WTF Happened in 1971?
The tl;dr of these hn comments:<p>1) It was women.<p>2) It was abandoning the Gold Standard<p>The first is absurd on its face, and I will prove it to you with counterexample: ridiculous as it sounds, imagine there were no women, only men, and procreation occurred by some other means, and instead of women entering the workforce in 1971 and toppling the economy, it was just a previous population boom coming to age, a bunch of men, the exact same number of men as there were women in reality, entering the work force. I&#x27;m not even going to spell it out, but it should be obvious that women entering the workforce only benefitted the US economy and GDP.<p>The second reason given is more complicated, but it is offered like it is a simple fact, like &quot;duh! It was the gold standard!&quot; But it really is not so simple and I strongly suspect there is a lot of bias. I&#x27;m not an MBA, so I&#x27;m just going to paste some of the wiki article, only to show that it really is not at all as simple as those claiming such, and I also suspect leaving the Gold Standards is not a boogyman, as some of its advantages are really disadvantages, and some of its disadvantages are somewhat compelling. But my only point here is <i>it is not as simple as that.</i><p><i>Advantages<p>According to Michael D. Bordo, the gold standard has three benefits: &quot;its record as a stable nominal anchor; its automaticity; and its role as a credible commitment mechanism.&quot;<p>A gold standard does not allow some types of financial repression. Financial repression acts as a mechanism to transfer wealth from creditors to debtors, particularly the governments that practice it. Financial repression is most successful in reducing debt when accompanied by inflation and can be considered a form of taxation. In 1966 Alan Greenspan wrote &quot;Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists&#x27; antagonism toward the gold standard.&quot;<p>Long-term price stability has been described as one of the virtues of the gold standard, but historical data shows that the magnitude of short run swings in prices were far higher under the gold standard.<p>Currency crises were less frequent under the gold standard than in periods without the gold standard. However, banking crises were more frequent.<p>The gold standard provides fixed international exchange rates between participating countries and thus reduces uncertainty in international trade. Historically, imbalances between price levels were offset by a balance-of-payment adjustment mechanism called the &quot;price–specie flow mechanism&quot;.Gold used to pay for imports reduces the money supply of importing nations, causing deflation, which makes them more competitive, while the importation of gold by net exporters serves to increase their money supply, causing inflation, making them less competitive.<p>Disadvantages<p>The unequal distribution of gold deposits makes the gold standard more advantageous for those countries that produce gold. In 2010 the largest producers of gold, in order, were China, Australia, the U.S., South Africa, and Russia. The country with the largest unmined gold deposits is Australia.<p>Some economists believe that the gold standard acts as a limit on economic growth. According to David Mayer, &quot;As an economy&#x27;s productive capacity grows, then so should its money supply. Because a gold standard requires that money be backed in the metal, then the scarcity of the metal constrains the ability of the economy to produce more capital and grow.&quot;<p>Mainstream economists believe that economic recessions can be largely mitigated by increasing the money supply during economic downturns. A gold standard means that the money supply would be determined by the gold supply and hence monetary policy could no longer be used to stabilize the economy.<p>Although the gold standard brings long-run price stability, it is historically associated with high short-run price volatility. It has been argued by Schwartz, among others, that instability in short-term price levels can lead to financial instability as lenders and borrowers become uncertain about the value of debt. Historically, discoveries of gold and rapid increases in gold production have caused volatility.<p>Deflation punishes debtors. Real debt burdens therefore rise, causing borrowers to cut spending to service their debts or to default. Lenders become wealthier, but may choose to save some of the additional wealth, reducing GDP.<p>The money supply would essentially be determined by the rate of gold production. When gold stocks increase more rapidly than the economy, there is inflation and the reverse is also true. The consensus view is that the gold standard contributed to the severity and length of the Great Depression, as under the gold standard central banks could not expand credit at a fast enough rate to offset deflationary forces.<p>Hamilton contended that the gold standard is susceptible to speculative attacks when a government&#x27;s financial position appears weak. Conversely, this threat discourages governments from engaging in risky policy (see moral hazard). For example, the U.S. was forced to contract the money supply and raise interest rates in September 1931 to defend the dollar after speculators forced the UK off the gold standard.<p>Devaluing a currency under a gold standard would generally produce sharper changes than the smooth declines seen in fiat currencies, depending on the method of devaluation.<p>Most economists favor a low, positive rate of inflation of around 2%. This reflects fear of deflationary shocks and the belief that active monetary policy can dampen fluctuations in output and unemployment. Inflation gives them room to tighten policy without inducing deflation.<p>A gold standard provides practical constraints against the measures that central banks might otherwise use to respond to economic crises. Creation of new money reduces interest rates and thereby increases demand for new lower cost debt, raising the demand for money.<p>The late emergence of the gold standard may in part have been a consequence of its higher value than other metals, which made it unpractical for most laborers to use in everyday transactions (relative to less valuable silver coins).</i> [1]<p>[1] <a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Gold_standard#Advantages" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Gold_standard#Advantages</a>