toilet, never mind extreme luxuries like a toilet or television. Well I guess at least aspiring to that lifestyle is consistent with your enthusiasm for policies that enrich the haves at the expense of the have nots...
[1]A Great Depression which is the last period to actually sees sustained price falls for more than a quarter or two, which was also the last period to see free convertibility of the USD to gold. It was a period of 25% unemployment...
In deflation you're not fighting against the system, like you are with inflation. If you earn 0.001% on your money, you're seeing a net increase in your wealth. Your comment implies you were equating it with inflationary systems where you need to beat inflation just to stop losing money. So both the rich and poor constantly see their spending power increase. If a billionaire wants to bury all his money, he's only hurting himself.
By contrast inflation is very different. Ostensibly everybody has their spending power reduced, but the wealthy can sidestep this by hoarding assets, whereas lower income individuals lack the resources to do so. In both systems the rich get richer. The major difference is what happens to the non-rich. In deflationary systems, they see their spending power increase over time. In inflationary systems, they see it decrease.
The thing I think you're not appreciating is self-feedback within systems. Consider education. Why are education costs inflating far ahead of already high inflation rates? It's because education is/was perceived as relatively priceless, and the government passed various laws mandating and enabling the ease of access to debt. So you take something that was perceived as priceless and give people vast sums of debt to purchase it. The exact same is true of housing. The endless inflation-driven price increases make it seem like a priceless asset. Now insert debt and away we go.
---
The reason I've focused on data from 1950 is because that's the final decade before we entered the full-on money printing era. Such had already commenced by then, but it was relatively modest. The reason I think they did some things much better is because of the median standard of life. Somebody could go to university, buy a car, and graduate with enough squirreled away for the downpayment on their first home - on the back of a part time job. This is not a trope - I can cite the exact figures if you fancy.
This is a large part of the reason that the boomers were largely completely out of touch with modern economics, and wondered why people didn't just work harder, like they did. In any case, all of the arguments I'm making are even more pronounced if you go further back than the 50s (sans catastrophes of course), but then we get to economic eras that are more and more alien. The 50s still feels at least kind of 'real', though when you look at what they could afford on the median, it already feels a bit like make believe.
> If a billionaire wants to bury all his money, he's only hurting himself.
Nope, if you're fixing the supply of money, you're making the monetary economy zero sum. If a rich person buries his money, that's less money available to everyone else that needs money, forcing them to work harder to earn the same amount of income to pay their bills. The billionaire on the other hand ends up richer than before without taking any risks or doing any work, or even maintaining anything
> By contrast inflation is very different. Ostensibly everybody has their spending power reduced, but the wealthy can sidestep this by hoarding assets, whereas lower income individuals lack the resources to do so. In both systems the rich get richer. The major difference is what happens to the non-rich. In deflationary systems, they see their spending power increase over time. In inflationary systems, they see it decrease.
This is just nonsense though, isn't it? The rich can hoard assets in any sort of system, but you are the person explicitly advocating a system rigged to ensure that the asset they hoard is fixed in supply and required by the non-rich as a means of payment, guaranteeing the rich risk free gains in perpetuity from starving the economy of resources. By contrast when the economy isn't rigged to preserve people who hold cash's wealth at the expense of those who need to earn cash, rich people have to invest in stuff like companies, which carries risk and actually contributes towards stuff being made and people having jobs
Non rich people can't afford to hoard cash in either system, they have bills to pay and need somewhere to live. In the US today, most non-rich people store most of their net worth in their house, an asset you are advocating becoming an expensive burden on them which will never increase in value.
As for the poor people living month to month, they don't get to store any non-trivial amount of value in either system. But an economy that isn't starved of capital offers them jobs, which is a lot better than "hey, that cash you need to spend on this month's food would buy you even more food this time next year if you didn't need to eat, why are you even worried about the unemployment rate?"
> The thing I think you're not appreciating is self-feedback within systems. Consider education. Why are education costs inflating far ahead of already high inflation rates? It's because education is/was perceived as relatively priceless, and the government passed various laws mandating and enabling the ease of access to debt. So you take something that was perceived as priceless and give people vast sums of debt to purchase it. The exact same is true of housing. The endless inflation-driven price increases make it seem like a priceless asset. Now insert debt and away we go.
The thing I think you're not appreciating is that I'm the participant in this discussion that understands how supply and demand works. The reason why the price of education grows ahead of income, and the growth in the number of people that would like graduate jobs exceeds the growth in reputable college places, and since college places also proportionally boost people's lifetime incomes, it's usually a good bet. This is nothing to do with it being "priceless". Suffice to say non-rich people who want college places are not helped by either by making it expensive or impossible to access finance or depressing their future incomes, even though both factors will ceteris paribus depress tuition fees.
