Paper Money Value vs Silver Value
The Treasury held gold is something that has stayed stable. Gold does have the prospective of exceeding the currency price. Remember that a troy ounce of gold is the same everywhere and is something that cannot be changed or moved. On the hand a dollar has an upper limit that is not a value that is rigorously held. The amount of dollars or the money supply has no limit.
If people were to observe just what the percentage of the dollar was worth in 1913 and how much it is worth today. What you will find is surprising. Ninety six percent of the value is completely gone.
Based on these observations it is pretty obvious to see that unbacked paper money lose their value as time goes by. Some believe that it is not going to be worth anything as time goes by. And as has been seen the dollar has actually lost ninety six percent of its value according to the Federal Reserve when supposedly the job of the Federal Reserve is to keep it steady.
One thing that a lot of people question when it comes to paper money is who decides on how many dollars exist at a specific moment in time and if it is truly possible that paper money is made out of air.
One good example of this is the rentenmark and the whole world was able to see this event in Germany after W.W.1 when the Rentenmark replaced the Papiermark. Because of the financial crises in Germany after the Great War there was no gold available to back the currency. As a result the Rentenbank, which issued the Rentenmark, mortgaged land and industrial goods worth 3.2 billion Rentenmark to back the new money. The Rentenmark was established at a rate 1 Rentenmark equal to 1:1012 Papiermark, beginning an exchange rate of 1 United States dollar equal to 4.2 RM. The Rentenmark was only intermediate money and was not legal tender. It was, nevertheless, acknowledged by the population and in effect ended the inflation. The Reichsmark developed into the new legal tender on the 30th of August in 1924 and was the same in value to the Rentenmark. The monetary policy organized by Hjalmar Schacht, the Central Banker, along with the fiscal policy of German Chancellor Gustav Stresemann and Finance Minster Hans Luther brought the inflation in Germany to an end. The Rentenbank remained in existence after 1924 and the notes and coins continued to circulate. The last Rentenmark notes were legitimate until 1948.
Obviously the idea of this real example is that money is simply not stable and many people are afraid of what could occur. During the late seventies people were purchasing gold due to the increase in money supply and the inflation figures. However, now money supply is not heard about that much. If you think about it the moment you realize or see that banks and countries are now starting to save their money in gold and once they start exchanging in gold paper money will come to an end.
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