People worry a lot about “inflation.” This is when the price of goods and services money buys increases, either because the quantity of available goods and services declines or the money circulating in the economy increases faster than the goods and services increase.
People used to think by limiting the money in circulation, prices would stay where they are. So they would “base” the money on something scarce. They thought inflation came from a “debased currency” – meaning the “base” wasn’t scarce enough anymore.
The gold standard was an example of “basing” the economy on scarcity. Governments had to round up (or borrow) gold and trade the gold for the things a government wants to do (forge weaponry, hire mercenaries…) To keep track of this kings and such had to use budgeting methods that made sure they didn’t run “deficits” that drained them of their gold until they couldn’t pay off their “debts.”
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