#GoldStandard #FiatCurrency #Inflation #Economics
Hey everyone! 👋 Let’s talk about a hot topic in the world of economics – the shift from precious metal standards to fiat money. 🤔
So, why do you think precious metal standards persisted for thousands of years, even though fiat money is considered to be a better alternative now? Here are some key points to consider:
– Historical devaluations of currency were viewed negatively, but now a small amount of inflation is actually supported by economists. How did this shift happen?
– The deflationary nature of the precious metal standard might have provided stability, but why did it eventually become unsustainable?
– With fiat money, central banks have more control over monetary policy, allowing for flexibility in stimulating or cooling down the economy. Could this be a reason for the transition?
What are your thoughts on this topic? Do you think there is a solution that combines the best aspects of both systems? Let’s discuss! 💬 #EconomicHistory #MonetaryPolicy #CurrencySystems
Fiat is better but it requires a complex state to implement, you need to be able to fight forgeries to standardize currency and to have a centralized government to respond to the business cycle
In order for fiat (i.e, non–species-backed) money to be valuable, the state needed to be solidified into a reliable institution. As seen by the numerous hyperinflation crises of the 20th and 21st centuries, fiat currency absolutely does have serious drawbacks in the absence of a functioning state. The solidification of the state, moreover, was greatly aided by technological advancements. So, the conditions in which fiat currency performs well enough to offset its drawbacks were rare throughout human history until recently. Sorry that there are aspects of your question I didn’t answer, but I didn’t want to write a whole essay.