/biz/ - Business & Finance

Pls halp.

only fiat currency inflates

gold doesnt change much

basically with a fiat currency, that is not backed by anything real, you can loan as much money as you want. it brings revenue in interest but also devalues the currency, which makes it impossible to pay off the debt, and the cycle continues

>>19429139
anon its simple, currency only inflate when the govt makes more of it.
now the reason why is mostly greed, they want things they can't afford so they print money to pay of it.

>>19429139
Because they can literally print money

>>19429368
So... if a country was advancing technologically, would that create a greater need for spending and creating money if they were selling that tech to their citizens and institutions at a faster rate than they could produce it?

>>19429139
you are thinking of two separate things
currency inflation
and some clever tricks to replace a currency that went to shit
look up zimbabwe for hyperinflation example
look up brazil real plan 1994 for example solution but keep in mind this won't always work I think venezuela tried unsuccessfully

>>19429406
only the technology would gain value based on supply and demand.
the currency would still buy the same number of apples even if the price of TV's goes up...

>>19429338
False
>>19429139
The country creates debt. To pay off the debt it starts making printer go BRRRR.
To make printer go BRRRR you need to back up the new currency in some way.

First you can do it by getting more backing from somewhere. Like exchange land you don't need for precious metals, confiscate PMs from the population or conquer a country with precious metal mines. This creates internal inflation, but it stabilizes itself though import.

Then you can do it by debasing it, hoping it will take enough time for everyone to notice - i.e. you move from .900 silver coins to .750 silver coins, so you can BRRRR more silver coins, without telling anyone of course or telling it in vague terms. This creates controlled inflation, because you can only inflate the currency so much at a time. Like you can't to from 90% silver to 1% and expect it to pass.

Then you can switch backing from PMs to natural resources or even labor. It's another way of controlled inflation. Especially labor backing, because money is basically backed by goods the money buys.

Worst case you can just start printing paper.Printing paper is basically borrowing from the future where you have the money to pay back. As you print paper you create more debt you will have to pay later. It creates a feedback loop and once the velocity picks up, which means once the money trickles down, it's worth increasingly less. So you get hyperinflation.

Look at it like at the coinmarketcap. Let's say some shitcoin like Bitcoin Diamond forked itself and suddenly has 10x the supply. It would automatically move it to top 10. Anyone holding BCD at the time of the fork has the time to dump before anyone realizes what's going on, but then the market realizes that the supply is inflated and dumps it back to #68 where it belongs.

>>19429139
>jews
This is basically what happens when a currency crashes

>>19429475
I'm just trying to think of how I can make it work for a story see.
It's a fantasy kingdom that uses gold coins as its main currency, but I wanted to switch it to something much more interesting, so precious metals could be quite common, and I was thinking on platinum, gold, silver, and bronze as the currency types.
Silver and bronze are far more plentiful than platinum or gold, and so the general populace uses that more commonly, but the richer of people use platinum and gold as their wealth far outlasses the lower currency and they don't want to be hauling around masses of currency everywhere.
The problem is, I have the end point I want to reach, I've no idea how to get there because I can't into currency shift.

>>19429531
I've literally no idea what moving .900 to .700 means, I've no idea what moving 90% to 1% in a coin means.

>>19429610
good luck anon, heres my favorite economist Milton friedman. but the website in general is a good one
https://www.freetochoosenetwork.org/programs/free_to_choose/index_80.php

120 years ago the dollar was a claim on gold.
Then around 90 years ago in 1933 the dollar was still technically priced to gold but you could no longer physically own gold in the US it was illegal.

Then after WW2 the USD became the world reserve currency. And finally in 1971 the USD any relation to gold ended.

Now the fed and the banks are creators of capital and allocators of capital. And the (((CENTRAL BANKS))) decided to wage war against small, community owned non-for-profit banks and favour big banks.

Big banks invest in big players who are in real estate and financial speculation whilst small banks invest in the real economy, small and medium business owners.

