Quote:
Originally Posted by bb4_96
Nobody answered my questions. If the system is 1:1 then how does the economy grow? Is gold then worth more wth? I'm fairly clueless with this concept.
|
The only real way to expand the money supply is to acquire more gold, then more currency can be issued that is backed by that new gold. Or, you could adjust the exchange rate of dollars/gold, but that would pretty much defeat the purpose of using a Gold Standard.
Long-term, if you hold the money supply constant, and economic activity increases, than you get deflation, as each dollar can buy more and more goods/services. However, deflation stifles economic growth. Why invest your money when you can just sit on it and watch it grow in value?