Moderator: Charlie Phillips
Homey wrote:So if I'm understanding your logic, a reserve currency would have to be immune to inflation? How is this possible?
headhonchoII wrote:Gold quantities are too limited to provide a backing to currencies. I don't know why people keep sticking on gold, it doesn't offer a better solution as the price would just inflate into another bubble, smarter governments would use a diverse base of assets to support their currency.
Well thought out and managed fiscal policy is the best way to combat inflation but it is IMPOSSIBLE to prevent inflation when demand increases and supply reduces.
Abacus wrote:Your graph is only valid if people are still earning $5/day (considered generous at the time). I definitely am not. If you want to have a valid argument then plot the value of a dollar vs something meaningful like avg wage. Everybody knows that inflation is real and that is all that your graph shows.
headhonchoII wrote:It has been seventy years or so and there has been no significant shift, yet, from the US being the preferred reserve currency. That's a pretty good record.
The deutchmark was destroyed twice by inflation and came back to be an investor favorite. On the other hand the Yen has rocketed in value versus other currencies and Japanese companies are pulling out of Japan. You can't look at these statistics in isolation.
Let's ask the question, why don't the Saudis insist on getting paid in gold for their oil? Why don't the Chinese do the same thing? Because , for their own reasons, it suits them to get paid in USD or other currencies.
China wants a relatively weak currency to encourage exports and the Saudis presumably want the US as an ally among other financial reasons.
SillyWilly wrote:Abacus wrote:Your graph is only valid if people are still earning $5/day (considered generous at the time). I definitely am not. If you want to have a valid argument then plot the value of a dollar vs something meaningful like avg wage. Everybody knows that inflation is real and that is all that your graph shows.
I'm not disputing that inflation happens. That would be absurd. The point I'm trying to make is that inflation doesn't have to destroy the purchasing power of the world's reserve currency as fast as it has with the US$. The solution is a currency backed by something that can't be created out of thin air, and I'm suggesting gold be that "something" since it can't be created out of thin air like paper money.
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