SamuelRSmith said:
Final-Fan said:
SamuelRSmith said:
Final-Fan said:
SamuelRSmith said:
The current financial crisis will ultimately result in the return to hard money, (that is, currency backed by some form of hard value store - like the gold standard of old), first, however, we will have long periods of austerity and inflation (for the most part of this decade).
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And then the world economy implodes due to the explosion in the resource(s) the hard money is based on, causing massive devaluation?
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No, the value of money increases. If you have a currency backed onto a commodity, and the commidity suddenly increases, if you maintain a tight monetary supply, then the value of money skyrockets, and you'll be able to buy a hell of a lot with a single dollar.
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OK, I don't know that much about hard currency, but I find it pretty hard to swallow that actual purchasing power of a gold-backed dollar would increase because there was more gold out there. Explain plz.
But I think my initial claim was based on the idea that money supply would automatically increase to match gold supply (or whatever supply), which in retrospect is silly.
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You have 5 dollars and 5 ounces of gold. A dollar buys an ounce of gold.
You have 5 dollars and 10 ounces of gold. A dollar buys 2 ounces of gold.
Therefore, the value of the dollar has increased thanks to an increase in the supply of gold.
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Wouldn't that just decrease the value of gold?
