Why the nominal value of paper money can not be equated with the value of gold?
January 6, 2011 9:01pm CST
Are are you today okay? Hopefully this is should be, amen. Means of payment accepted are the days of yore gold and silver. If for example at the time of monetary crisis, the people of the holder of gold and silver money it will not be harmed because the gold price following the increase in gold prices in effect at that time. While this is impossible in the present we dare to bring the gold bullion, because the government issued a "receipt" as a substitute for our ownership of gold and silver stored in the BI, which is referred to as paper money and coins. If the monetary crisis, then the owner of the bill will incur losses because the value of paper money against the value of gold declined at that time. Without meaning to downplay the role of our government, and since the bill was "proof" our ownership of gold in the Federal Bank or Bank of America, was not at the time of monetary crisis that catapulted the gold price should have a nominal value of "evidence" and even then go up also ? Because "proof" that's gold substitute ours?
2 people like this
8 Jan 11
fiat money or paper money is only a nominal which shall be affixed on the sheet of paper processed by the tree. therefore, the value of a currency price will change which will ultimately unstable vulnerable to inflation .. example of the economic crisis in the U.S. gold is stored in bank gold sales surge even as gold is resistant to crises and relatively equal value even ride ... to overcome the economic crisis epicenter which extends up to now, the government should use gold and silver currency.
7 Jan 11
The governments should not keep printing currency notes without depositing gold of equal value in the reserve bank, this is what my professor friend says, other wise the currency notes will be just paper, no more paper money.. Thank you so much for this nice discussion. Professor ‘Bhuwan’. . HAPPY NEW YEAR
7 Jan 11
as i understand it everything should be converted to paper value. it is not the same with the past centuries that things are just traded either for money or stuff. in the recent times, the situation is far more different. Until a few decades ago paper money in different countries was based on the gold standard or silver standard or some combination of the two. This meant that you could take some paper money to the government, who would exchange it for some gold or some silver based on an exchange rate set by the government. The gold standard lasted until 1971 when President Nixon announced that the United States would no longer exchange dollars for gold. This ended the Bretton Woods system, which will be the focus of a future article. Now the United States is on a system of fiat money, which is not tied to any other commodity. http://economics.about.com/cs/neoclassical/a/value_of_money.htm