Currently the United States dollar, and (as far as I know) the rest of the world's currencies are fiat, that is there are no commodities (gold) supporting the value of the money system. This system is enforced by the Federal Reserve System in the United States, as well as by the other central banks in other countries, who are charged with maintaining monitary stability. They, however, do not seem very well equiped to do so, as can be attested to by all the problems created in the economy by their bad policies (for instance the current "housing crisis" that was caused by the Fed keeping interest rates too low for too long post 9/11). I believe a market based solution would be a better way of insuring monitary stability, however, I can see no way to do this with our current fiat currency. I believe it would be possible to do so with a commodity based currency, however, to do so would require deflating the dollar enough to a point that the USA would be destitute.
2007-09-06
05:20:13
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7 answers
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asked by
Schaufel
3
in
Economics