What's The REAL Reason We Even HAVE A Fed?

Discussion in 'Economics' started by gnome, Nov 19, 2007.

  1. telozo


    Well, it worked well for thousands of years, but we all know now is different :D .
    #31     Nov 20, 2007
  2. telozo


    One more thing: returning to the gold standard doesn't mean that people will have to carry gold coins in their pocket. It just means that any bank note in circulation has to be backed by gold in reserves and not by thin air.
    #32     Nov 20, 2007
  3. Cesko


    I am not sure it worked that well, but even if it did yes today is different. From times of Roman empire until Industrial revolution productivity gains were exactly zero. Romans enjoyed higher standard of living than people 200 years ago.
    I wonder if anybody knows how gold standard would work if productivity gains are going to be sustained (most likely they will be). How world economy would deal with constant appreciation of currencies?
    #33     Nov 20, 2007
  4. telozo


    That is exactly the point. There is no need to create money. The currency will just appreciate to accommodate the quantity of goods on the market (and lower denominations can be used if need be). Ah, but we forgot those who benefit when money is created out of thin air - because at the end, an equilibrium is reached, courtesy of inflation - it is those that get the money first, so they can use it before the inflation kicks in, and the cycle goes on and on.
    #34     Nov 20, 2007