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What did inflation look like on a hard-money standard?
282 sats \ 8 comments \ @stack_harder 26 Nov econ
Would people have mainly just experienced inflation due to supply and demand events (bad harvest, sunken trade vessel etc ) and monetary inflation from an increase in gold supplies (like the 16th and early 17th century "mega inflation" in Spain caused by gold and silver imports from the New World)?
Is it really possible for modern people to know? Even if we had super old relatives, the final decades of the gold standard weren't even a true gold standard, starting at least with ww1, govs were going off the gold standard secretly to finance wars, then we have the same thing happening again, add in fractional reserve banking 'temporary halts to gold redemptions, bans then Bretton woods etc etc
Still, it's wild to think that most modern people are so used to inflation as a part of life, accept it and then happily justify it .
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60 sats \ 1 reply \ @sophostheliberator 26 Nov
Interesting question.
Inflation under a hard-money standard (e.g., gold or silver-based monetary systems) generally exhibited very different characteristics compared to modern fiat systems:
  1. Stable Prices Over the Long Term Prices under hard-money systems tended to remain stable or even decline over long periods due to productivity growth outpacing the supply of money. Example: During the 19th century under the classical gold standard, the purchasing power of money increased in many countries as industrialization and technological advancements lowered production costs.
  2. Short-Term Volatility While long-term inflation was negligible, short-term price fluctuations were common, often driven by:
  • Economic shocks (e.g., wars or crop failures).
  • Gold/silver discoveries (e.g., the California Gold Rush in the mid-1800s increased the money supply, temporarily causing inflation).
  1. Deflationary Tendencies Because the money supply was constrained by the availability of gold/silver, economies sometimes experienced deflation (falling prices) when demand for money grew faster than its supply. This was common during periods of rapid economic expansion or financial crises.
  2. Regional Variations Inflation or deflation was influenced by the local supply of and demand for gold and silver. Regions with gold/silver mines or higher trade surpluses could experience localized inflation.
  3. Impact on Wages Wages adjusted more slowly than prices, leading to periods of economic hardship during deflationary episodes, especially for debtors whose debts became harder to repay in "harder" money.
Historical Examples: A. Gold Rush Inflation (1848–1855): The influx of gold caused a temporary increase in money supply and inflation. B. Deflation in the Late 19th Century (1873–1896): Known as the "Long Depression," many economies experienced deflation due to rapid industrialization and limited monetary expansion under the gold standard.
Inflation on a hard-money standard was typically minimal or even negative over the long term, with periods of short-term volatility. While this system ensured monetary stability and trust, it could also cause economic rigidity, making it difficult to respond to crises or accommodate rapid growth. This contrasts sharply with the fiat systems of today, where inflation is often persistent and centrally managed.
Further reading:
a) Historical Studies "Prices and Wages in England" by Arthur Gayer, W. W. Rostow, and Anna Jacobson Schwartz. A detailed study of price levels and wage changes during the gold and silver standards.
"The Gold Standard in Theory and History" edited by Barry Eichengreen and Marc Flandreau. Discusses the operation and economic effects of the gold standard, including inflation and deflationary episodes.
b) Research Papers "The Gold Standard as a Rule" by Michael D. Bordo (NBER). Examines the historical gold standard and its role in stabilizing inflation and economic growth.
"The Deflation of the Late 19th Century" by Hugh Rockoff. Focuses on the period of deflation during the classical gold standard era and its implications.
"Commodity Money Inflation: A Lesson from American History" by Peter L. Rousseau. Explores periods of inflation and deflation in the U.S. under hard-money and fiat systems.
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0 sats \ 0 replies \ @stack_harder OP 26 Nov
doesn't seem to bad at all, wages still increase at a shit pace and fiat hyper inflation has decimated so many counties
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32 sats \ 3 replies \ @denlillaapan 26 Nov
yes.
That's the most succinct way for me to put this. The pre-modern world from which we came was, aside from operating on harder, regression-to-the-mean money (#749912), was also overwhelmingly agricultural and so susceptible to bad harvests etc.
But you're entirely right; aside from monetary shenanigans (rulers calling in coins, new world silver etc) monetary "inflation" wasn't a thing.
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0 sats \ 2 replies \ @stack_harder OP 20h
funny how as a historical constant we've always had rulers, kings, and emperors doing their best to debase money
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0 sats \ 1 reply \ @denlillaapan 17h
Well, define "always"
They were definitely trying now and again, but for long stretches of time they -- as a class -- didn't.
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0 sats \ 0 replies \ @stack_harder OP 16h
i've just asked chatgpt for some examples. by always , i mean it wasn't just an example of one time in history, the theme of an authority abusing monetary tust has come up many, many times
hence why we like bitcoin
Nero (54–68 CE):
One of the first Roman emperors to debase currency systematically. Reduced the silver content of the denarius from 98% to 93.5% and reduced the weight of gold aureus coins. Caracalla (198–217 CE):
Introduced the Antoninianus, a silver coin that contained less silver than the denarius but was valued higher. Accelerated the debasement of Roman currency, leading to inflation. Diocletian (284–305 CE):
Drastically reduced the silver content in coins and issued new copper-based coins. Attempted price controls to curb inflation caused by prior debasement but largely failed. Constantine the Great (306–337 CE):
Reduced the gold content of the solidus and continued debasement of silver coins. Relied heavily on monetary manipulation to fund his reign and the establishment of Constantinople. Medieval and Renaissance Monarchs Henry VIII of England (1509–1547):
Known as "Old Coppernose" because his debased silver coins exposed the copper base underneath. Reduced the silver content in coins to fund his wars and extravagant spending. Philip IV of France (1285–1314):
Frequently debased French currency to finance wars and his administration. His debasement policies contributed to economic instability and dissatisfaction. Charles IV of France (1322–1328):
Continued aggressive debasement policies to address fiscal deficits, causing public outrage and inflation. Holy Roman Emperor Charles V (1519–1556):
Debased currency across the Habsburg domains to finance wars, including campaigns against France and the Ottoman Empire. John the Good of France (1350–1364):
Drastically debased the French currency during his reign, leading to economic hardship and a loss of public trust. Islamic Rulers Al-Mahdi (Abbasid Caliph, 775–785 CE): Debased silver dirhams to address financial strains during his reign. Ottoman Empire: Several Ottoman sultans debased the akçe coin over centuries, causing economic disruptions and inflation. Modern Monarchs and Rulers Louis XIV of France (1643–1715):
Frequently altered coin weights and fineness to finance his wars, such as the War of the Spanish Succession. Frederick the Great of Prussia (1740–1786):
Debased the Prussian coinage to finance his military campaigns, particularly during the Seven Years’ War. Napoleon Bonaparte (1799–1815):
Introduced new coinage during his reign, and though he did not heavily debase currency, his wars were partially financed by manipulating money supply in occupied territories.
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20 sats \ 1 reply \ @Diego 26 Nov
Thanks for asking this Q. Something I’ve been thinking about for a while. Would be good if someone had some historical references for this
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0 sats \ 0 replies \ @stack_harder OP 26 Nov
i'm sure there are some good references or things from a few hundred years ago that detailed it, hopefully someone will mention one
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