Fixing inflation is easy, but no one talks about it
In 1544, Henry VIII of England undertook the Great Debasement of the ever-reliable British silver penny. The silver content in the coin began to be only 25%, compared to the old 92.5%. In other words, it began to take about 3.7 times more pennies to buy an ounce of silver than before. It is obvious that prices in Britain soon rose by about three times.
Henry did not invent anything new. The Romans at one time devalued denarius, which led to the price of wheat rising two million times. Central banks today are essentially doing the same thing, but in the digital age. Benchmark in the Bretton Woods era $35 an ounce. Now this figure has decreased by about 50:1. To buy one ounce of gold, you will now need about fifty times more dollars.
Henry did not invent anything new. The Romans at one time devalued denarius, which led to the price of wheat rising two million times. Central banks today are essentially doing the same thing, but in the digital age. Benchmark in the Bretton Woods era $35 an ounce. Now this figure has decreased by about 50:1. To buy one ounce of gold, you will now need about fifty times more dollars.
One of the last steps to lower the dollar came in 2019-2020. In response to the Federal Reserve's expansion, the value of the dollar fell from about $1,200 to $1,800 an ounce. Markets always adapt to the low dollar exchange rate and, all other things being equal, prices will increase by 50%. It's not happening fast. Like swinging a huge pendulum, this will happen in some time sometimes up to 5 years. This process is called "pushing out costs," "drawing wages," or "spiral." You are with us experiencing this today.
Another example is Mexico. In the early 1990s, approximately 3 pesos equated to one American dollar. The dollar is worth more than 20 pesos to date. As an example, beer rose from 15 pesos to 100 pesos. We all know why this happened.
Another example is Mexico. In the early 1990s, approximately 3 pesos equated to one American dollar. The dollar is worth more than 20 pesos to date. As an example, beer rose from 15 pesos to 100 pesos. We all know why this happened.
If you want to stop cash inflation, you just have to stop the currency falling. Obvious hyperinflationary examples of situations are Argentina 1991 or Bulgaria 1997. Argentina tied the value of the peso to the value of the dollar. Bulgaria took a very similar step, but tied to the value of the mark, and later tied to the value of the euro. These examples show that "inflation" can end in a matter of days.
Therefore, the stabilization of value and binding to gold has always been an important principle in the history of states. Argentina was guided by the same idea when it decided to tie the value of the peso to the dollar in 1991. And it worked great.
Therefore, the stabilization of value and binding to gold has always been an important principle in the history of states. Argentina was guided by the same idea when it decided to tie the value of the peso to the dollar in 1991. And it worked great.
So today, if you don't want more inflation, you just have to keep the value of paper currency from falling. It's not a very complicated concept.
Over the past six months, people have received numerous comments about "inflation" in the media. But no one mentioned that in 2019-2020, as a result of the aggressive expansion of the US central bank, the value of the dollar fell. This, combined with real non-monetary factors in the type of "supply chains," caused inflation in the country. Unfortunately, with the help of the media, they often talk about anything but the most important thing - the value of the currency.
If the concept gets publicity again in the near future, and we recall the story, then soon everyone will come to the conclusion again that it is best to tie paper currency to gold. This happened almost two centuries before 1971 and made the United States the richest country in world history. In 1971, a series of economic reforms carried out by US President Richard Nixon took place in the United States, the most significant of which was the unilateral refusal of the United States to tie the dollar to gold.
Over the past six months, people have received numerous comments about "inflation" in the media. But no one mentioned that in 2019-2020, as a result of the aggressive expansion of the US central bank, the value of the dollar fell. This, combined with real non-monetary factors in the type of "supply chains," caused inflation in the country. Unfortunately, with the help of the media, they often talk about anything but the most important thing - the value of the currency.
If the concept gets publicity again in the near future, and we recall the story, then soon everyone will come to the conclusion again that it is best to tie paper currency to gold. This happened almost two centuries before 1971 and made the United States the richest country in world history. In 1971, a series of economic reforms carried out by US President Richard Nixon took place in the United States, the most significant of which was the unilateral refusal of the United States to tie the dollar to gold.