> The reason I've focused on data from 1950 is because that's the final decade before we entered the full-on money printing era.
The reason you've focused on data from 1950s which is not an example of the policy you advocate is the last time we had the two things you favour (policy actually encouraging year on year deflation due to the US money supply being limited by its redeemability for gold) was a time of misery almost unprecedented in modern history. And if you want a money supply that's actually fixed in terms of commodities rather than going through repeated inflation/crash cycles as banks try to deal with the gold supply being insufficient, we're going back to pre-industrial times. There's a reason why there's no period of sustained deflation in modern history for you to compare with outside a massive credit crunch, and that's that sustained deflation is synonymous with a credit crunch, with all the side effects that entails.
CPI inflation in the 1950s averaged around where it's been for most of this century (and the Fed's actual target), just with more volatility. It was much higher the decade before (during which the US won a war, and also found enough money left over to boost the housing stock). The fact a decade with inflation averaging just under 2% is actually compatible with the job outlook being relatively rosy and more people being able to buy homes than before actually fits my argument better than yours.
Memes about 1950s purchasing power[1] to counter boomer arguments is not an argument against the tautology that deflation is sustained by people who contribute to the economy working harder and taking more risks with their investments to ensure that the people can increase their purchasing power by not contributing to the economy.
[1]fwiw there are an order of magnitude more cars in the US today, and you can definitely buy a better car than most people were driving in the 1950s with a part time job today. And it's funny how those memes never mention other consumer goods, or food or that more people actually manage to buy their home today...
You continue to ignore the incentives that systems create. A college degree in the past also provided a comparable earning premium, yet was affordable by a median part time job. Then the government expands debt opportunities and the costs skyrocket to the point of being independently unaffordable. Why? Because the incentives changed. Like Charlie Munger said, "Show me the incentive and I'll show you the outcome."
Deflationary systems do not create an incentive to hoard money, because you're not fighting against the system. You can even take smaller edges. If you can see a 0.1% return on something, your wealth is growing and becoming worth more on top at the same time. In an inflationary system, small edges are impossible to pursue because you need to beat inflation just to break-even. In any case somebody burying their money would hurt nobody but themselves - because what matters for macroeconomic factors here would be the amount of money in circulation. For a wealthy individual just swimming in a Scroogian vault of gold coins, that's going to be a negligible chunk of their wealth.
In 1950 the US was still under Bretton Woods which imposed a gold standard on the government. That only ended in 1971 and, even then, only due to a default. I can try to use previous dates if you prefer but on top of the systems being more alien, you also start to run into data issues. Lots of data we take for granted today (and in 1950) didn't exist when you go further back.
There are not more home owners now a days, though there are more people with mortgages. The paper I linked earlier [1] gave the numbers. In 1951 56% of people owned their home, free and clear. That was a local low because the 50s were the early beginnings of the end. In modern times it's 40%, which is a local high owing primarily to the retiring elderly in non-urban areas in low-income states. The demographics of home ownership are rather broken in modern times, and it's trending worse.
You're completely right with have more gidgets and gizmos today. But do you think a new graduate would prefer to (1) graduate debt free, with a car, and enough to put a down-payment on a house or (2) graduate with nothing except crippling levels of debt, and a smartphone. I feel that should be snarky, but in reality I don't think it's even really an exaggeration. I used to be quite dismissive of the economic arguments around fertility collapse, but when you start to look into these things, there really is something to it.
> You continue to ignore the incentives that systems create. A college degree in the past also provided a comparable earning premium, yet was affordable by a median part time job. Then the government expands debt opportunities and the costs skyrocket to the point of being independently unaffordable. Why? Because the incentives changed. Like Charlie Munger said, "Show me the incentive and I'll show you the outcome."
No, I understand incentives perfectly well. Students are incentivised to go into debt for their education because the premium (and or intangible value) they expect exceeds the cost of the loans.
If the repayments attached to those loans become more expensive, universities are only incentivised to drop their entry fees enough to cover the increased costs of servicing student debts. The overall cost to students would remain unchanged, it's just less of it would be paid to the entity providing their education.
(In practice, of course, they wouldn't need to drop it that by the amount because they could just skew their admissions more towards people that already had $200k lying around, and the all important profit-generating sportsball players of course. Funny how all the changes you want to help the less well off actually benefit those with dynastic wealth at their expense...)
