Economics Week 17 Fiat Currency

Prompt: “Is it counterfeiting when government-licensed banks create money out of nothing?”

The gold backed standard allows the free market to have control over a limited supply of wealth. Under this standard there is no fiat currency, all the money in circulation is backed by gold. Government licensed banks, such as the federal reserve, have the power to print all the money they see fit without the restrictions of a limited gold supply. I wouldn’t necessarily call this counterfeiting, as it is legally backed. But it does pose the threat of inflation if the fed prints out more money than our economy can afford to support.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s