Quote:
Originally Posted by idi banashapan
The coins and paper we place value on is supposed to represent a receipt for a proportion of gold you own in a bank / reserve. the problem arises because it's become a fiat currency. it no longer relates to any gold. there simply is not enough gold in the world to pay out if everyone cashed in. the largest economies are now built on nothing at all. quantitative easing only makes it worse.
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You're contradicting yourself. The notes and coins in your pocket are *not* supposed to represent a proportion of gold, because our currency is not pegged to the value of gold. This was a deliberate decision of government. A five pound note states that the Bank of England promises to pay the bearer, on demand, the sum of five pounds, but does not define what five pounds actually is.
A fiat currency has no hard value because it is intended to allow for non-tangible things, such as the time you spend working on something, to take on a monetary value. A specialised, industrialised economy with a developed service sector can't function with a non-inflatable commodity such as gold as its currency because you can't steadily increase the gold supply to pay all the people who do jobs that don't result in something being grown, manufactured or dug out of the ground.
A return to the gold standard would indeed signify a catastrophic collapse of the fiat system but in terms of economic development it would be a big step back, not forwards, and the aim must be to return to fiat currency as soon as reasonably possible.
The crisis in the Eurozone is a perfect example of what happens when a nation state loses control of monetary policy. Greece cannot do anything to influence the value of the Euro, which is held at a level favourable to the more productive economies in the North, principally Germany. Just as if it were reliant on gold, which to all intents and purposes is worth the same, everywhere, Greece cannot unilaterally devalue its currency to a level where its industries and its citizens can actually afford to use it. The result is grinding poverty while the Greek government, with a EU gun held to its head, performs what is euphemistically called an "internal devaluation", whereby the workforce is pressurised to breaking point into accepting massive cuts in their wages and their standard of living in order to allow the government and Greek employers to be able to afford to continue trading and paying wages in Euros.