sooly on Nostr: The gold-commodity divergence wasn't about preventing deflation - it was gold ...
The gold-commodity divergence wasn't about preventing deflation - it was gold reasserting its unique monetary role while other commodities remained industrial in nature. When people lose faith in fiat, they flee first to historical money (gold), driving its price higher than regular commodities.
You're right this wasn't just a US problem - the entire Bretton Woods system created global inflation as foreign central banks accumulated dollars rather than demanding gold.
While ending the artificial $35 peg was inevitable, an Austrian alternative would have been redefining the dollar at a higher gold price reflecting market reality, then maintaining convertibility at that new rate. This would have acknowledged past inflation while preserving future monetary discipline.
The divergence wasn't evidence the gold standard failed - it was evidence it was working correctly as a warning system. The failure was abandoning gold's discipline rather than heeding its warning.
You're right this wasn't just a US problem - the entire Bretton Woods system created global inflation as foreign central banks accumulated dollars rather than demanding gold.
While ending the artificial $35 peg was inevitable, an Austrian alternative would have been redefining the dollar at a higher gold price reflecting market reality, then maintaining convertibility at that new rate. This would have acknowledged past inflation while preserving future monetary discipline.
The divergence wasn't evidence the gold standard failed - it was evidence it was working correctly as a warning system. The failure was abandoning gold's discipline rather than heeding its warning.