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Those were three separate ideas. A bank run would most likely be a result of deflation, yes, but it is not guaranteed that if that were to occur that the bank w
by craigc 8y ago
Those were three separate ideas. A bank run would most likely be a result of deflation, yes, but it is not guaranteed that if that were to occur that the bank would be able to stay solvent.
The inflation example can already be seen in Venezuela, where the people there have been using cryptocurrencies as a way to survive.
> Ultimately the US dollar (and other fiat currencies) are backed by something: a government with an effective monopoly on violence over a particular territory including all the people and assets therein.
Are you suggesting that the US military will use force to ensure that people use the dollar and that is its backing? I am not saying you are wrong, but that is not exactly a friendly thought. Sounds more like a dictatorship than a free market economy.
- drewmol 8y ago>Are you suggesting that the US military will use force to ensure that people use the dollar and that is its backing? Not the OP, but the governments' 'monopoly on violence' usually refers to the fact that they hold position as the sole enforcement authority. Dollar is 'backed' by a reputation/record of US government fulfilling it's debt obligations. As the enforcement authority, they can/will use force to secure an operating revenue via tax collection. The specifics of what people use to transact, is more flexible. So the dollar is backed by US Government's ability to fulfill it's future debts. The method it uses to extract (something of value, payment is currently required in $ format) from it's citizenry to pay them is less important, but a 'monopoly on violence' sure helps with collection efforts ;-)