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New reform suggestions

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yangusbeef
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Post: #1
New reform suggestions

1. Annul excise taxes
Excise taxes have LONG hindered growth in this country... Too long. The annulment of the cancerous legislation will restore consumer confidence and cause large growth in the consumption sector.

Effects:
Excise tax percentage reduced to 0(or very close.)
Population becomes more happy
More spending(as well as small side-effects, such as higher exports, imports, and wages.)

Influence required: 3


2. Restore Gold Standard
The vampires of society are sucking the country dry! Fiat currency backed by nothing has caused massive inflation only to the benefit of major elites and the detriment of the everyday citizen! The restoration of the a Gold Standard will restore our currency's competition on the international scene as well as halt the egregious practices!

Effects:
Inflation increases 75% less per quarter.
Money supply and GDP values change(I'll leave it up for you to decide how)
Value of currency hikes
Extremism and content-ness both rise.
Overall popularity decreases slightly

Influence required: 6


3. Federalism
The state is too ineffeicent! In some areas, people are completely content, while in others, people are absolutely miserable: all because of ill tailored government policies. A prudent resolution would be to set of half autonomous provinces who will personally manage the policies of those areas, while interactions between multiple provinces will be managed by the state. The state will continue to be the sole provider of national defense and most other services, the states will merely help manage the funds. The installation of the system will be a benefit to all!

Effects:
All budget expenditures in all except defense and safety are halved.
People become more content, with small increases in extremism
Influence decreases drastically.
Inflation as well as most economic values(infrastructure, safety, ect) increase at arbitrary sums.
Money supply increases
Real GDP increases
Wage decreases
Tax burden increases
(As well as other effects that you may add)

Required influence: 8

29.02.2016 00:43
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Helsworth
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Post: #2
RE: New reform suggestions

yangusbeef Wrote:
2. Restore Gold Standard
The vampires of society are sucking the country dry! Fiat currency backed by nothing has caused massive inflation only to the benefit of major elites and the detriment of the everyday citizen! The restoration of the a Gold Standard will restore our currency's competition on the international scene as well as halt the egregious practices!

Effects:
Inflation increases 75% less per quarter.
Money supply and GDP values change(I'll leave it up for you to decide how)
Value of currency hikes


Quote:
It was once claimed by Murray Rothbard that deflation was the natural state of the economy: or, that is to say, what Rothbard imagined as the “natural state” in his anarcho-capitalist fantasy world.

Needless to say, anarcho-capitalism has never existed in the real world, so we really have no empirical evidence to support such an idea. If we turn to the real world, the most laissez faire economy ever seen in the US (relatively speaking) was certain periods during the gold standard era. Austrians are fixated on the 1873–1896 period because of the near continuous price deflation in that time, but the truth is that it was an historical aberration.

A look at the data on price inflation in the US shows that inflation regularly occurred in the late 18th and 19th centuries:

