Having currency linked to PMs

[jim4silver]

Interesting what this lady says. I have always (since becoming a PM bug) thought that the only way any currency will avoid being inflated to death like most major currencies are today is to somehow involve PMs with it. It has been said that the US dollar is only worth about 3 cents of its value in the early 1900s. If that is true, where will we be in another 20 or 50 years?

World Bank Whistle-blower: ?Precious Metals To Serve As An Underpinning For Paper Currencies? | SilverDoctors.com

Jim

 

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[TreasurePirate69]

Well.... I could go on and on but I'll just simply state that the backing of currencies with PM's has NEVER worked. We went off of the gold standard for many good reasons. There are different types of PM currency standards. The one we went off of in 1971 did NOT keep us from inflating the money supply and did NOT keep us from spending. These are common misconceptions related to the gold standard. It also did NOT keep the value of the dollar from falling.

As for a dollar being only worth about 3 cents of what it was in the 1900's, this is another ruse. It's not that it isn't true. But the reality is that it really doesn't matter. None of us were alive back in the early 1900's and everything from prices to wages are now way higher than they were back then. So as long as inflation is slow and controlled it really doesn't matter what the dollar is worth compared to long ago. Until you read an article stating this fact you probably never realized or even cared about it. What we care about is where we are today and where we are going to be in the next few years. As long as inflation is controllable and we have the ability to inflate our net worth faster than what the value of the dollar drops then for most people it is a non-issue. But if inflation is very high, then it becomes a serious problem. But to say that the absolute value of a dollar compared to 1900 somehow implies that the dollar is weaker or that this is a sign of problems is probably misguided.

To give an example, imagine that tomorrow, the government decided that it wanted to get rid of fractional dollars to make things easier. Many countries have done similar things (although usually in the reverse direction). So tomorrow, you would have 100 times more money in the bank, 100 times the salary, and all prices would be 100 times higher. It is an accounting trick and doesn't actually change the relative value of anything in the economy. The dollar would suddenly be the new penny. The net effect of this is that the dollar would suddenly be worth 1/100th what it was the previous day. Oh no! The dollar just lost most of it's value in a single day! Massive hyperinflation right? Well, no. It was an accounting trick. Essentially, everything else changed along with the value of the dollar so the net effect is zero. But I guarantee you that some PM bull on some web site will be claiming that the dollar is headed toward zero because of this and the world was going to collapse very soon. Such is life. Just because a statistic is true doesn't mean that it implies what you claim it implies. Classic example: "the inflation adjusted price of silver since 1980 is $140".