My understanding is lay, at best. It may be overly simplified. At least it's understandable, I believe.
First, I'd like to point out that the idea of 'gold' or some other tangible is no assurance of anything.
The value of gold is subjective and subject to the same forces as 'cash'. It's value is usually measured against cash! Therefore it's 'value' is also
manipulated. If one's currency system is gold based, there is nothing stopping that gov't from printing/issuing more currency than the stores of gold.
Bottom line is no difference in potential 'inflation'.
Inflation is now considered 'needed' in the sense that only via inflation can a country's debt be reversed without crashing the world's economy. I.E.,
if there is 1000% inflation over the next twenty years, in theory, and with a balanced budget, that debt is reduced to 10 % of it's previous levels,
The biggest alarm, at least in the U.S.( in the day), to inflation was wage increases, believe it or not. Nothing kicked in inflationary fears more
For simplicity's sake let's say the average person's expenses, food, rent/mortgage, insurance, so on, uses 90% of their income. That leave 10% for
discretionary spending. DVD's, computers, so on. Now add in a meager 6% average wage increase. Again, for simplicity, say 2%-one third- goes directly
to various income taxes right off the top.
That leaves 4% for more discretionary spending. Add the 4% to the original 10% which makes a 40% increase! That is massive. The retail industry would
go nuts. Massive increases in buying and manufacturing goods, retail outlets, all demanding quick investment to take advantage of this 'increase'. All
going to the same lending institutions looking for loans. Up go the interest rates, the prices for new properties, the wages for the new hired-in a
supply and demand market- on and on.
An inflationary disaster! LOL.
Cash value, if I understand correctly, is measure against the GNP of the nation. I'm guessing not any more..LOL.
A sagging economy is deflationary, which we are obviously in, and the two forces, Id guess, are being juggled as we speak, so as to keep everything
going. That deflation somewhat offsetting inflationary currency printing/issuing.
A house of cards ready to crash completely. deliberate or a confluence of vested interests, it doesn't really matter. the result is the same....
The scary part is this is just one of the many doom and gloom scenarios we have to watch for...
edit on 20-4-2015 by nwtrucker because: (no
edit on 20-4-2015 by nwtrucker because: (no reason given)