Above all, I understand that universities which now have low single digit acceptance rates do not need to drop their tuition costs to equivalent to part time earnings to fill their courses, with or without federal government loans. The problem with trying to derive how a market will behave if things change from naive memes about the 1950s is that it's rarely a good idea to ignore all the other things that have changed since the 1950s, like the demand for graduate jobs and graduate premium being much higher US economy now being based around high value added services rather than production lines, expectations of college attendance being much less narrowly centred on certain social classes and even women and non-white people expect to be given equal treatment nowadays. (You'll like the 1950s even more when you learn how high the acceptance rates for that cheap Ivy League degree was! At least until you understand why so few people were applying for them...)
> Deflationary systems do not create an incentive to hoard money, because you're not fighting against the system. You can even take smaller edges. If you can see a 0.1% return on something, your wealth is growing and becoming worth more on top at the same time.
No, this argument is as basically wrong as saying "if we supply less of something the price will go down". Indeed arguing that reducing the money supply will make people willing to invest or lend their money for lower return is literally a form of that argument.
Actually a 0.1% monetary return is terrible under any form monetary policy once you understand that risk is a thing and interest rates are not the same thing as the rate of inflation.
In a deflationary system, someone might expect to earn a 2% real return on doing absolutely nothing with their money. So a 2.1% real return on risking money on something isn't very attractive.
And that's even before we've considered base interest rates, which are much higher when credit creation is limited by an arbitrary amount of metal rather than risk assessment. Nobody is investing for a 0.1% when they can extract much higher returns out of lending to a bank with gold-standard induced maturity transformation issues. And the fact that if you're investing in producing something expecting a 0.1% return when prices of everything are going down, you will normally get a return of a lot more than 0.1% investing in producing the same good or service when prices of everything are going up...
> In 1950 the US was still under Bretton Woods which imposed a gold standard on the government. That only ended in 1971 and, even then, only due to a default. I can try to use previous dates if you prefer but on top of the systems being more alien, you also start to run into data issues. Lots of data we take for granted today (and in 1950) didn't exist when you go further back.
If your argument is that deflation is good and the Fed's target of 2% inflation is bad, arguments that a decade which had 2% inflation was good supports an argument against your post. Bretton Woods wasn't sustainable precisely because the system relied on the US government being able to print many more dollars than it could redeem in bullion. An intellectually honest argument in favour of deflation would focus on opposing the decision to end the 1930s deflation by making the dollar no longer convertible to gold, not the 1950s when prices rose at rates comparable to modern central bank targets (but with more volatility). There's certainly no lack of data for the 1929-33 period. Of course, the fact that data and analysis all points to the problems created by arbitrarily tying currency to a fixed commodity is inconvenient...
But yeah, I would agree that as we go further back into history systems are more alien. This is one of the reasons why I don't think that trying to bring the banking systems of the ancients into an era of universal access to real time information and internationally mobile capital is a good idea.
> The paper I linked earlier [1] gave the numbers. In 1951 56% of people owned their home, free and clear. That was a local low because the 50s were the early beginnings of the end
Something of a moot point since the 1950s isn't remotely representative of your deflationary dream, but you misread that. Your paper puts the number of owner occupiers including people with mortgages at 53%, which the paper you linked to points out was an all time high (though it's over 65% now) not a local low. 56% of the owner occupiers were free and clear, which works out at under 30% of the total. There's no shortage of actual time series showing how these figures work, though I guess one of the few advantages of trawling through 1950s papers looking for data is you get other gems like 23% of them not having a bathtub or shower, and rental rates doubling in 10 years. Weird how fewer people owned houses (and cars), considering that according to you, they both basically came free with a degree and part time job everybody paid their mortgages off easily...
> In a deflationary system, someone might expect to earn a 2% real return on doing absolutely nothing with their money. So a 2.1% real return on risking money [by investing in something with an EV of 0.1%] isn't very attractive.
Deflation doesn't affect your wealth by making it literally increase in quantity anymore than inflation affects it by making it literally decrease. If you have something with a expected value of 0.1% per year then if you invest $1000 in it, at the end of the year you have $1001 and your wealth has grown even faster than if you did nothing with it. By contrast if you carried out such an investment in an inflationary system then you also have $1001, but your wealth has decreased relatively significantly because it has much less spending power than your initial $1000. In deflation you can invest in literally anything you think is profitable, and even if turns out to be slightly unprofitable, you'll see your wealth grow. In inflation, you need to see infinite exponential growth, or you lose. So gambling and moonshots are incentivized while stable cost-focused ventures are disincentivized.
