And this can go on until GDP is forced to shrink because people and businesses are all hoarding crypto tokens instead of participating in the real economy. This happened almost a hundred years ago when the world got too excited about gold. It' scary to think it could happen again with cryptocoins.
What historical period are you referring to? If you look at the first 200 years of US history, for example, there was plenty of real world growth on spite of slow price deflation. Gold and silver jointly backed the banking system until the Federal reserve started the current USD system in 1913.
In much of the rest of the world, the 40 years prior to WW1 were largely characterized by economic growth, while on an international (albeit decentralized on a national level) gold standard.
Probably an unpopular opinion on a VC site, but to some degree recessions are good and needed to weed out underperforming and utterly useless companies to free up resources. The lack of such and bail-outs/rescuing attempts by governments to "save jobs" [1] have delayed necessary restructuring for way too long. Also, if recessions are the norm rather than the exception I'd expect people and companies to be more prepared (e.g. by being less leveraged, keeping more savings), so that the actual event isn't as bad on a personal level and it's just about capital reallocation.
[1] an especially bullshitty argument, since ideally we'd want to get rid of jobs that don't add (enough) value to make the economy more efficient. I think the wasted human resources and ingenuity are the greatest tragedy.
Except low aggregate demand recessions do no such thing. It's often the opposite. Recessions keep alive inefficient manual labor intensive, low tech service industries because they make available cheap unemployed/underemployed labor. That's on top of the inefficiency of people doing nothing and living off of unemployment benefit/welfare.
Under performing companies get much more efficiently "creatively destructed" in an economy that is running hot where only the more efficient, well tooled businesses can afford employees at tight labor market wages. On top of this, fewer human resources are left wastefully idle.
High interest rates weed out underperforming companies. That's exactly what inflation is for. The reality is that CPI inflation is still dead and the fed is irresponsibly following a 0% interest rate strategy that will never work out.
Perhaps the pre-WW1 period is too different from today because we're still living in the 100-year+ experiment if central banks and applied Keynesian theory. If the Austrian school's business cycle theories are correct, recessions are longer and more painful under central banks' manipulated monetary markets because malinvestments are rarely cleared from the economy: those enterprises get bailed out instead, and taxpayers foot the bill.
Do you have a source for asserting that people saving gold caused the great depression?
