[stephen_g]

Governments have not historically kept balanced budgets more often than not, and when they have it's not a winning formula. Some of the worst economic crises have occurred after some of the most successful runs of 'responsible' Government balanced or surplus budgets, because it saps net financial assets from the private sector, with the only way for growth to happen being private debt (which eventually leads to deleveraging when the private sector can't take on more debt, which pretty much always results in recession). The only way run a Government surplus and avoid this is to run a big trade surplus (like Germany) - but that's a zero sum game so not everyone can.

Argentina, Venezuela and Zimbabwe aren't in any way representative of the results of "printing money". They are much more complicated than that, and MMT actually has much more explanatory power to explain what went wrong (variously - huge supply shocks leading to massive unemployment, attempting to maintain a peg to a foreign currency, and having debt denominated in a foreign currency, etc.).

One of the leading MMT researchers, Prof. Bill Mitchell is especially interested in inflation, and they have actually generated a pretty strong theoretical framework for how it happens that again has better explanatory power than competing theories (i.e. Austrian economics that predicted hyperinflation due to QE, monetarism that can't explain why inflation is so sluggish with such low interest rates, etc.). He publishes a lot of info on this his blog nearly every weekday, it's definitely worth a read.

[WalterBright]

Any theory of money needs to explain how the US went from subsistence farming in 1800 to superpower in WW1 on the gold standard (which more or less means balanced budgets).

[stephen_g]

That's definitely in spite of being on the gold standard. Have a look at the history of financial crises in the US [1]. In the time period you mentioned, there were 21 recessions, five 'panics' and three depressions.

If you look at the CPI history, it was largely deflationary (which is good if you do like recessions and depressions), but also times where inflation reached 27% [2]. The gold standard can't stop price inflation, and when inflation takes off it makes currency pegs impossible to hold, which is why pretty much every commodity convertible currency has eventually failed.

1. https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit... 2. https://www.minneapolisfed.org/community/financial-and-econo...

[WalterBright]

A gold standard does not imply currency pegs. I think we can all agree that pegs never work.

As for the panics etc. in the 19th century, yes they happened, and were usually the result of government monkey business with the economy. Note that with fiat money we've still had panics, depressions, and recessions, including the Mother Of All Depressions.

The last one was just 10 years ago.

> The gold standard can't stop price inflation

If it doesn't, then you don't actually have a gold standard. You have pegging a currency to gold, which is something quite different.

[dragonwriter]

> Any theory of money needs to explain how the US went from subsistence farming in 1800 to superpower in WW1 on the gold standard

No, it doesn't. Especially since the the US was on a bimetallic standard, not the gold standard, for much of that time.

> which more or less means balanced budgets

No, it doesn't. Either in theory or US practice.

[WalterBright]

> on a bimetallic standard

Sort of, but the point is it was not fiat money. There was no net inflation from 1800-1914.

> No, it doesn't.

Since the government at the time did pay off the national debt, that means balanced budgets.

[dragonwriter]

> Since the government at the time did pay off the national debt

There was a brief period in the early half of the 19th Century where it paid off the debt, but the it ramped up beforen the secession crisis, went sky high during the civil war, and was never paid off after that, so, no, in net budgets weren't balanced in the Revolution to WWI period.

Also, other problem with your scenario is that the US didn't start as a subsistence farming economy (which would have made it near worthless as a set of colonies.)

[WalterBright]

> in net budgets weren't balanced in the Revolution to WWI period.

According to this, they were:

https://www.usgovernmentspending.com/debt_deficit_history

> US didn't start as a subsistence farming economy

Yes, it did. A consistent food surplus did not appear until around 1800. Bone evidence from the colonists showed repeated episodes of starvation.

[Rescis]

What would you propose to be the explanation?

[WalterBright]

That fiat money and inflation is not necessary for a thriving, growing economy.