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Message: Re: Theoretically the price of gold is screaming upward

Money,

First rule: Something is only worth what someone else will pay for it.

Now: If a hypothetical administration created a new type of money that was supposed to be worth twice of what the old money was worth the question is what is it about this new currency that makes it worth twice what the old currency was worth? What is it backed by that is different than the previous currency's backing that make it more valuable?

The governement might try an ancient government trick of simply saying, "It's worth that because we say it is." To this, the People say, "We don't care what you say." To this the Government says, "Use this new money!" To this the People say, "We won't!" To this the Government says, "Use it or we'll shoot you!" To this the People say, "O.K." and they use it for awhile until a black market pops up.

However, what our government is doing is not printing a new currency, but just new dollars to add to the old currency supply. This is a very different situation than the hypothetical one you propose. As the supply of money increases without new backing, the value of every outstanding dollar decreases proportionately, therefore the price of ANYTHING exchangeable for those dollars goes UP. There is no escaping this. Bull

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