Don’t Know Much About History . . .

Yeah, volatility is usually considered a “bad thing” in economics.  It’s basically the chance that the dollar you leave in your wallet tonight will be worth $0.50 or $1.50 when you wake up in the morning.  Makes decision making difficult.  Like living on a roulette table.

* Conversion of the U.S. dollar to silver and gold was suspended during the Civil War and discontinued entirely by 1972.  Covers the years for which full data are available (i.e., 1820 through 2009).

This analysis excludes, for what I hope are obvious reasons, the years covering America’s wars of existential crisis, i.e., the Civil War, World War I, World War II, when military spending as a % of GDP reached anamolous heights, ranging from over 3% and up to nearly 37% in 1942.  See details of calculations and source citations at the linked workbook.

This piece dutifully distributed by the Dystopia Diaries.

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  • Butter Knife

    Yes, it would appear that metallic money offers (somewhat) less volatility. That’s nice.

    Doesn’t really matter if there simply isn’t enough shiny metal for everyone to use it as currency, though.

    It especially doesn’t matter if the modern economy has become too complex for gold and silver to be genuinely viable as an every day currency.

    • Liam_McGonagle

      I have to admit your response threw me a bit, because it seems to imply exactly the opposite of these historical graphs do.  Typo?

      Metallic=blue; red=Non-Metallic.  2.9% is LESS than 3.9%; 2.6% is nearly 3X LESS than 7.3%.  Metallic money was (historically) much MORE volatile.

  • Sam Cooke

    Don’t know much biology

  • Redacted

    “Uhhhh… I’m, like, angry at numbers.”
    -Butt Head

  • Haystack

    “It’s basically the chance that the dollar you leave in your wallet tonight will be worth $0.50 or $1.50 when you wake up in the morning.”

    Wait! I have a dollar in my wallet?!? 

  • http://twitter.com/anarcho anarcho

    Systems of accumulation require access and opportunity,  even if you were successful in reestablishing the monetary base it would only make a few elite people rich.

    • Liam_McGonagle

      That’s definitely true under the current, traditionalist paradigm.

      But I think alternative currencies ARE feasible–but ‘alternative’ in the sense of supplementary, rather than replacement.

      For instance, there actually is, and has always been, a large number of alternate currencies available in the form of negotiable instruments like equity shares and bonds.  Just how far they can circulate and how stable their value is depends in large part on the state apparatus such as the SEC and the Fed, but they point the general direction:  cooperative local and regional currencies. 

      The government exercises very little of its theoretical control over these currencies, and in fact no longer even tracks them as a monetary aggregate, though they used to under the category “M3″.

      I’ve heard of a handfull of small scale local experiments in Britain and Germany that operate under the aegis of populist cooperatives rather than corporate structures.  They are limited to pretty small geographic areas and subject to some important limitations, as they don’t all have complete buy-in from the national and multinational companies that control so much of our society’s infrastructure, like electronics manufacturers, petrol companies, etc.

      I haven’t spent too much time investigating these, though maybe I should.  Conceptually they could be a game changer.  But the odds just seem stacked so far against them.  And fundamentally they all critcially depend on a type of good faith comprimise, the lack thereof is the principle reason for the current mess.

      Maybe I just have to trust more in the imagination.  Maybe time to stop disdaining ‘small’.

      • http://twitter.com/anarcho anarcho

        “I’ve heard of a handful of small scale local experiments in Britain and
        Germany that operate under the aegis of populist cooperatives rather
        than corporate structures.  They are limited to pretty small geographic
        areas and subject to some important limitations, as they don’t all have
        complete buy-in from the national and multinational companies that
        control so much of our society’s infrastructure, like electronics
        manufacturers, petrol companies, etc.”

        This is the area that has to be addressed,  combining your currency point with adding this (the nature of corporations) is the only formula.  We have to pull away from the corporate paradigm,  which is merely the housing of the elite – restructure the nature of property to an egalitarian standard without the deadening centralism which has plagued this system,  and has forced the wealth of the nation into the hands of the few (actually,  the form of government is meant to function this way,  so we are not dealing with reform from corruption,  but how the system actually operates).  Removing the means of exchange would than be a crowning glory on a new system. 

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