Year | Inflation Rate
1775 | -5.24%
1776 | 14.17%
1777 | 21.87%
1778 | 29.78%
1779 | -11.51%
1780 | 12.25%
1781 | -19.34%
1782 | 9.70%
1783 | -12.33%
1784 | -3.88%
1785 | -4.84%
1786 | -2.55%
1787 | -1.85%
1788 | -4.43%
1789 | -0.93%
1790 | 3.75%
1791 | 2.71%
1792 | 1.87%
1793 | 3.45%
1794 | 10.95%
1795 | 14.38%
1796 | 5.26%
1797 | -3.75%
1798 | -3.33%
1799 | 0.00%
1800 | 2.10%
1801 | 1.31%
1802 | -15.73%
1803 | 5.49%
1804 | 4.38%
1805 | -0.70%
1806 | 4.23%
1807 | -5.41%
1808 | 8.66%
1809 | -2.05%
1810 | 0.00%
1811 | 6.80%
1812 | 1.26%
1813 | 20.02%
1814 | 9.89%
1815 | -12.29%
1816 | -8.65%
1817 | -5.36%
1818 | -4.34%
1819 | 0.00%
1820 | -7.87%
1821 | -3.52%
1822 | 3.65%
1823 | -10.65%
1824 | -7.88%
1825 | 2.57%
1826 | 0.00%
1827 | 0.83%
1828 | -4.96%
1829 | -1.85%
1830 | -0.89%
1831 | -6.26%
1832 | -0.95%
1833 | -1.93%
1834 | 1.97%
1835 | 2.89%
1836 | 5.62%
1837 | 2.77%
1838 | -2.70%
1839 | 0.00%
1840 | -7.10%
1841 | 0.95%
1842 | -6.62%
1843 | -9.24%
1844 | 1.12%
1845 | 1.10%
1846 | 1.09%
1847 | 7.69%
1848 | -4.14%
1849 | -3.14%
1850 | 2.16%
1851 | -2.11%
1852 | 1.08%
1853 | 0.00%
1854 | 8.68%
1855 | 2.95%
1856 | -1.91%
1857 | 2.92%
1858 | -5.67%
1859 | 1.00%
1860 | 0.00%
1861 | 5.96%
1862 | 14.17%
1863 | 24.82%
1864 | 25.14%
1865 | 3.68%
1866 | -2.53%
1867 | -6.82%
1868 | -3.91%
1869 | -4.14%
1870 | -4.24%
1871 | -6.40%
1872 | 0.00%
1873 | -2.03%
1874 | -4.83%
1875 | -3.62%
1876 | -2.35%
1877 | -2.31%
1878 | -4.73%
1879 | 0.00%
1880 | 2.48%
1881 | 0.00%
1882 | 0.00%
1883 | -2.02%
1884 | -2.06%
1885 | -2.00%
1886 | -2.15%
1887 | 1.10%
1888 | 0.00%
1889 | -3.25%
1890 | -1.12%
1891 | 0.00%
1892 | 0.00%
1893 | -1.13%
1894 | -4.36%
1895 | -2.40%
1896 | 0.00%
1897 | -1.23%
1898 | 0.00%
1899 | 0.00%
1900 | 1.24%
1901 | 1.23%
1902 | 1.21%
1903 | 2.28%
1904 | 1.17%
1905 | -1.16%
1906 | 2.23%
1907 | 4.47%
1908 | -2.09%
1909 | -1.12%
1910 | 4.42%
1911 | 0.00%
1912 | 2.06%
1913 | 2.13%
1914 | 0.94%

If we ignore those periods of war such as the American War of Independence (1775–1783), the War of 1812 (or Anglo-American War from 1812–1815), and the Civil War (1861–1865), we still find many periods of price inflation, usually when booms were occurring (that is, expansions in the business cycle).

Even in the 19th-century, gold-standard era, booms were basically inflationary (outside of the historically aberrant 1873–1896 period). For example, the US had price inflation under the gold standard in the following booms: 1825, 1834–1837, 1844–1847, 1841, 1852–1855, 1857, 1859, 1880, and 1896–1914. In particular, there was a period of protracted price inflation in most Western nations from 1896–1914. And note that the United States had no central bank for most of this period.

It is interesting to compare the periods of deflation above with those periods when the US suffered recessions in the 19th century, on the basis of Davis’s list from real manufacturing output data:

US Recessions in the 19th Century
Years (Peak–Trough) | Recession Length (years)
1796–1798 | less than 1
1802–1803 | less than 1
1807–1808 | less than 2
1811–1812 |
1815–1816 |
1822–1823 |
1828–1829 |
1833–1834 |
1836–1837 | less than 1
1839–1840 | less than 3
1856–1858 |
1860–1861 |
1864–1865 | less than 2
1873–1875 | less than 3
1883–1885 | 1
1892–1894 |
1895–1896 |
1903–1904 |
1907–1908
(Davis 2006: 106).

Although there is not a perfect match, it nevertheless seems to me that many of these recessions were deflationary periods as well: this tends to confirm that, before the unusual period of deflation from 1873 to 1896, people tended to think of strong booms as inflationary and recessions as deflationary.

Thus when Irving Fisher wrote this in 1933, he could have cited some considerable evidence in US history to support it:
“I had since 1909 been stressing the fact that deflation tended toward depression and inflation toward a boom.” (Fisher 1933: 350, n.).
And that is how many economists have come to see the nature of deflation too.

Davis, J. H. 2006. “An Improved Annual Chronology of U.S. Business Cycles since the 1790s,” Journal of Economic History 66.1: 103–121.
Fisher, Irving. 1933. “The Debt-Deflation Theory of Great Depressions”, Econometrica 1.4: 337–357.