This loops right back into education. You're quite fond of calling things you disagree with memes, yet your perspective of education and its 'organic' value is heavily meme driven, so to speak. The college wage premium peaked in the early 2000s, when college prices were substantially lower than they are now, though still already unreasonably high. [1] And the college premium of 2005 was the same as it was in 1915. [2] It's the funny money, and only the funny money. Whether or not people themselves can convert their dollar to gold is largely immaterial to this discussion. The issue is about government's making the money printer go whirrrrrrr, and that decision's subsequent effect on society. Bretton Woods constrained government's abilities to do this, at least ostensibly. But the 1950s were still relatively constrained.
---
The numbers you're giving are misleading. For instance in modern times there's only about 45 million housing units that are owned without debt (don't forget home equity loans as well). [3] And then only some percent of those are owner-occupied, and then only some percent of those are comparable to the type we're looking at - single family, detached. Unfortunately the census does not provide a direct way to combine these data. But we can see as a percent of all housing units (which is about 149 million) we're already approaching quite negligible numbers. Don't get so vested in an argument that you stop sniff testing the things you yourself are saying. Speaking of sniff, it's not like e.g. people just didn't shower in the 50s. The stuff like houses without indoor bathrooms is going to come, overwhelmingly, from things like rural farms and such with outhouses where excreta could then be used as fertilizer.
And yes, rental rates began to skyrocket in the 60s, and the trend began to where we are now. That's when the money printer started going out of control, money was being aggressively injected into society, and everything began being unaffordable - except wages which were (and are) now constantly being pushed downward. And so we got the see inequality spiral out of control, housing become unaffordable for the majority of people, people being unable to graduate without being drowned in debt, and all of these other fun things that modern society has created.
> Don't get so vested in an argument that you stop sniff testing the things you yourself are saying.
If only your self awareness wasn't inversely proportional to your tenacity...
The irony of saying that in response to an exchange where I've observed that you've failed to understand the contents of a source you provided and corrected you about what it actually says! It's well established that home ownership is about 14 percentage points higher than it was in 1950 or about 20 points higher than the actual gold standard era, and that homeowner equity and free and clear home ownership is reached all time recorded highs recently. Trying to rescue your argument by looking at disaggregated data runs into the trouble that numbers of rooms and availability of running water and commutability to well paying jobs is not likely to be favourable to 1950s housing stock, never mind the glories of the deflationary period of the 1930s (other names for that era include National Mortgage Crisis!). It's almost like stuff like 50% deposit requirements and higher relative costs of basics like food and clothing, and needing to live within walking distance of workplaces were an obstacle to people obtaining houses in the gold standard era despite their low sticker prices! The 1940s and 1950s of course were the era of the Fannie Mac, Freddie Mae "funny money" and so started to look a little better. And yes, housing also costs more today than it does in the 1950s, or indeed during actual deflationary periods like the Great Depression and Panic of 1873. Nobody doubts that. Nobody with an adult level of understanding of how the world works argues that it's all about inflation without considering other factors affecting housing supply and demand, from population changes to rural-urban migration to the average person no longer spending a quarter of their income of food. Hint: if something grows significantly above the rate of inflation, it's probably not a primarily inflation-driven phenomenon.
The reason I refer to memes is your repeated failure to understand even basic terminology never mind the actual arguments indicates that you haven't obtained your confidence that you know how the economy should run from actually bothering to learn about it, or even attempting to understand the arguments you're responding to.
Taking an introductory course in economics would be a much better use of your time than responding to an argument about risk and base interest rates by repeating your assertion that risking $1000 to earn $1 is a good decision people should definitely make [in the context of high base interest rates, high credit risk and risk-free real wealth accumulation from not investing], and arguing against a tautology. Nope, deflation by definition means that the real wealth held as cash increases, just as inflation by definition means it decreases (a few posts ago, this was your objection to inflation!).
I've endeavored to completely read your messages. I would appreciate if you returned the courtesy to avoid needless repetition when our messages are already somewhat lengthy owing to the large number of simultaneous topics. And also please cite your numbers - you're now pulling a bunch of numbers/facts out of nowhere that seem largely hallucinated. Citations would go a long way here and take like 3 seconds. So here are the apples to apples base data for the most recent branch of discussion:
Percent of all housing units 'owned' by their occupants = 53% in 1950, 58% in 2025 [1].
