RE: If paper money was banned & silver & gold came back, what would happen?
February 28, 2015 at 7:22 pm
(February 28, 2015 at 6:10 pm)CapnAwesome Wrote: The arguments of those in favor of a gold standard is funny. It's true that paper money only has the value that we imagine it to have, but gold is exactly the same. Gold is only valuable because we believe it to be valuable. So it's not really that different, except for one important thing. There is a limited supply of gold.
The problem is the limit on the supply does not move in relation to the amount of material productive capital in the world. If a large gold deposit is discovered and exploited by an interested party, then gold will depreciate and inflation will strike. This has happened repeatedly in history, a more extreme example being the massive inflation seen in Spain after conquistadors injected massive amountS of gold into the Spanish economy, creating lasting impoverishment of Spanish peasantry and craftsmen classes, by devaluing the small amount of wealth they have that were backed by silver and gold. So Gold is most definitely not a cure for fluctuation in monetary value.
