Can I Has Gold Standard Nao Prx?

Central banking is bullshit. The stability provided by a gold or silver backed currency increases growth in the long term more than artificial booms and busts caused by central banks lowering interest rates.

Let's look at the current bank and mortgage situation in the US.

1. Fed lowers Federal Funds Rate to increase money supply and spurn economic growth.
2. Banks find themselves with a surplus of reserves by 1.
3. Average investors are tired of the 21st century's weak stock market and decide to get into real estate.
4. Banks, with a surplus of reserves, make loans to anyone with a pulse.
5. Speculators, trying to get in while it's good, take high risk loans because interest rates are low.
6. 3-5 combine to form a housing boom.
7. 6 causes an artificial inflation in real estate prices.
8. Due to 7 and a new (artificial) sense of wealth, people take out mortgages on their homes.
9. Inflation, caused by 1, manifests as the new money makes its way through the economy.
10. The economy contracts just as suddenly as it had expanded.
11. Those who took the most risk during the expansion now take the hardest fall as the malinvestment in the housing market and mortgages is liquidated.

This is where we are now. Unfortunately, amidst the second largest bank failure in US history, the charlatans in the US government are the ones with the least understanding of why. So I ask again, can I has gold standard nao prx?

>>22
Please, if you can't keep up then just GTFO. Of course a market naturally fluctuates and makes adjustments. This is because the economic forces behind any market TEND TO EQUILIBRIUM. So ask yourself what government interference in the market does. Obviously it TENDS AWAY FROM EQUILIBRIUM, otherwise there wouldn't be any interference in the first place. Government may implement "spread the work" schemes, guaranteed loans for those who would normally (NATURALLY) be too high risk, price fixing, rent control, wage fixing (note all three of these are essentially the same thing), and many more.

But economics is a lot like physics (and I'm a 4th year physics student). In any natural system, a move away from equilibrium requires an external force. But a RESTORING FORCE will always tend back to equilibrium. Think of pushing a box on the ground. You provide an impulse and the box accelerates. Friction (and other) resorative forces then decelerate the box and it comes to a halt. You could suggest just applying a constant force to the box to overcome restorative forces. Sure, you can do this for a certain length of time, but you can't push the box forever.

The market is obviously a much more complicated system than a box on the ground, but the underlying concepts are similar, and to get back on topic, I'll use a central bank example. Central banks operate through the manipulation of interest rates (in the US this is called the Federal Funds Rate). The intended consequence of this is to increase the money supply. In time, this action leads to inflation. Inflation is exactly the consequence that is desired by the bank because in Keynesian and other circles it is believed that inflation stimulates the economy (it's really just a tax, but that's a different topic). This belief comes from not understanding the full consequences of this intervention. You can read OP to see what the full consequences are. The inflation causes an artificial high, but the restorative forces of the market always return it to equilibrium. In the end, rather than stable and healthy growth, the economy grows in spurts and abrupt halts -- bubbles and bursts.

A good case study is Japan's bubble economy of the 70's and 80's. Japan made huge growth during that time, but it was largely artificial, caused by the continued lowering of interest rates. But the restorative forces eventually overtook them when the central bank could not lower interest rates any longer (the interest rate was VIRTUALLY ZERO), and the result was what the Japanese call the "lost decade" a period from 1990 to 2003 when all the malinvestment was liquidated and subprime loans were defaulted. Today, Japan sees much more modest growth, but it's also a much healthier, natural, and sustainable growth.

Why do we discuss the gold standard? Because it makes a central bank unnecessary and makes it almost impossible for the government to manipulate the value of its currency. It replaces the central bank with the infinitely more efficient market.