expat_panama
Gold Member
- Apr 12, 2011
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Gold and silver can not be created artificially at will. Something will always be used as a medium of exchange in the market, and in the opinion of sound money advocates it would be better if that medium couldn't be reproduced infinitely....All money is "fiat money".
Please help me out if I'm not catching your thoughts here, but my guess is you're saying that when a government pegs its money's value on gold or silver then money can't be created out of thin air in banks. Actually, For hundreds (if not thousands) of years banks have openly loaned out depositor's funds with the agreed understanding that deposits would be backed with acquired collateral.
On one day ten rich guys can deposit 100 golds each. The next day 10 middle class farmers can mortgage their farms (each worth 200 golds) for mortgage loans of 100 golds each. The first day the money supply is 1,000 gold coins backed by bank deposits totaling 1,000 golds. The second day the money supply is 2,000 gold coins backed by a thousand golds in borrowers hands plus bank assets worth 2,000 golds.