... then won't a recession result when private agents increase the money supply, too?
Say there's a gold standard in place; gold is money, and the supply of gold is the money supply. If there's random year to year fluctuations in gold production, or superior capitalist production allows an ever increasing production of gold, then won't the money supply expand eventually, lowering interest rates and so forth?
But it won't cause a recession, right, because it's "good money" when private banks issue it and "bad money" when the federal reserve issues it?
Oh boy. That graph only serves to make my point. This source estimates the above-ground gold is around 5.8 billion ounces. Your graph merely shows fluctuations in the rate of new gold mining.
World production is around 2,500 tons per year out of a total of 165,000 tons of above ground gold, a gold supply growth rate of 1.5% a year- and the production rate relative to total reserves is growing exponentially as superior capitalist production produces ever-more gold per year. If technology continues to advance thanks to dynamic market processes, we might see 5% or even, yes, 10% annual increases in the gold stock in a few decades.
This 1.5% annual increase, in addition to changes in circulation, is a pretty rapid rate of circulating gold supply growth compared to the "inflation" (Austrian definition) which supposedly caused the 19th century business cycle.
No. You're confusing different sense of interest rate.
I'm not. Your own link notes that the Keyensian analysis claims that higher interest rates increase the demand for money, implying lower interest rates reduce the demand for money.
For example, if increases in the demand for money tended to reduce sales revenues more than cost expenditure, then there would be a negative relationship between the demand for money and interest rates (as held in standard Keynesian analysis).
This Keynesian position is obviously incorrect as it does not take into account the pure rate of interest, and hence when gold is used as money, lower interest rates increase the demand for money, especially when increased demand for money increases sales revenue.
I also noted that you tend to link to Mises articles without creating your own argument; I'd appreciate it if you were able to put it into your own words rather than rely on the (highly reputable, I'm sure) Austrian economists who write those.
Ban-Evader:World production is around 2,500 tons per year out of a total of 165,000 tons of above ground gold, a gold supply growth rate of 1.5% a year- and the production rate relative to total reserves is growing exponentially as superior capitalist production produces ever-more gold per year. If technology continues to advance thanks to dynamic market processes, we might see 5% or even, yes, 10% annual increases in the gold stock in a few decades.
Please prove that the production rate is necessarily (and always?) growing exponentially due to "superior capitalist production" (and please define that term while you're at it). Your last sentence is just pure speculation - why should anyone take it seriously?
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It might not; it's just an extrapolation. It's best for you to hope it doesn't happen, though.
This is irrelevant anyway, because the amount of gold being mined does not necessarily reflect the amount of gold in circulation, which fluctuates dramatically.
Ban-Evader:It might not; it's just an extrapolation.
Translation: "I agree that no one should take it seriously." So why then did you write it in the first place?
Ban-Evader:This is irrelevant anyway, because the amount of gold being mined does not necessarily reflect the amount of gold in circulation, which fluctuates dramatically.
By "in circulation", you mean "being used as money", right? If so, isn't that what Clayton said earlier?
Because it's even more of a problem if gold production becomes much higher under an efficient free market.
Yes, and it means that rapid money supply growth would still occur under a gold standard.
Ban-Evader:Because it's even more of a problem if gold production becomes much higher under an efficient free market.
This seems to be a giant red herring thrown in the face of my post about how fractional-reserve banking can expand the (perceived) money supply vastly more than mining more gold or even printing more paper fiat currency. You seem to have (conveniently) ignored that post.
Ban-Evader:Yes, and it means that rapid money supply growth would still occur under a gold standard.
It does, huh? Explain how exactly.
This isn't fractional reserve banking. This is just the amount of gold in circulation. You can't "fractionally reserve" physical gold.
Because the amount of gold in circulation is constantly changing.
Ban-Evader:This isn't fractional reserve banking. This is just the amount of gold in circulation. You can't "fractionally reserve" physical gold.
You don't seem to understand what gave rise to the "financial panics" during the 19th century. It was mainly due to fractional-reserve banking. Note that this fractional-reserve banking went on in spite of there being a gold standard during that time.
Ban-Evader:Because the amount of gold in circulation is constantly changing.
That in itself in no way means that rapid money-supply growth would necessarily still occur under a gold standard.
That's not the point. I'm saying that the amount of gold in circulation increases just as fast as any fiat currency over a credit cycle.
... And I'm saying it doesn't.
Then you didn't see the chart above.
I did. But you didn't see my post above.
Your post talks about fractional reserve banking, not gold circulation.
Fractional-reserve banking is the cornerstone of any modern-day fiat-currency system.
I never disagreed with that. What will prevent the money supply (the amount of gold in circulation) from fluctuating under a gold standard?