"The late nineteenth century was, like the early 21st, a deflationary period in economics. Both prices and wages were falling, driven down by agricultural surpluses and cheap labor, ...
"The radical solution to the nation's ills was the inflation of the currency, to be accomplished by a massive coinage of silver. That, it was thought, would reduce value of debts, while increasing wages and prices. The opposite view, represented by President Cleveland and most of the Republican Party, held to the gold standard and "sound money." That was the establishment position the world over, and especially in the world's financial capital, London....
"To the Establishment, free silver seemed as subversive and disastrous as Trump's protectionist ideas seem today. It would force the United States inward, taking it away from the world economy, and threaten chaos. The nation's press lined up behind McKinley, just as our punditry is abandoning Trump today." DK
The big banks, including the central banks which are really large private banks, later concluded that they could control interest rates, wages, prices, and profits, off the gold standard, by controlling the money supply in tandem with trade and investment liberalism and welfare benefits: not much inflation, not much deflation, profits remain stable, not much prosperity at least over here, not much apparent depression over here. There are winners and losers in the global economy, but this fact is masked by the process.They were helped in this direction by the fact of the dollar having served as a reserve currency, even after the US abandoned the gold standard. As I have pointed out, the gold standard was never the stability panacea that the banking community had always made it out to be, in any event.
Yet, even so modern an economist as Piketty warned against going off the gold standard without extensive regulatory controls over the banking sector. I have to believe that he is implying restraints on fractional reserve banking in tandem with a verifiable physical gold reserve regardless of lack of convertibility, and constraints on printing money. In spite of his warning, in our system, the banking tail wags the global economy dog.
Postscript: Re above: "not much inflation, not much deflation, profits remain stable, not much prosperity at least over here, not much apparent depression over here...."
See for example Irwin article today: ...Slow Growth World...
I reiterate: "There are winners and losers in the global economy, but this fact is masked by the process."
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