Agreed with all.
I think it's obvious of the implications of debt based economy if mismanaged.. Although long term it's impossible to manage due to greed and fear. The reason It was done was because economy simply would stagnate and not grow from the 70s on who knows if Internet would have been invented.. Although the system was the best at the time it's not one to look back on and say we totally failed.
Perhaps it was the global roll-out of the telegraph from the 1870s which was the beginning of the end of the gold-standard. Long-distance commerce needed a monetary system which could play out at the same speed, and this transition was complete by 1971. So the debt-money system that resulted was the best that could be done.
It's really interest rate targetting that is the foundation of the system and it's pretty sound according to John Nash although not ideal. Gold standard is less ideal howver Bitcoin seems to be better than both on paper.. In practice who knows. I personally believe nash purposely doesn't acknowldge it because he had a hand in designing it and it may be definition of what he calls ideal money. It would probably result in a big credit crunch lasting years before we prosper so it really depends on if enough people can be convinced of the long term solution giving up some short term pain.
And this is what is failing because it has all but hit the zero-bound and staying there year after year: in the US, Eurosystem, Japan, UK and Switzerland - simultaneously. CBs are tinkering with ideas like negative rates, and want to restrict the use of physical cash to just small transactions, forcing people to stay in electronic money where negative rates might get traction. Desperate stuff. No wonder there are seismic cracks in the credit markets.
And that is why gold as money worked for so long. Yes there were cycles, but since money never extended too far beyond the base money (M0 gold), the busts were relatively small.
With debt money, as you said 95% of money in use isn't even printed yet, and on top of that is further leverage. This means that the bust would be massive and crushing in a manner that could never happen under a gold standard.
What the US traded was a series of small but easily recoverable busts that continuously cleansed out the system, for a system that appears stable but in reality is not, the series of small busts are simply being allowed to build into one massive bust.
Absolutely. However, governments are now such control freaks (unlike in 1907 when the crash then was considered more like a force of nature, and allowed to work itself out), that the one massive bust to come may well be met with one massive bout of money printing!
They exchange function for confidence, the real for the prettier illusion.
I suppose it is a risk... If you are running such a really long con, even your successors might fall for it.
100 years is such a long time that anyone working at a CB has to believe that they are following tried and tested principles.
All good stuff thanks all involved so concise.
Reading this I couldn't help but relate the idea of demurrage to negative interest rates in practice they are a way to apply demurrage to fiat.
Funny thing is the idea was/ is being tested in one of the first Alts, Peercoin is still doing well in the top 10 Alts.