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29.02.2016 09:37
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yangusbeef
Unregistered


Post: #3
RE: New reform suggestions

Helsworth Wrote:

yangusbeef Wrote:
2. Restore Gold Standard
The vampires of society are sucking the country dry! Fiat currency backed by nothing has caused massive inflation only to the benefit of major elites and the detriment of the everyday citizen! The restoration of the a Gold Standard will restore our currency's competition on the international scene as well as halt the egregious practices!

Effects:
Inflation increases 75% less per quarter.
Money supply and GDP values change(I'll leave it up for you to decide how)
Value of currency hikes


Quote:
It was once claimed by Murray Rothbard that deflation was the natural state of the economy: or, that is to say, what Rothbard imagined as the “natural state” in his anarcho-capitalist fantasy world.

Needless to say, anarcho-capitalism has never existed in the real world, so we really have no empirical evidence to support such an idea. If we turn to the real world, the most laissez faire economy ever seen in the US (relatively speaking) was certain periods during the gold standard era. Austrians are fixated on the 1873–1896 period because of the near continuous price deflation in that time, but the truth is that it was an historical aberration.

A look at the data on price inflation in the US shows that inflation regularly occurred in the late 18th and 19th centuries:

Year | Inflation Rate
1775 | -5.24%
1776 | 14.17%
1777 | 21.87%
1778 | 29.78%
1779 | -11.51%
1780 | 12.25%
1781 | -19.34%
1782 | 9.70%
1783 | -12.33%
1784 | -3.88%
1785 | -4.84%
1786 | -2.55%
1787 | -1.85%
1788 | -4.43%
1789 | -0.93%
1790 | 3.75%
1791 | 2.71%
1792 | 1.87%
1793 | 3.45%
1794 | 10.95%
1795 | 14.38%
1796 | 5.26%
1797 | -3.75%
1798 | -3.33%
1799 | 0.00%
1800 | 2.10%
1801 | 1.31%
1802 | -15.73%
1803 | 5.49%
1804 | 4.38%
1805 | -0.70%
1806 | 4.23%
1807 | -5.41%
1808 | 8.66%
1809 | -2.05%
1810 | 0.00%
1811 | 6.80%
1812 | 1.26%
1813 | 20.02%
1814 | 9.89%
1815 | -12.29%
1816 | -8.65%
1817 | -5.36%
1818 | -4.34%
1819 | 0.00%
1820 | -7.87%
1821 | -3.52%
1822 | 3.65%
1823 | -10.65%
1824 | -7.88%
1825 | 2.57%
1826 | 0.00%
1827 | 0.83%
1828 | -4.96%
1829 | -1.85%
1830 | -0.89%
1831 | -6.26%
1832 | -0.95%
1833 | -1.93%
1834 | 1.97%
1835 | 2.89%
1836 | 5.62%
1837 | 2.77%
1838 | -2.70%
1839 | 0.00%
1840 | -7.10%
1841 | 0.95%
1842 | -6.62%
1843 | -9.24%
1844 | 1.12%
1845 | 1.10%
1846 | 1.09%
1847 | 7.69%
1848 | -4.14%
1849 | -3.14%
1850 | 2.16%
1851 | -2.11%
1852 | 1.08%
1853 | 0.00%
1854 | 8.68%
1855 | 2.95%
1856 | -1.91%
1857 | 2.92%
1858 | -5.67%
1859 | 1.00%
1860 | 0.00%
1861 | 5.96%
1862 | 14.17%
1863 | 24.82%
1864 | 25.14%
1865 | 3.68%
1866 | -2.53%
1867 | -6.82%
1868 | -3.91%
1869 | -4.14%
1870 | -4.24%
1871 | -6.40%
1872 | 0.00%
1873 | -2.03%
1874 | -4.83%
1875 | -3.62%
1876 | -2.35%
1877 | -2.31%
1878 | -4.73%
1879 | 0.00%
1880 | 2.48%
1881 | 0.00%
1882 | 0.00%
1883 | -2.02%
1884 | -2.06%
1885 | -2.00%
1886 | -2.15%
1887 | 1.10%
1888 | 0.00%
1889 | -3.25%
1890 | -1.12%
1891 | 0.00%
1892 | 0.00%
1893 | -1.13%
1894 | -4.36%
1895 | -2.40%
1896 | 0.00%
1897 | -1.23%
1898 | 0.00%
1899 | 0.00%
1900 | 1.24%
1901 | 1.23%
1902 | 1.21%
1903 | 2.28%
1904 | 1.17%
1905 | -1.16%
1906 | 2.23%
1907 | 4.47%
1908 | -2.09%
1909 | -1.12%
1910 | 4.42%
1911 | 0.00%
1912 | 2.06%
1913 | 2.13%
1914 | 0.94%

