Final-Fan said:
SamuelRSmith said:
Kirameo said:
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).
|
And then the world economy implodes due to the explosion in the resource(s) the hard money is based on, causing massive devaluation?
|
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.
|
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.
|
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.
|
Wouldn't that just decrease the value of gold?
|
Yes? And increase the value of money? If you can exchange more of A than you can B compared to previously, then A has increased in value, and B has decreased in value.
|
Well obviously if you have a shit-ton more gold, then gold will be worth less (all else being equal), therefore a dollar will get you more of it. That is true for fiat currency as well.
What we don't see is why the dollar being able to buy more gold translates to the dollar being able to ALSO buy more bread, which you claim with your 'increased purchase power' allegation. The value change did not happen with the dollar (being worth more) but with the gold (being worth less).
Basically, I guess it depends on whether you reckon the "value" based solely on its relation to your commodity (gold) that it's based on, or to everything in general.
|
Ah, yes. Well, no where did I actually mention gold, either in my idea for a hard currency (though, it's easy to jump to the gold conclusion, as this is what is traditionally used), or rapid resource expansion. If all resource supply increases tremendously (which is what I meant by the space exploration = more resources thing), then money will increase in value against everything.
Truthfully, thinking about it, I can see some mistakes in my thinking... as, one of the things that makes gold a good store of value is its relative rarity, and the amount of effort it takes to actually mine something like gold. In fact, I'm now struggling to think how hard money could work in a world of almost limitless resources. Hard money is based on the notion of limited resources, a finite world. Which currency system will be best in the future, with the mass of resources, I have no idea... beyond my realms of understanding.
In fact, all economic theories and systems are based on the notion of scarcity and limits of resources. How the study of economics will evolve if/when we beging pillaging deep space for particular resources, is an interesting thought.
