[creshal]

The problem is that you cannot really control the gold/silver supply. If your gold mines suddenly run dry (which happened to the Romans), it immediately cripples your economy (debasing the currency will create a panic, not debasing the currency leads to runoff deflation). If someone suddenly finds a massive new gold source, it will… also cripple your economy, due to runoff inflation (happened in the Spanish Price Revolution after the discovery of the New World).

Fiat money gives a much better control over the currency. Now we can argue what inflation/deflation rate a currency should have, instead of leaving that to random chance.

[PepeGomez]

That would still make currencies far more stable than modern currencies. It's very unlikely that a significant source of gold will be found and even if it will be, it won't be in owner's interest to mine it very quickly.

The price revolutions were literally a one off event and while it's usually described as "rampant", the inflation rate was at most in the range of a few percent and it would be seen as moderate to low today.

[creshal]

> That would still make currencies far more stable than modern currencies.

Stability is not inherently good. Stable currencies that suffocate the economy because they do not allow for rapid enough expansion or reduction of the money supply are a burden. Another example would be the interwar years and great depression, were virtually all countries suspended the gold standard because it was simply impossible to uphold, and the economy recovered from it.

[PepeGomez]

When the economy expands, things get cheaper. Like with most electronics in the last five decades or so.

[creshal]

Deflation is a lot more complicated than that, unfortunately.

[PepeGomez]

No, it isn't.

[creshal]

Okay, so you have products that get cheaper and cheaper. Is that good? No, the computer industry is in a deep crisis because of that – first PC sales tanked, then laptop sales, then netbook sales, then ultrabook sales, then tablet sales, soon smartphone sales… if products get cheaper and cheaper, you have no incentive to buy more than absolutely necessary, because not waiting with your purchase will always lose you money.

And then we have the other problems: What about rents? Debts? Wages? Do you decrease them over time, too? What happens if they aren't? Who would lend money under such circumstances, if just keeping the money under your pillow will make you richer anyway, and at zero risk, too?

Etc. pp.

[empath75]

https://en.wikipedia.org/wiki/List_of_banking_crises

Note all of the entries that start with "Panic of.." from well before the collapse of Bretton Woods.

Even the Great Recession wasn't that bad compared to what we had before.

[PepeGomez]

It shows much fewer crises before and virtually zero during the Bretton woods. If you click to some of them, you will see that most of them happened when the exchange to gold/silver was limited and people believed there isn't enough precious metals to back all the money, or the gold or silver standard was actually abandoned by some country.

[AnimalMuppet]

> That would still make currencies far more stable than modern currencies.

Not really. Let's say we're on the gold standard, and now the computer revolution happens, and the internet revolution, and so on. We've created a bunch of new businesses, which are worth a bunch of money, but the amount of gold didn't change. So the value of money had to change, because the size of the economy changed, and the amount of gold didn't.

For that matter: Which is growing faster, the population, or the amount of gold? That affects the value of money if we're on the gold standard.

[necessity]

I'd say it's a matter of debate how good that control is when who's controlling it is either incompetent or has it's own interests -- or worst, both. I'm not saying we should go back to the gold standard, but alternatives such as Bitcoin become increasingly interesting in countries plagued by hyperinflation.

[weland]

> I'd say it's a matter of debate how good that control is when who's controlling it is either incompetent or has it's own interests -- or worst, both.

The problem is that, in the example quoted, no one had that control. Gold mines run dry and you're fucked. Not because some incompetent banker is controlling the gold supply, but because there is no more damn gold. The most competent financial advisor of Rome -- a figure so gargantuan in the field of finance that, if transplanted to the modern world, would not only win that fake Nobel prize for economics, but would cause every other economist to retire out of shame -- would have been powerless. Because there was literally no more gold.

Obviously, it wasn't the end of all things -- new mining facilities would be open, sometimes processes would be optimized in older ones, wars would be waged, but these things took time and needed money.

[gshubert17]

No more gold? Wasn't there more gold in other places? Places the Romans didn't know about, but still places.

I'm not suggesting the Romans needed to venture westward and discover the Americas, but did they really have no other options?

[creshal]

Their trade balance was massively negative – it's called the "silk road" and not the "Roman wine and glass ware road" for a reason. Gold and silver left Europe and perishable goods were bought for it. It was initially offset by spoils of war and massive mining operations (some of the Roman mines in Spain are still visible today).

Apart from that, there was also normal economic and population growth – even without trade, if your population and economy grows, you'll need more money if you want to keep prices and wages stable.

So, they had several options:

• Conquer places that have gold! That went well for a few centuries, until it didn't any more.

• Debase the currency to make more of the money still here. That was, unsurprisingly, massively unpopular. And because monetary value was still tied to precious metals, people just started to hoard old money to melt it in later (something you still occasionally see with e.g. copper pennies), which led to all sorts of economic problems (occasionally crashing all the way down to barter trade).

[creshal]

> I'd say it's a matter of debate how good that control is

It's just that having this debate is pure luxury already. Otherwise it'd be "where the hell do we get the gold we need to fuel our economy?" or "what do we do with all the surplus gold that's ruining our economy?".

> but alternatives such as Bitcoin become increasingly interesting in countries plagued by hyperinflation.

Bitcoin, really? Private currencies where inflation is at the mercy of random developers who may or may not control significant currency reserves as well?

Using foreign currencies to supplant or replace a failed domestic currency isn't a new phenomenon, nor limited to "crypto""currencies" (the Balkans used the German Mark extensively in the late 90s, and US Dollars get you far in a lot of places).