This is the reason behind the increase of wealth inequality, improper bank allocation of credit. It all goes towards stocks or real estate creating asset inflation making the rich richer and the poor poorer.

In America in the 1920's the average salary was $3269 or in terms of ounces of gold 163.47 ounces of gold. In todays price of gold that would be like average salary being $282803

Todays average salary in america is 63,179 or 36.5 ounces of gold.

163.47 / 36.5 Big difference huh.

That effectively means that the average american in 1920 was paid 4.5X more in real money (Gold) then the average american is paid today, really makes me think. Or in other words the average america today in relative terms is 78% poorer then the average american in 1920

>>19429687
what I don't understand is why boomers don't understand inflation. its like you bought that house for 40k and selling it for 200k, and they think that's all profit, not inflation lol.

>>19429610
>I've literally no idea what moving .900 to .700 means, I've no idea what moving 90% to 1% in a coin means.

Brainlet. In a backed system a coin is made out of a precious metal and the paper money are just metal certificates.
So if you have .900 silver in you coin and lower it to .750 silver per coin, you get to stamp more coins.
Do you even know what paper money is?

>>19429817
Oh I see.
All I know is that paper money is a substitute for actual coins of precious metal.
I figured it was abandoned because its easier to produce and we use a lot of precious metals in technology.

>>19429768
It is profit relative to people that didn't buy real estate lol. Also whilst a house is increasing in value due to inflation you can also rent it out for double gains.

So how would you go from gold coins to a system of four-tiered coins?
Plat, gold, silver, bronze.

>>19429933
only in locations with restrictive housing laws, is housing a good investment. in most places once you account for maintenance taxes and inflation, really its not a big difference.
but me personally I rather have the comfort of knowing some douche bag land lord won't try to rummage through my stuff

Bump for assistance.

>>19429610
Pretty much everyone in this thread has given you an awful answer. I’m sorry.

The reasons silver, gold, and to a lesser extent copper became valuable in ancient society as currency:
1) the metals do not easily tarnish and were already valued for their beauty
2) due to their material properties coins or these metals were difficult to counterfeit (more on this in a moment)
3) most importantly, extracting it in large quantities could only be efficiently done by the state, so the kings could easily monopolize the supply

the counterfeiting aspect was the main driver of currency panics in the ancient past. corrupt mints (or corrupt kings) would lower the % of silver or gold in the coin’s alloy, debasing the currency and over time causing inflation while the corrupt party lined his pockets with the raw metal. Savvy criminals also found ways to duplicate the properties of metals (such as coating lead with gold and trying to pass it off as a full weight gold coin) or shaving off tiny amounts of metal from real coins and melting the accumulated scraps down into bars or what have you.

>>19430792
I’ll add that platinum never historically enjoyed status as a currency, even though it is rarer than gold and has many similar properties, because it is hard to extract and was not found by Europeans until they colonized South America

>>19430792
That's cool, that helps with getting the coins sorted because as its fantasy, magic can be used on the coinage and used against the coinage to both protect them from conterfeiting and break down the protections on them.

But what about introducing new coins?
What would lead to new coins being introduced?
Could it be possible to introduce new coins of higher value to an existing single coin system of gold coins, where prosperity is high?
Say 1 platinum is worth 20 gold coins, but isn't a coin currently, even though it's easy to procure as a precious metal in this world.