Percent of 'owned' housing units without a mortgage = 56% in 1950, 39.4% in 2025. [2]
Approximate (max) rate of 'real ownership' (multiplying the two values) = 29.7% in 1950, 22.9% in 2025.
The first link also goes into detail on the demographic collapse I mentioned showing 'ownership' in people under 35 is at 36.8% and continuing to trend downwards. The local max is being driven by the elderly in non-urban low-income states, as already mentioned. I also have specifically focused on issues above and beyond inflation. Inflation is an effect, not a cause. The cause of these problems (of which inflation is but one) is money printing and the transition to becoming a debt driven society.
I 100% agree that things were awful in 1930. It was the worst economic event in 150 years of deflationary systems in the US that also came on the tail end a number of catastrophes setting up a perfect storm. But focusing on this time is like me arguing that the past was better than 2008. Well yeah, I'd certainly hope so! But in that case it'd say a whole lot less about the past than it would about 2008. I do agree 1950 isn't ideal in a perfect world but it's probably about as good as we can get on balance of the difference in the systems + reliable/impartial data we can obtain and it being a fairly 'normal' era during a time of world war and catastrophic plagues.
---
The latter part of your post turned into an unhinged and incoherent jumble of ad hominem and strawmen. That, I will admit, I am skimming over. If you want to phrase things like an adult, and argue against what I'm actually saying, then I'll happily read it again.
> So here are the apples to apples base data for the most recent branch of discussion:
These are explicitly not apples to apples comparisons because the 1951 percentage is extremely restrictive about the housing units considered (i.e. most apartments are excluded, as are farms) and there's no reason to believe the ownership percentages are equivalent. I could (equally unfairly) point out that the 9.5 million "free and clear" homes in your paper is less than a quarter of the total recorded nonfarm housing stock which is a lot less than the 34 million (39.4%) owned free and clear today.
What is clear though is that no interpretation of the available data is compatible with your original statement that "In 1951 56% of people owned their home, free and clear", or your assertion that something your source claimed had grown massively recently was a "local low". Defending those basic misunderstandings with clumsy misuse of statistics two posts later whilst telling me not to get too vested in arguments is... pretty funny.
Also, as I keep pointing out and you keep pretending isn't the case, the 1950s were a time where inflation rates averaged their current level (but with more volatility) not a time of deflation (and for that matter were also a time of the Fannie Mae mortgage backing you blame for everything, rather than the good old days when you had to save up 50% of the cost of your house as a deposit and pay it off within 10 years). So it is completely irrelevant to your argument for deflation.
You have not addressed any of the other points in my last two posts. I am sorry, but if genuinely don't understand why nobody would invest for a 0.1% return [under a gold standard] even when the post you are responding to explicitly mentions things like interest rates and risk and the relationship between credit prices and money supply, it is not worth my time trying to educate you on what those very basic concepts entail. Especially given that you have made it extremely clear you have no interest in understanding.
There is no point phrasing things like an adult to someone that flat-out refuses to acknowledge very basic adult concepts like interest rates and risk and supply and demand whilst resorting to babyish memes like "money printer go whirrr" and "funny money"
I've already mentioned that the contemporary data are also restrictive. The (of total) maximum possible free and clear owned housing stock is 30% [1] since it's only 45 million units out of a total housing stock of 147. And it'd be even lower because we're only considering owner occupied, and corporations own about 10% of houses in modern times - yet another 'yay' for funny money driven inflation evasion and speculation. So the max would be in the 20s at the absolute most, yet we get 39.4% of homes being owned free and clear. How? By removing a lot of the housing stock from consideration. In any case, much of the stock removed in the 1950s data works against me. For instance farm units had even more favorable ownership rates than general housing stock. There is no 'trick' in the data here.
I've also already said I fully agree that the data we're using isn't ideal in terms of inflation. It was right after WW2 and so there was some serious localized inflation, as well as some early funny money stuff. But 1950 is pretty a pretty reasonable inflection point between 'the good ole days' and the inflation squeeze of modern times. If your argument is that inflation/money printing from the 40s was causing the positive outcomes, you end up with a logical contradiction because we engage in orders of magnitude greater inflation/money printing today, yet have worse outcomes by endless metrics. Furthermore, 1950 wasn't some local max. Most data there was significantly worse than the era prior to the wars, spanish flu, and so on.
