Oddbean

You have to remember that the finance ministers of the time grew up under the gold standard. Even during the California gold rush, gold supply didn't increase over 1,5% per year. Anything over 2% is de facto devaluation against commodities.

Did they grow up under the gold standard? This target was identified in the late 80s early 90s. Nixon revoked the dollars redeemability for gold in the 70s, and it’s not like the dollar was pegged to gold before he did that, he did that because they had already over printed them. The classical gold standard ended in the early 1900s, well before most finance ministers in the late 80s were born.

I grew up in Germany in the 80s and everyone was still talking about the gold standard and how the Deutschmark could be strengthened and the importance of the Bundesbank gold reserves. Gold is still something central bankers think about a lot, and they still buy and buy and buy it. They're steadily repatriating it, on the down-low. There actually is no evidence that, for instance, the ECB governors actually think their fiat is going to last forever, despite all the CBDC posturing (which seems to largely be a response to the digital yuan and Fedcoin and etc.). They're quietly stocking up gold reserves and trying to balance the per-capita amounts among the various member banks.

They’ve been talking about it for 50 years now, and it’s been over 100 since it actually existed. Bretton woods wasn’t a gold standard, it was a dollar standard, and the fed was already playing games and rehypothecating the gold countries could “redeem” as soon as they could. The gold standard isn’t coming back because we live in a world where shipping 10tons of gold around is too slow a form of settlement. The central banks don’t want to be constrained by some arbitrary commodity reserve, and the politicians want to be able to spend money whenever they want however they want. Gold is useful for jewelry, and as a hedge for the bunker dwellers in the case of nuclear war. The gold standard is dead otherwise.

It’s not an upper target, it’s the target. I’m not sure what people you’re talking about for whom it “feels right.” The bankers who use it to plan for their long term financial deals for estimating profitability? The exporters who expect to sell their wares for more? Equity owners for planning their ROIC? The worker saving their wage?