Quote:
Originally Posted by mcsluggo
true enough... assuming that all the preconditions of "perfect competition" exist.
so when you and I are able to start cranking our own printing presses and crank out $100 bills, the price will eventually drop down to 5cents (see Zimbabwe)
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Zimbabwe's currency didn't go to hell because the central bank there had competition....it went to hell because they thought the solution to their economic problems was to print more money.
(and if fiat currency is a technological advance, then Zimbabwe is one of the most technologically advanced countries on earth).
“The US government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many US dollars as it wishes at essentially no cost" -- Helicopter Ben
Alchemists contributed more to chemistry than our modern bankers will contribute to the field of printing. Let's note that $100 1971 dollars is worth $17 dollars today, so the Fed is steadily moving the value of the currency towards it's production cost, even in the absence of competition.
If you give politicians and bankers a printing press and a fiat currency, they'll print themselves into oblivion. (I know this in the same way that I can guess the outcome of giving a 16 year old boy a box of porn, a bottle of hand lotion and a house to himself). Maybe not Volcker, or Greenspan, and maybe not Helicopter Ben....but it only takes one to make that mistake to send the currency on a death-spiral -- the likelihood of finding that one in the long-run is about certain. That is, the long-run value of a fiat currency is zero. The question is not whether the Federal Reserve Note will one day be worthless, the question is when.