As for investment, expected value [2] is a term you do not seem familiar with. It is a risk adjusted value of expected return on something. In modern times any potential venture needs an expected value greater than inflation to break even. That immediately leads to the scenario where you need infinite exponential growth or this economic system collapses. That infinite exponential growth briefly looked possible. Now the digital explosion is plateauing, there's a fertility collapse (which again is very possibly caused, at least in part, by this system's failures) and more. If LLMs or space don't restart the game of kick the can, this system will die. The only question is whether it will go out with a boom or a whimper.
Also, somebody else just submitted this [1]. The Fed just released a paper showing (or at least affirming) that the labor share of income in the US is at its lowest post-war level which is, more or less, equivalent to stating that it's at its lowest level ever. They're likely just using data starting at the 40s for the same reason I am.
But the really interesting thing? Go open their graphs and look where the inflection point is. It's, again, the funny money.
> I've also already said I fully agree that the data we're using isn't ideal in terms of inflation.
It's not a case of it being not ideal. It's the case of it being an example of literally the opposite phenomenon from the one you're arguing for. Arguing that the 1950s are a good example of how deflation helps people is like arguing that Barack Obama is a good example of how Republican candidates make good presidents.
> As for investment, expected value [2] is a term you do not seem familiar with. It is a risk adjusted value of expected return on something.
hahahahahahaha
Again, it's a basic definitional thing that EV isn't adjusted for the investor's risk tolerance (it's a probability weighted average, as your link and many better introductory economics and finance texts you should probably read will tell you.)
Not only am I familiar with what expected value actually means and its use as a synonym for risk-neutral return in investment parlance, I'm also apparently the only participant in the discussion aware that 0.1% expected return isn't likely to leave enough of a risk premium[1] and (ii) investors also have to consider opportunity cost, so even in a world filled with insane risk-neutral investors who'd in principle be comfortable betting their house on a fair coin flip, they still wouldn't touch an investment at a nominal 0.1% return in a gold standard world, because the opportunity cost would be giving up much higher returns on lending the money elsewhere. Because unlike you I know that market and base interest rates are a thing and why they're relevant to the argument. And also they're not the same thing as inflation and are in fact generally inversely related[2].
Once we've got past the basic definitional stuff and the "why doesn't this hypothetical gold standard economy where you're considering investing in a productive venture for a 0.1% return have anyone else that wants to borrow your money?", I could question what sort of venture would get a 0.1% nominal return when prices of stuff it might make are going down, and only get a 0.1% nominal return in an inflationary environment where the prices of stuff it might make are going up[3]. It's easier to make more than 0.1% making stuff to sell next year when prices of everything are going to be 2% higher, and harder when prices of everything are going to be 2% lower.
Again, if you don't have the basic grasp of the relevant terms you're quoting (some of them more high school than undergrad) never mind sufficient grasp to understand even an argument as simple as "risking money to earn 0.1% is not attractive when money is in short supply" have the decency to the possibility that you might not be in a position to know best about how the economy works. Also, if you don't like billionaire capital owners having too much money, maybe don't pin your hopes on the only policy prescription that hasn't trended towards the CATO institute, von Mises and Ayn Rand's[4] arguments in favour of letting billionaires keep more of their money since the 1950s...
[1]in any economy except, ironically, an economy with lots of money printing (seriously, go learn about QE. Hint: it's printing lots of money because printing lots of money is a way to get people interested in investing when interest rates are very low)
[2]and also why, and covering the relevant transmission mechanisms might take half a semester of undergrad macro, but even understanding that money isn't cheap to borrow when its in short supply would get you there.
[3]I mean, when I say wonder, I actually know that the most likely way of achieving that with actual goods and services is if it's an inferior good with negative income elasticity. I'm just not sure why anybody would want to base economic policy on incentivising the production of inferior goods with negative income elasticities, even if such a policy were feasible.
[4]weird how it's all these extremely rabidly pro-billionaire personalities and organizations and none of the pro-worker organizations that want the gold standard back, considering your conviction that it will be good for workers and bad for billionaires.
In the 40s the inflation was, in and of itself, liminal and driven by short-term actions in response to WW2, similar to what happened during the Civil War, WW1, and other such eras. The funny money took off as policy much later. It has very little to do with the current era of the routine 'printing' of trillions of dollars as a normal policy, let alone with a wealth of systems adapted to exploit that to this maximal. This is why the 40s, in terms of outcomes, looked more like previous eras then the current.
In investing, you seem to be trying to derive variance from expected value, which is impossible. And risk is not the same thing as variance. It's entirely possible for an investment with a 0.1% EV to have a lower variance than one with a 15% EV. The obvious example there would be hedges against black swans, contrasted against a government bond from a stable country.
