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What did the author mean by "stave off deflation by debasing their currencies"? How does the latter lead to the former?
by hackaflocka 11y ago
What did the author mean by "stave off deflation by debasing their currencies"? How does the latter lead to the former?
- thaumasiotes 11y ago> How does the latter lead to the former? Debasing your currency is, by definition, inflation. Debasing your currency means that the value of the currency drops, such that the same amount of currency buys a smaller amount of whatever (for example, if $30 will get you a barrel of oil today, but only 60% of a barrel tomorrow, the dollar has been debased). Inflation means that the same thing costs more money (for example, if a barrel of oil costs $30 today, but $50 tomorrow, we're seeing inflation in the dollar, as reflected in the oil price). As you might notice, those are two different ways to frame exactly the same pricing information. (The reason we have two terms is (at least in part) that they arose from different historical circumstances -- debasing a metal currency meant, e.g., taking what were supposed to be gold coins and mixing a base metal into them, so that your new coins weighed just as much as they should but were worth less (since they contained less gold).) So, the mechanism is: they are the same thing.
- hackaflocka 11y agoThank you.