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If the salary/pricing spiral goes out of control, the currency quickly becomes worthless. If your $10 today is the value of $1 yesterday, it's very hard to sto
by fnordsensei 9y ago
If the salary/pricing spiral goes out of control, the currency quickly becomes worthless.
If your $10 today is the value of $1 yesterday, it's very hard to store wealth in such a currency. So people move their assets to a less volatile currency.
- EGreg 9y agoWhy are currencies needed to store wealth? As we see there are plenty of assets that people are parking their money in. Why not simply use money as a medium of exchange?
- fnordsensei 9y agoUnless conversion is instantaneous, they all need to store wealth. From the time it takes for you to get your salary until you spend it for example. Inflation guarantees that your salary is worth less when you spend it than when it was paid to you. If inflation is high enough for you to worry about it, the solution would indeed be to convert it as quickly as possibly to something that is better at storing value. At some point, people might start trading the thing that stores value really well and just retire that constantly depreciating currency.