>>19430830
Well if magic is used as the validator of value then it hardly matters what metal is actually used, right? your banking wizards would print money by enchanting something to have whatever marker of value they desired

>>19429139
well, see the case of germany (weimar), you have a country with its own currency and things going well, suddenly incredibly huge war sanctions are imposed on them, which have them pay billions of british pounds daily.
Germany cannot print british pounds so they have to buy them on the markets in exchange for german marks, but there is not enough demand for marks at the current exchange rate for them to convert, so they need to print more marks to buy the amount of pounds they need to pay in war reparations. As this has to keep happening (printing marks and selling them for gbp), mark goes down in value, while gbp appreciates.
Now smart people be like, why the fuck should i keep my savings in marks which are gonna depreciate, when i can keep them in much stronger pound? So they also start converting. After a while average people realize this too. No one wants to hold german marks anymore cause they know theire savings will depreciate, they just want the strong currency. So effectively the price of the mark goes to zero, no one wants it anymore.
History books say silly thing like inflation goings to million % and whatnot, and people using wheelbarrel of money to buy shit. The simple truth is the mark went to zero, so 1/zero goes to infinity. The wheelbarrels only happens for a super short time (few days at most), when people are still trying to convert) from then on people just start using substitute currencies in their transactions, be it foreign currency or shit like gold etc

>>19430855
Yeah but for the sake of simplicity so the world isn't using shells or bottle caps as a currency I was just going to go with coins of precious metals.

>>19430871
Yeah I looked to Weimar and decided that gold coins superinflating wasn't the way I wanted to go. As I asked here >>19430830
Would it be possible to introduce new coinage based on rising prosperity of the country? As technology advances and they produce better goods, more countries want what they've got and now they're overflowing in gold, and that gold is way too much to handle, so they create new coins of different values to keep a lid on it?

>>19430906
precious metals as coins doesn't really work, thats why the gold standard had to be abandoned.

As productivity goes up, if you can't create new currency, the currency will deflate, and this is generally agreed to be bad cause it only makes the rich richer and favors hoarding instead of spending.

Fiat currency is much better cause supply can be expanded and contracted at will, so in theory it is a superset of any other possible currency, giving the currency creator ultimate power and the possibility to maximize prosperity through currency creation and allocation

>>19430993
If a single mint is able to create coinage though, it can control the supply of coins as you say, so if gold coins start to devalue because there's too many, they could issue new coins and say 'Right, these gold coins are now worth 50 of a single platinum coin, and 50 silver coins are worth 1 of the gold coins' or something?

>>19430045
The bimetallic standard of gold AND silver and eventually a trimetallic standard with copper/bronze is an outgrowth of how much value gold alone represents. An ounce of gold was useful when you wanted to buy a horse, and several my get a parcel of land. Or when you're a king making payment for an army. But when you're trading for your daily bread, the size of a gold coin you'd need to transact such a small sum becomes impractically tiny. And you can only dilute the gold content in the alloy so fat before counterfeits become easy to pass off.

This is where silver comes in. Its been exchanged with gold at a ratio between 8-1 and 16-1 historically. and when even 1oz silver is too large a sum, you can make fractionals that let you spend enough for a loaf of bread. And if your economy gets to the point where you can't practically transact in tiny bits of silver, you can add copper coinage to the mix. However as copper is a base metal, 1 cent pieces will need to be large.

Platinum was only discovered in the 17th century AD and doesn't have the history as coinage and real money that other precious metals do. its much rarer than gold, so you'd think it would be a shoe in as a 'super gold', right? Except its primarily an industrial metal now; its hugely important as a catalyst and valuable in high temp applications. Its not as institutionally accepted as a hard asset, and its historically low value in March (680/oz) was tied to a lack of industrial output.

Also if society ever collapses, they won't even be able to melt down platinum bullion.

>>19431153
Yes but this is a fantasy world I'm writing for, we can assume platinum is both easy to smelt and easier to get than it is in this world, but not as easy to procure as gold, so it has higher value over gold.
The issue is that a gold coin gets you a loaf of bread, but a gold coin also gets you a small bag of carrots or potatoes or something.
So how do you change that from a system that's almost like a barter system where the gold coin doesn't have a fixed decimal sort of value, to say, a Royal Mint going 'Right this is now worth x'

>>19431047
>>19430993
The liquidity of of PM coins vs fiat bills was never the reason PM standards got abandoned. The US for years ran on a system where the dollar bill was pegged to a weight of gold. The primary reason for going fiat is always because the issuing government wants to be able to inflate its money supply in a way that it can't when the money has to be physically extracted from the earth at a rate too slow for their tastes.

