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Here is a list of incidents of hyperinflation. How many are in C20 and beyond? How many prior to that? http://en.wikipedia.org/wiki/Hyperinflation#Examples_of_

by sien 13y ago

Here is a list of incidents of hyperinflation. How many are in C20 and beyond? How many prior to that? http://en.wikipedia.org/wiki/Hyperinflation#Examples_of_hyperinflation http://en.wikipedia.org/wiki/Hyperinflation#Examples_of_hype... Inflation that is rapid and is not covered by interest is most definitely an erosion of wealth. Specie backed currency was a much better store of money than fiat currency. For example, gold was $35 dollars an ounce when the US went off the gold standard at the end of the Bretton Woods agreement in the early 1970s. The USD has now lost 95% of it's purchasing power against gold since then. It took the Romans 200 years to do the same with a currency backed by gold. However, this is not to say that Specie backed currency is a good idea. The expansion of the money supply is, overall, a good thing when well managed. Indeed, a great problem with bitcoin is that it doesn't expand as the economy does. There is an excellent book by a former FT journalist who now works at The Economist on the history of money called 'Paper Promises' that should be on anyone's reading list if they want to understand money, and indeed the economy, better.

swombat 13y ago
Specie backed currency was not a better store of money, because the levels of redeemability of the paper notes were highly variable. Banks went bust all the time in those days, taking all your savings and all the currency and loans issued by them with them. Deflationary periods were even more disastrous than hyper-inflationary periods. Once the banks started popping, they shrunk the money supply along with their numbers, caused further deflation, and further ruined everyone. Specie backed currency issued by a strong, ethical central bank with a solid management team in a stable country might be a better store of wealth - but how rare are those? Historically, very. In the long run, we are all dead and there is no good store of wealth. In the short run, however, diversified investments in stable countries are a decent store of wealth - certainly better than any currency holding. Which is why you don't see rich people hoarding vast sums of cash. They typically keep very little money in the form of cash, because it's the least reliable. Cash, currency, is valuable as a medium of exchange, not of storage.

by sien 13y ago

swombat 13y ago

Specie backed currency was not a better store of money, because the levels of redeemability of the paper notes were highly variable. Banks went bust all the time in those days, taking all your savings and all the currency and loans issued by them with them. Deflationary periods were even more disastrous than hyper-inflationary periods. Once the banks started popping, they shrunk the money supply along with their numbers, caused further deflation, and further ruined everyone. Specie backed currency issued by a strong, ethical central bank with a solid management team in a stable country might be a better store of wealth - but how rare are those? Historically, very. In the long run, we are all dead and there is no good store of wealth. In the short run, however, diversified investments in stable countries are a decent store of wealth - certainly better than any currency holding. Which is why you don't see rich people hoarding vast sums of cash. They typically keep very little money in the form of cash, because it's the least reliable. Cash, currency, is valuable as a medium of exchange, not of storage.