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Replying to myself to avoid an edit as this is a new topic. I’m wondering increasingly lately if oil hasn’t replaced gold and fiat as the underlying backer val
by ianai 7y ago
Replying to myself to avoid an edit as this is a new topic.
I’m wondering increasingly lately if oil hasn’t replaced gold and fiat as the underlying backer value of currency. We had a problem in Econ to contrast and compare fiat currency to gold backed currency. Fiat is supposed to not be tied to a scarce resource and thus central banks have the ability to influence market growth through currency growth. Gold or resource backed currency can only grow at the rate new stock is removed from the ground. Of course, oil complicates there concept as oil is irreversibly consumed when it’s burned. The value of it still greatly affects market growth potentials though.
- derefr 7y agoThe difference with oil is that not everybody exports it. With the gold standard, every sovereign nation worth the name attempted to create a gold-backed sovereign currency, and so was essentially “exporting gold” in some sense (the sense in which you can take their currency outside the country and spend it.) But not all countries are oil exporters, or oil “holders”; and even those who are, are not exporters to the same order-of-magnitude. This creates very clear market effects where e.g. the value of the Canadian dollar at any time is essentially the value of the US dollar divided by the quantity of US oil exports. This would be like different gold-backed sovereign nations declaring a different, floating “ratio” of their fiat currency’s value to their level of gold deposits, such that changes in the price of gold would throw exchange rates around (and some nations having no gold at all, and thus having an exchange rate that measures only how much of some other country’s gold their fiat currency could buy you!)