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At some point in time it will reach an equilibrium price and it will only deflate as quickly as its economy is growing. Also note that gold-backed currencies h

• gnaritas 13y ago
  > and it will only deflate as quickly as its economy is growing. Which is bad. Deflation is not good for a currency, people don't want to spend it, people hoard, liquidity dries up, vendors don't like lowering prices and won't as quickly as they'd raise them. End result, deflationary spiral as the feedback loop of hoarding ensues. > Also note that gold-backed currencies have a much longer track record historically than fiat currencies. Yes, a much worse one. Fiat currencies stabilized our economy and eliminated the continual severe boom/depression cycles that occurred under gold. Fiat currencies have a far better track record than gold, despite being a shorter one.
  • _delirium 13y ago
    In addition to that, most semi-recent "gold economies" have been of a fairly fictional variety, not literally trading physical gold as the medium of exchange, but rather trading paper money that is theoretically backed by gold, with the theory supposed to be bolstered by the fact that it's exchangeable on demand for gold. But these economies depended on not too many people at once actually demanding the exchange for gold, which is why the American 19th century economy was littered with bank runs. There hasn't been a real test of what a purely "hard money" gold-based economy would look like in centuries. Could turn out well, could not. I would guess not.
    • gnaritas 13y ago
      I agree and I'd say we know not; currencies need to be able to expand to match demand in growing markets, the idea that a fixed supply currency can work as a medium of exchange to represent wealth that is not fixed in supply simply doesn't make sense. A boom in wealth would cause severe depreciation and recession as the currency adjusted to the new amount of wealth it represents; that's just logically a terrible medium of exchange.
      • grinnbearit 13y ago
        So who should get access to this newly minted currency? How about we just increase everyone's bank accounts and the price of all dollar denominated assets/goods by a factor of 10, would that solve your problem? Inflation for everybody.
        • gnaritas 13y ago
          Your first question is a good one, the rest are just absurd and show your lack of seriousness about the discussion.
          • grinnbearit 13y ago
            No, it was a serious question. Have you heard about the MMO Wakfu? They faced a problem a while back where their player base grew faster than the supply of virtual currency. And since the currency was not divisible (integer values only) all low value items were not being traded. They solved this problem by increasing everyones supply and increasing all store prices by a factor of (10?), effectively moving the decimal point. They could have solved it by giving a few players a massive supply of the currency which would have eventually spread out but they chose not to.