AHC: Have the American dollar go through Deflation instead of Inflation

Okay, so your goal here is to basically, throughout the mid-to-late 20th and early 21st century, have the American dollar deflate, or increase in value, instead of inflating, or decreasing in value.

I... am sub-par at economics, so I don't know how one would go about it, but I'd like to see how people who are better at this stuff than I am would go about accomplishing this in an alternate scenario.
 
Keep the US on the Gold Standard. There is only $210 Billion worth of Gold in the world at the old Gold Standard Rate of $35=1 Troy Ounce of Gold, and about $260 Billion at the final rate, and 7.8 Trillion at current market value of gold. Ergo the money supply in the US is vastly limited and deflation has to happen, as the US can only issue s much money as its gold reserves allow
 
Which is claimed as one of the top reasons the US went off the gold standard during the Nixon Presidency. The folks in charge were anxious to avoid a period of deflation. They were alive during the Depression and the memories of the painful deflation of the era were fresh when they went through college economics classes. Have further seen claims some of the policy wonks argued a inflationary policy would be of short term economic benefit. I am guessing they were thinking in terms of the low 1950s or 60s inflationary rates. Not the morale busting double digit inflation of the 1970s.
 

Ian_W

Banned
Which is claimed as one of the top reasons the US went off the gold standard during the Nixon Presidency. The folks in charge were anxious to avoid a period of deflation. They were alive during the Depression and the memories of the painful deflation of the era were fresh when they went through college economics classes. Have further seen claims some of the policy wonks argued a inflationary policy would be of short term economic benefit. I am guessing they were thinking in terms of the low 1950s or 60s inflationary rates. Not the morale busting double digit inflation of the 1970s.

Which was still less bad than either the Great Depression of the 1930s, or the Little Depression of the 1990s-2000s.
 
Whether the 70s international crisis was worse or better depends on locality and ideology.

Historically: Better for the US working class, worse for the Chilean. Unlike the 30s by the end of the 70s the anglophone workers movement had far for deficient institutions and movement organisation.
 
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Which was still less bad than either the Great Depression of the 1930s, or the Little Depression of the 1990s-2000s.

I missed the1990s part of that. I made money off the construction/housing industry until circa 2003 when it firmly stagnated. Was fairly well set for a typical short recession by then. Ten years later it had been no mini Depression for the construction industry. Most of my peers were long bankrupt or had left the business. Companies like CP Morgan or Beezer Homes proved size, tricky financing, & assets were not enough. Maybe it was location, but the period 1991-2002 was a fairly nice long run for us.
 
Deflation is just as bad as rampant inflation.
When prices are falling, consumers have an incentive to delay purchases and consumption until prices fall further, which in turn reduces overall economic activity. When purchases are delayed, productive capacity is idled and investment falls, leading to further reductions in aggregate demand. This is the deflationary spiral.
This is what happened during the Great Depression. Additionally, salaries decreased while the amount of debt owed remained constant, so more of your salary went towards to paying off that debt. My grandfather lost a house he bought in 1928 because of that. He was lucky and kept working full-time but his salary was reduced to the equivalent of 1 1/2 days per week by 1933, so he could't afford to pay the mortgage.

The comment about remaining on the Gold Standard is the probably your best option to getting a deflationary period.
Deflation is the natural condition of economies when the supply of money is fixed, or does not grow as quickly as population and the economy. When this happens, the available amount of hard currency per person falls, in effect making money more scarce, and consequently, the purchasing power of each unit of currency increases

Not going to be a happy scenario when it occurs. :(
 

kernals12

Banned
As John Maynard Keynes explained, prices are sticky downwards. TL DR For complex psychological reasons, a worker will be happier if their pay goes up 5% even if all the things they buy also go up by 5% in price than if prices fell 5% and their pay also fell 5%. So, employers, if they are forced to cut prices, will be much more likely lay off workers than cut wages.

Pretty much every economist agrees that a small amount of inflation is good.
 

kernals12

Banned
Keep the US on the Gold Standard. There is only $210 Billion worth of Gold in the world at the old Gold Standard Rate of $35=1 Troy Ounce of Gold, and about $260 Billion at the final rate, and 7.8 Trillion at current market value of gold. Ergo the money supply in the US is vastly limited and deflation has to happen, as the US can only issue s much money as its gold reserves allow
You shall not crucify mankind upon a cross of gold.
-William Jennings Bryan
 
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BigBlueBox

Banned
Whether the 70s international crisis was worse or better depends on locality and ideology.

Better for the US working class, worse for the Chilean. Unlike the 30s by the end of the 70s the anglophone workers movement had far for deficient institutions and movement organisation.
Are you sure that American exports becoming more expensive and foreign imports becoming cheaper is good for the US working class?
 

RousseauX

Donor
Okay, so your goal here is to basically, throughout the mid-to-late 20th and early 21st century, have the American dollar deflate, or increase in value, instead of inflating, or decreasing in value.

I... am sub-par at economics, so I don't know how one would go about it, but I'd like to see how people who are better at this stuff than I am would go about accomplishing this in an alternate scenario.
There was deflation for a while after 2008 iirc
 

kernals12

Banned
There was deflation for a while after 2008 iirc
There was only a very small amount of deflation in 2009 and that was caused solely by the extreme drop in gas prices. If you do what the Fed prefers to do and exclude highly volatile food and energy, then there was inflation that year.
 
Are you sure that American exports becoming more expensive and foreign imports becoming cheaper is good for the US working class?

I apologize. I was talking about the historical inflationary crisis, which I do believe was softer on real wages than the 1930s. Obviously the air traffic controllers vs cio, very different for institutions.
 
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