If we ignore those periods of war such as the American War of Independence (1775–1783), the War of 1812 (or Anglo-American War from 1812–1815), and the Civil War (1861–1865), we still find many periods of price inflation, usually when booms were occurring (that is, expansions in the business cycle).

Even in the 19th-century, gold-standard era, booms were basically inflationary (outside of the historically aberrant 1873–1896 period). For example, the US had price inflation under the gold standard in the following booms: 1825, 1834–1837, 1844–1847, 1841, 1852–1855, 1857, 1859, 1880, and 1896–1914. In particular, there was a period of protracted price inflation in most Western nations from 1896–1914. And note that the United States had no central bank for most of this period.

It is interesting to compare the periods of deflation above with those periods when the US suffered recessions in the 19th century, on the basis of Davis’s list from real manufacturing output data:

US Recessions in the 19th Century
Years (Peak–Trough) | Recession Length (years)
1796–1798 | less than 1
1802–1803 | less than 1
1807–1808 | less than 2
1811–1812 |
1815–1816 |
1822–1823 |
1828–1829 |
1833–1834 |
1836–1837 | less than 1
1839–1840 | less than 3
1856–1858 |
1860–1861 |
1864–1865 | less than 2
1873–1875 | less than 3
1883–1885 | 1
1892–1894 |
1895–1896 |
1903–1904 |
1907–1908
(Davis 2006: 106).

Although there is not a perfect match, it nevertheless seems to me that many of these recessions were deflationary periods as well: this tends to confirm that, before the unusual period of deflation from 1873 to 1896, people tended to think of strong booms as inflationary and recessions as deflationary.

Thus when Irving Fisher wrote this in 1933, he could have cited some considerable evidence in US history to support it:
“I had since 1909 been stressing the fact that deflation tended toward depression and inflation toward a boom.” (Fisher 1933: 350, n.).
And that is how many economists have come to see the nature of deflation too.

Davis, J. H. 2006. “An Improved Annual Chronology of U.S. Business Cycles since the 1790s,” Journal of Economic History 66.1: 103–121.
Fisher, Irving. 1933. “The Debt-Deflation Theory of Great Depressions”, Econometrica 1.4: 337–357.


Large periods of inflation due to the introductions of fiat currency by the country(especially in beginning of country and civil war.)


Also, if you add all of the numbers together, disclosing periods of fiat currency, you get -10.59% inflation...


Finally, this is correlation not causation, periods of inflation were caused by introduction of fiat currency or mass increases in banks - not economic growth.

29.02.2016 17:54
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Helsworth
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Post: #4
RE: New reform suggestions

No introduction of a new currency or wars going on here.


Quote:
If we select those periods of economic and historical significance in US history, including the 1870 to 1913 period, and rank them from the highest to the lowest in terms of growth, we get the following average annual GDP figures:
(1) World War II average annual growth rate: 12.491%
(2) Recovery from Depression: 1934–1940: 6.511%
(3) Roaring ’20s 1922–1929: 4.856%
(4) Average annual real GDP rate 1983–1989 (Reagan boom): 4.282%
(5) Average annual real GDP rate 1950–1973: 4.160%
(6) Average real GNP growth rate, 1870–1913 (Balke and Gordon): 4.06%
(7) Average real GNP growth rate, 1870–1913 (Romer): 4.05%
(8) Average annual real GDP rate 1871–1913 (Maddison): 4.034%
(9) Average annual real GDP rate 1948–1973: 4.000%
(10) Average annual real GDP rate 1873–1896 (Maddison): 3.666%
(11) Average annual real GNP growth rate, 1873–1896 (Balke and Gordon): 3.596%
(12) Average annual real GDP rate 1974–2001: 2.963%.
As we can see, the 1870–1913 or 1871–1913 period was not “unmatched at any point in US economic history” in terms of economic growth. The largest GDP growth happened in America’s moderate command economy in World War II.