If in your fantasy example there is only a single mint churning out the coinage, I suppose they can set the exchange rate between PM 'denomination' to be whatever they want. The reason this doesn't fly in reality is that you'd have to stop people from getting any of this precious metal and just transacting in it based on its value/ounce. If your wizard bank really wants to reduce the money supply it has to kill anyone trying to skirt the system, melt down some coinage that gets circulated back to it, and sit on that stockpile of bullion until its time to make more coinage.

>>19431298
So what if it was GoT style and there were several kingdoms with their own Mints? The royal houses borrowed coinage from one another as their respective Kingdoms as they had numerous mines in their own territories and the ability to sit on their wealth.
Would that work into this one Kingdom that only trades in a single gold coin turning to have to produce new coins?

>>19431213
Honest question, are you ESL because I had to reread that post a few times.

You should just look at what actual royal mints were minting for use as late as the 1910s. Your mint would be foolish to only produce 1 kind of gold piece, 1 kind of, silver piece, etc...

What happens is that there is a an exchange ratio between gold/silver/plat based on their mining rates / total above ground amounts. Then you standardize a certain gold piece as the wizarddollar. you can make bigger gold pieces worth 5 wizarddollars, or smaller ones worth .5 wizarddollars. Then your really valuable plat coinage is assigned a value based on how much more expensive its metal content is than the 1 wizzarddollar gold piece. Likewise you do this for you 0.10 wizzarddollar silver dimes.

Once you get down to pennies and half pennies the exchage rate from gold doesn't really work, since the metal is almost worthless, so you just say this is 0.005 wizzard dollars, but you can't just trade in an equivalent weight of copper. Otherwise I could trade you the equivalent weight of 500000 wizzardpennies in copper scrap I stole from wizzardairconditioners for much more than its value in gold wizzarddollars at the wizzardbank.

>>19431348
Rewrite this post, its unreadable.

>>19431408
>>19431423
You're messing my brain up with your .10's and .5's and cutting in the word wizzarddollar.
I'm native English, I'm just tired as shit because it's late and I've been trying my fucking damndest to understand this shit for the past 5 hours.

>>19429139
quite frankly you shouldnt go to /biz/ for this. you are talking to schizophrenic 30 year olds and autistic teenagers. if you spend too long here, you're liable to be silver-pilled.
Read Thomas Sowell's Basic Economics.
>>19429768
boomers are fucking retarded.
"Kids these days are so spoiled. Complaining about only making $40,000 a year after graduating from college. Back when I graduated, I was only making $15,000 a year, and I got by just fine."

>>19431445
If you're going to have multiple entities minting their own coinage and trading with each other, then there is going to be a consensus formed among the merchants and banking houses about who's currency is worth what, as it will be incumbent on them to know how much gold is in Kingdom A's 5 jizzarddollar piece compared to Kingdom B's 1 jizzarddollar piece. A rough foreign currency exchange will be established in this case.

Even if there is little trade at an institutional level, farmers living near the borders of 2 kingdoms will end up trading both currencies be default anyway, and will work out exchange rates locally.

You have to remember that despite what we like to think now, most monarchs (even absolute monarchs) in history just let the economic engine go. As long as tax money came in and they weren't actively prosecuting a war the people didn't see much of their kings. You could maybe have a thing where its illegal to deal with an embargoed kingdom, and anyone caught with their coinage will be executed, but that will just result in the embargoed nation trading their money for someone else's then using that for trade within the embargoing state.

>>19429139

When there is a demand for currency and it is being printed, that seems to be OK

Inflation happened only when a currency is printed and injected into economy but there is no actual reason for it, which means no actual necessity.

>>19429338
You dumbass, nobody wants his gold tainted with shit metals unless you want to be universally despised, not the same tune for fiat.