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Government Money- The Track Record Of Government Funds

The shaky link between gold exchangeability and inflation was an annoyance for the US government's inflationism, manifesting itself in two ways: first, the global gold market was always seeking to reflect the reality of inflationism through a higher gold price; second, the global gold market was always seeking to reflect the reality of inflationism through a lower gold price.

Author:Gordon Dickerson
Reviewer:James Pierce
Mar 10, 2022
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635.2K Views
The shaky link between gold exchangeability and inflation was an annoyance for the US government's inflationism, manifesting itself in two ways: first, the global gold market was always seeking to reflect the reality of inflationism through a higher gold price; second, the global gold market was always seeking to reflect the reality of inflationism through a lower gold price. This was addressed by the creation of the London Gold Pool, which aimed to lower the price of gold by dumping part of the gold reserves kept by governments into the market. This worked for a while, but in 1968, the US dollar had to be revalued in relation to gold to reflect the years of inflation it had endured. So, what is it about track record of government funds?
The second issue was that certain nations began attempting to repatriate their gold holdings from the United States as they realized their paper money's buying value was eroding. President Charles de Gaulle even sent a French military carrier to New York in an effort to reclaim his country's wealth, but when the Germans sought to return their gold, the US determined enough was enough.

U.S. Government Expanded Its Monetary Policy In Unprecedented Scale

Except for the one true driver of price hikes, an increase in the supply of the US dollar, the US government and its experts blamed everyone and everything for the rise in prices. Most other currencies fared considerably worse, since they were affected by both the inflation of the US dollars that backed them and the inflation of the central banks that issued them.
President Nixon's action completed the process that began with World War I, converting the global economy from a worldwide gold standard to one based on a number of government-issued currencies. Freely shifting exchange rates formed "a system of partial barter" for a society that was becoming more globalized alongside developments in transportation and telecommunications.

The Premier Reserve Currency Was Created By The United States Government

While most academic circles consider such a notion typical and undeniable, it is well worth investigating the soundness of this prevalent sort of money.
It is theoretically feasible to assign a monetary function to an artificially scarce item. Governments throughout the globe, as well as Bitcoin's inventor, attempted this after leaving the gold standard, with varying outcomes. After the connection between fiat money and gold was broken, paper currencies saw faster supply growth than gold, resulting in a drop in their value when compared to gold.
Overlapping of bundle of paper money
Overlapping of bundle of paper money

The World's Main Currencies' Supply Grows At Predictable Low Rates

The quantity of currencies in developed countries has increased at a slower rate than in emerging economies, which have seen price hikes and hyperinflation in recent years. For the most part, the broad money in industrialized countries has grown at an average annual rate of roughly 5 percent, seldom exceeding double digits or falling below zero.
When it comes to economic development, developing nations are significantly more volatile than their developed counterparts, with growth rates that range from double to triple digits, often quadruple digits, and even into negative territory.

Hyperinflation Is A Particular Sort Of Economic Calamity

Unlike other economic disasters, hyperinflation only occurs when government money is used. Gold and silver-based civilizations have never had hyperinflation, and even when artifact money like seashells and beads loses its monetary function over time, the new money takes over more and more of the departing money's buying power. But with government money, which has a low manufacturing cost, it is conceivable for a whole community to lose all of its savings in the form of money in a matter of months or even weeks.
A hyperinflationary crisis is significantly more harmful to a society than the loss of a large amount of economic value by a large number of individuals; it is an all-out collapse in the long-term structure of economic output. The collapse of money makes it difficult to sell, manufacture, or participate in any other activity other than scavenging for the minimal requirements.

Summary

A single episode of global hyperinflation would do considerably more harm than good even if textbooks were true about the advantages of central bank control over the money supply. And the government money century had a whole deal more than just one of these disastrous occurrences.
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Gordon Dickerson

Gordon Dickerson

Author
Gordon Dickerson, a visionary in Crypto, NFT, and Web3, brings over 10 years of expertise in blockchain technology. With a Bachelor's in Computer Science from MIT and a Master's from Stanford, Gordon's strategic leadership has been instrumental in shaping global blockchain adoption. His commitment to inclusivity fosters a diverse ecosystem. In his spare time, Gordon enjoys gourmet cooking, cycling, stargazing as an amateur astronomer, and exploring non-fiction literature. His blend of expertise, credibility, and genuine passion for innovation makes him a trusted authority in decentralized technologies, driving impactful change with a personal touch.
James Pierce

James Pierce

Reviewer
James Pierce, a Finance and Crypto expert, brings over 15 years of experience to his writing. With a Master's degree in Finance from Harvard University, James's insightful articles and research papers have earned him recognition in the industry. His expertise spans financial markets and digital currencies, making him a trusted source for analysis and commentary. James seamlessly integrates his passion for travel into his work, providing readers with a unique perspective on global finance and the digital economy. Outside of writing, James enjoys photography, hiking, and exploring local cuisines during his travels.
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