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> It doesn't matter if it's backed by gold or commodities, what matters is whether people believe there's an entity backstopping the currency that can guarantee

> It doesn't matter if it's backed by gold or commodities, what matters is whether people believe there's an entity backstopping the currency that can guarantee its stability. Commodity backing is a mechanism by which a country can ensure the stability of its currency across different political administrations. It's a kind of social technology like a constitution or super-majority requirement that creates stability. It's a plus that the US is stable power, but you can bet that the dollar will inflate year over year. That is its own form of instability.

throw0101d 1y ago
> Commodity backing is a mechanism by which a country can ensure the stability of its currency across different political administrations. Historical data contradicts the idea that you get stability on the gold standard: * https://archive.is/https://www.theatlantic.com/business/archive/2012/08/why-the-gold-standard-is-the-worlds-worst-economic-idea-in-2-charts/261552/ https://archive.is/https://www.theatlantic.com/business/arch... * https://www.moneyandbanking.com/commentary/2016/12/14/why-a-gold-standard-is-a-very-bad-idea https://www.moneyandbanking.com/commentary/2016/12/14/why-a-...