Even putting wars aside, it was the recovery from the Great Depression from 1934–1940 under Roosevelt that had the highest average GDP growth rate at 6.511%. Next comes the Roaring ’20s (if we calculate this as 1922–1929) then the Reagan boom (1983–1989), and then the Golden Age of Capitalism if we reckon this as the 1950–1973 period.

Only then does the 1870 to 1913 period occur in the ranking, and no matter what data you use.


Quote:
"Pegging a currency to paper puts it at the mercy of the state (or whoever runs the printing presses)"
And a gold standard puts it at the mercy of arbitrary gold discoveries and private sector money creation (read: potentially millions of private printing presses in banks, private bills of exchange, promissory notes, etc.)??
E.g., the US currency was "debased" from 1898-1913 by price inflation (without even any central bank existing), but by private sector activity. Why wasn't this a horrible evil?
Anyway, complaints about "devaluing the currency" are mostly grossly misleading, because even under mild to moderate price inflation real wages rise and real living standards rise too.
The vast majority of people do not in fact become poorer just because price inflation occurs.
~LK


Quote:
I've never come across an Austrian explanation of the Price Revolution, a period of specie-based inflation between the second half of the 15th century to the first half of the 17th century in Western Europe when gold lost about 85 percent of its purchasing power: https://en.wikipedia.org/wiki/Price_revolution
~Mark Plus


Quote:
"The vast majority of people do not in fact become poorer just because price inflation occurs."
Up to surprisingly high levels of price inflation - double figures at least.
Even less so if they have salary linked pensions and decent union representation.
Neither do productive businesses which just mark up whatever input costs they have. In fact inflation tends to cover off mistakes.
So equity investors in productive businesses are covered - with their dividend and value growing with the inflation.
So that, I think, just leaves money lenders at a fixed rate...
~Neil Wilson


Quote:
The reasons nations have gone off the gold standard isn’t because it was working so well and their economies were doing well. The reason they got off, like the US did in 1934, was because it was a disaster.

Historically nations suspend their gold standards in times of war, when they need their economies to function to the max. If a gold standard was so good for an economy, why suspend it when you need max economic performance? Obviously because it is not conducive of maximum real output.

The ideological issue is whether the primary function of the currency is to be an investment/savings vehicle, or a tool for provisioning government and optimizing real economic performance. In a market economy you can’t fix the price of two things without a relative value shift causing you to be buying one of them and running out of the other. Likewise, you can’t sustain full employment and a stable gold price if there is a shift in relative value between the two.
Being on the gold standard doesn’t prevent a financial crisis, but it makes the consequences far more severe.

We were on a gold standard when the roaring 20’s private sector debt boom lead to the crash of 1929 and the depression that followed. 4,000 banks closed before we went off gold in 1934, and it was only getting worse which is why we went off of it.

Gold would not have prevented the pre 2008 sub-prime boom, but it would have made the consequences far more severe. Including no Fed liquidity provision to offset a system wide shortage due to hoarding and banks bidding ever higher for funds that didn’t exist, most all firms losing inventory financing and being forced to liquidate inventories as rates spiked competing for funds that didn’t exist, and no deficit spending for unemployment comp as federal revenues fell from the collapse. In other words, the automatic fiscal stabilizers we rely on can’t be there. Instead it’s a deflationary disaster that only ends when prices fall sufficiently to reflect changes in relative value between gold and everything else.
~Warren Mosler


More useful links debunking the myth of price stability under the gold standard:

http://blog.oup.com/2014/02/five-myths-a...-standard/
http://moslereconomics.com/2012/08/24/go...-thoughts/
http://blogs.reuters.com/rolfe-winkler/2...-standard/
https://www.youtube.com/watch?v=X-N0EnY0qjI
http://bilbo.economicoutlook.net/blog/?p=20754


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This post was last modified: 29.02.2016 18:54 by Helsworth.

29.02.2016 18:39
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