Saw a post about this at !history@hexbear.net and was a bit confused by exactly how badly the people there were going at each others throats in the comments. Nobody seemed able to agree on what precisely happened in 1971. Suggested explanations included:
- Neoliberalism being declared the state religion by Grand Moff Richard Nixon
- The gold standard being abolished
- The oil crisis
- The Republican and Democrat parties becoming increasingly divided
- Declining birthrates
- Institutional Racism
If any of you could give some explanations with, like, sources that aren’t just 10 pages of graphs with arrows pointing at 1971, that would be pretty great.
Categorically false.
The problem with a gold standard is that your monetary supply can’t increase with your population, unless you can also increase your gold reserves at the same rate. If your monetary supply can’t keep pace with the population, then your money increases in value. That’s a bad thing; it makes it more expensive to buy anything, or to use any kind of credit.
A way to explain it is that if you have 100 people, and $1000, then you have an average of $10/person. But if your population increases to 110, and you still have the same amount of money, then you have an average of $9.09/person. But that $9.09 has the same purchasing power as $10 had previously. The result is that people hold on to money, since it’s going to be far more valuable in a few years than it is now. This is a form of deflation, and it’s a good way to crash an economy.
Going off the gold standard allows the federal reserve to more readily manipulate the monetary supply–they don’t have to hold reserves of gold or silver–to keep an economy growing along with a population.
Deflation is only bad for the rich. You are spitting bad justifications for the end of the gold standard. There is only one reason it was ended : the USA defaulted as their gold reserve was empty after all major actors like France demanded their gold back
Really? You think that deflation is good for workers? Deflation means that they get laid off, because why the fuck would I, were I an employer, continue to employ someone when their effective wage rises ever year, if I can get someone for half the real wages? Deflation means that no one is going to get a mortgage, because you’re going to be underwater on that loan before the ink is dry; that also means that you won’t be able to sell a house if you need to. With deflation, everyone puts of discretionary purchases, because the increasing value of money means that those purchases will be cheaper at a later date. With everyone stopping discretionary spending, you see a very rapid halt to the economy.