In any case, this argument also works against you. Because the point is that anything with a real expected return of "x" in an inflationary system has a real return of e.g. "x+5" (or whatever the exact delta happens to be) in a non-inflationary system. You cannot, in good faith, try to argue that is a bad thing. Whatever 'x' happens to be, whether 0.1 or 50, it's going to be better in a non-inflationary system.
---
As for social equalities, you likely missed the above note. I'll simply quote it here: "Somebody else just submitted this [1]. The Fed just released a paper showing (or at least affirming) that the labor share of income in the US is at its lowest post-war level which is, more or less, equivalent to stating that it's at its lowest level ever. They're likely just using data starting at the 40s for the same reason I am.
But the really interesting thing? Go open their graphs and look where the inflection point is. It's, again, the funny money."
> In investing, you seem to be trying to derive variance from expected value, which is impossible. And risk is not the same thing as variance.
It's funny, because two posts ago you wrote the words "expected value is a term you do not seem familiar with. It is a risk adjusted value of expected return on something". So you're really only arguing against yourself here
But variance is, in fact a way for investors to assess risk (again, if you had an adult-level of understanding of the subject matter or even a modicum of self awareness you wouldn't keep contesting definitions for no reason). And since investors care about risk adjusted returns, they do not think an expected 0.1% nominal return on productive activity is attractive, least of all in a deflationary environment. (Sure, you can't directly derive variance from expected return, but you don't need to do that to rule out ludicrous scenarios like a sub 10 basis point risk premium on investing in productive activity whilst prices fall, which means you don't invest at 0.1%)
> It's entirely possible for an investment with a 0.1% EV to have a lower variance than one with a 15% EV.
Sure. It is however entirely impossible for a productive venture with a 0.1% EV to have an attractive risk adjusted return under deflation. Nobody with an adult level understanding of finance would make this argument, let alone still be trying to defend it by arguing against their own attempted gotcha multiple posts later. Because they understand basics like "deflation causes debt to be more expensive" (remember a week ago when you wrote that, apparently without understanding what it means), and 0.1% is not a high return on risky activity when debt is expensive. And also, they understand that the risk-adjusted return will be negative, particularly as risks to commercial activity increase under deflation caused by monetary policy intentionally starving the economy of capital).
> Because the point is that anything with a real expected return of "x" in an inflationary system has a real return of e.g. "x+5" (or whatever the exact delta happens to be) in a non-inflationary system
Again, this is just an assertion that only somebody with no understanding of basic stuff like how inflation/deflation affects sales prices and interest rates would make. It is very easy to argue that the price somebody has to pay a wealthier person to borrow money being x+5 rather than x is a bad thing, if you believe that it is better for economies to reward people that make stuff rather than people that have stuff.
The actual point was that it's harder to make a positive money return producing stuff to sell when next year's price is y-2 rather than y+2, and in those circumstances also easy to make a small real return doing nothing or a big real return lending to cover short term debts instead.
Again, I'm sorry you don't understand this, but it's really, really not possible to contest the fact that deflation does not incentivise investment if you understand supply and demand to high school level (never mind the actual nuances of interest rates and transmission mechanisms). I guess I can look forward to you eventually accepting that it doesn't whilst attempting to attribute your current position to me in five days time.
If only you could trade some of your unmatched reserves of persistence for a little actual knowledge...
(you could, for example,read a book instead of doubling down on being wrong by Googling more economic terms to insinuate I'm missing whilst not even being able to define them without making mistakes)
> But the really interesting thing? Go open their graphs and look where the inflection point is. It's, again, the funny money
The really interesting thing is that you've actually managed to find an economic chart without an inflection point to make argument about inflection points, which is quite an achievement! The trend line over the period displayed appears to be a noisy concave function with the noise attributable to economic cycles.
Although if you put a gun to my head any asked me to point to what looks most like an inflection point in this graph without an actual inflection point, I'd probably point to the steepening of the downslope of the curve around the millennium which doesn't seem to have much to do with leaving the gold standard or inflation being high....
>So if the 'Gilded Age' saw deflation of ~30% over some decades, what will historians in the future call an era of thousands of percents of inflation over some decades?
The 'Gelded Age' where the average man had his balls cut off by inflation?
"Gold Standard era there were many periods of deflation" - yes but that's not so much about inequality.
I think there's a lot merit to Gold is a bit better for equality - but it probably holds us all back in the aggregate.
Elon Musk could not be a Trillionaire in the highly speculative cash-flush situation we have today.
The 2008 crash and the current boom are happening only because of alot of extrea money in the system, and it's going to one group, not the others.
