Comments by "Jim Luebke" (@jimluebke3869) on "Why Gold Can't Displace Fiat? || Peter Zeihan" video.

If there isn't enough gold to back a currency in a growing economy, wouldn't that be deflationary rather than inflationary?
349
@mikehansen233 I'm considering it. If you limit the money supply but the supply of goods and services goes up, that's deflationary.
18
To be fair, coinage itself is a fiat currency, capable of debasement.
7
@npcknuckles5887 I agree, although a countervailing force occured to me. - In a deflationary situation, people hang onto their gold instead of investing it or spending it. - This reduces the amount of goods and services in the economy, which is an inflationary pressure So, you get a new equilibrium, where investments under a certain expected return are not pursued and some money (which is appreciating simply because of deflation) is held in reserve. Wouldn't this stabilize the economy, as broadly-held reserves would reduce the virulence of financial contagions? Although I suppose the history of the late 19th century might argue otherwise.
6
@npcknuckles5887 Sorry, I wasn't clear. If gold is the currency, wouldn't people hold onto that currency instead of spending it, in a deflationary situation?
6
@mikehansen233 Thinking about it some more, if demographic collapse means we really are seeing "the end of growth", wouldn't pegging the dollar to some relatively fixed-volume commodity like gold, be the only way of maintaining what economists think of as "healthy inflation", i.e., enough inflation to convince entities to spend money rather than hold onto it?
5
@markalbert9011 The problem is your teacher was wrong. If you have more stuff, and there isn't enough money to buy it at the old prices, you have to cut the price to be able to sell it.
4
Was the banker named Sam Bankman-Fried?
3
@tredegar4163 My observation was that the denarius was a fiat currency insofar as it was "worth" one denarius, regardless of the silver content. Quantitative easing is entirely equivalent to debasing the currency.
3
@josephkamt2745 The Spanish were rich specifically because they had the overflowing mines of Potosi backing them. (Study the history of the silver flows from Peru to Canton, and you'll touch most of the history of the 16th through 19th centuries, including the Thirty Year's War, the fall of Angkor Wat, and the Opium Wars.) Ironically, the domination of an economy by a non-metallic commodity is known as "Dutch disease".
2
@Will-xk4nm In a deflationary economy, only people who have capital already, can expand business?
2
@tylernorby4939 I'm not sure what you mean by "assigned to currencies".
1
@Sega_1848 If it takes more Fiats to buy one Gold, that means the Fiats are experiencing the inflation and not the Gold, doesn't it?
1
@hg2. Is it worse, being crucified on a cross of gold?
1
@hg2. I'm not sure you recognize the reference. William Jennings Bryan gave a famous oration known as his "Cross of Gold" speech, back in 1896. He argued that the gold standard was harming regular Americans, and that silver should also be used as a form of currency. You should look into that "bimetallism" debate, and the interaction of currency with the boom / bust economic cycles of the late 19th century. This is not a new debate, nor is it done justice with just a simple theory or slogan. We've got a good deal of history we can refer to, for evidence of what happens when various policies are implemented. I agree with you that fiat currencies have extreme drawbacks. I might even agree with you that a return to the gold standard would be better. However, you're going to be more persuasive if you can present a bit more background on the subject, like Zeihan does with his videos here.
1
@MichaelBrown-wx6zq Yes. If you use pennies instead of nickels, that's deflation.
1
@chend9616 Isn't that what I said, more or less?
1
@ds7766 Normally I wouldn't recommend reading a comment thread this long, but you probably should do so. You'll learn why you're wrong.
1
Is gold the only commodity? And I don't just mean silver, I mean oil, other metals, other raw materials.
1
@morenetworth Limiting the supply of fiat is deflationary.
1