A qualified defense of goldbuggery and some related observations on the regressive effects of inflation With currency and deposits redeemable in gold, customers and other banks can take any excess balances of such liabilities to the issuer for gold. Should any bank produce more money than its customers wish to hold, those customers will either bring it back to the bank directly for redemption or they will spend it, where it will most likely end up in the possession of a different bank. The other bank will not want to hold stocks of a competitor’s money. Instead, it will prefer to redeem it for gold or reserves at the bank directly or at a clearinghouse, either of which will impose a cost on the competitor by taking away the gold or reserves it needs to create loans. This process of adverse clearings ensures that if any bank creates too much money, it will pay an economic price for it in the form of reduced reserves. (07/23/14)
Posted on: Thu, 24 Jul 2014 09:13:12 +0000
Trending Topics
Recently Viewed Topics
© 2015