The 2008 bailout was to the 'open secret upper class' aka home owners.
If we 'let the cards fall' in 2008 the banking system would have crashed but it's home prices that would have crashed harder.
A 'stricture monetary system' would have forced people to pay the price. Though it would have had devastating consequences as well - it's possible that with stricter lending, the 2008 crisis would have never happened.
FED sets rates that generally favour the GDP, the growth of which is mostly captured by people with more equity. The more loose money for equity etc the more likely it is to be concentraed.
This is all 100% solvable.
There is no ideological debate needed.
A 'relatively strict' Fed, with rules that favour consumer surplus and that is not fully oriented around equities or some 'outside cause' - that's really truly like 'Gold but with some expansion' ... aka a very small-c conservative approach would be a solution that should be acceptable by pretty much everyone except for the MMT people.
I think it would bode better for 'equality' because money means something known, and large enterprise, financiers can't leverage their influence and scale into making it mean something more for them.
I would think it would be the opposite, as the old joke-y "Golden Rule" goes: He who has the gold makes the rules.
> 3) Asset owners thus become "more valuable" by measure of currency.
Under the Gold Standard the currency itself is also an asset, much more so than under (so-called) fiat.
In a supply-demand situation where supply is finite, and demand is potentially limitless, then the suppliers can charge higher prices. When the demand is for money itself, the price is the interest that is charged by the suppliers (lenders, financiers) can be higher.
And not just in good times when everyone is trying to get a piece of the action: the historical records shows interest rate hikes during major economic events (e.g., 1857, 1873, 1893, 1896, and 1907) when risk was higher.
> 4) Renters / non-asset-owners have to eat the costs of inflation while benefiting by none of the inflationary pressure on assets.
Inflation helps debtors:
> If wages increase with inflation, and if the borrower already owed money before the inflation occurred, inflation benefits the borrower. This is because the borrower still owes the same amount of money, but now they have more money in their paycheck to pay off the debt. This results in less interest for the lender if the borrower uses the extra money to pay off their debt early.
The recent Iran-Hormuz oil shock notwithstanding, the major affordability issue in recent years has been housing, and that's more of a land-use policy issue.
Yup. I'm extremely unconvinced that a non-distributionary constraint (ex: limiting the money supply one way or another, i.e. the gold standard, bitcoin, etc.) fixes a distributionary problem.
You know what would fix a distributionary problem? A (re)distributionary solution.
The most obvious one is progressive/wealth taxation (a ceiling) and UBI (a floor).
Keep competitive market dynamics, narrow the window in which they're allowed to operate and add some hard constraints.
Or, if you're scared of UBI: government work programs, like the good old Works Progress Administration.
Tax, and hire millions of people for a good living wage to do things that either need to be done and aren't (infrastructure repairs and improvements, inspections of all flavors, etc), or that don't really need to be done but make some fraction of the population happy (unnecessarily beautiful post offices).
> Yup. I'm extremely unconvinced that a non-distributionary constraint (ex: limiting the money supply one way or another, i.e. the gold standard, bitcoin, etc.) fixes a distributionary problem.
Well, that's good because that's not what limiting the money supply does. It _acts as a force against inequality_. It doesn't _fix_ or _prevent_ inequality that already exists and doesn't claim to stop organic inequalities from arising - but it does put a limit on inequality resulting from an inflation of the money supply.
It doesn't act as a force against inequality though. It literally acts as a force to force the have nots to work harder and pay more to convince the haves to offer them any money for anything (whilst maintaining the purchasing power of any cash rich people that don't want to risk investing in anything that might create any wealth for anyone else)
Historically, I'm not aware of a single major case of the Gold Standard helping with inequality.
In all cases where inequality went down, it was helped by inflationary spending.
Yet Gold Standard (and its intellectual descendants) directly led to several examples of stagnation. The most recent one was in Europe, it lost a decade of growth after 2008 by insisting on austerity.
Yea, that's his point. The gold standard neither prevents nor encourages inequality, except inasmuch as it limits policy flexibility (which, similarly, could be used to promote or limit inequality).
The gold standard mechanistically is a driver of wealth inequality, due to its deflationary effects and lack of a governmental mechanism to create more of it. It is not the only driver of wealth inequality, but when we used it that is what it did.
Policy flexibility is the only one of those that’s in theory responsive to democratic governance. Your opinion of whether that’s a good thing or not depends somewhat on which side of the inequality you’re on, I think.
I've got some news for you about modern levels of inequality.