All posts tagged fiat money

Back to Basics, Pt. 3: The Quantity Theory of Money

In the previous post, we entered the fiat money system. Now we will examine the quantity theory of money. The supply and demand of the fiat currency is different from the commodity money model(silver or gold) we examined earlier. There are two reasons for this: In the fiat money system, the government has unlimited control […]

Back to Basics, Pt. 2: It’s all about appearances

In the previous post, I covered the phase-out of the gold standard. During the times when we were using commodity money, a medium of account(MoA) was developed that is valid for both gold and cash. For this to happen, one had to be fixed on the other. Silver was abandoned in the 19th century, and […]

Back to Basics, Pt. 1: The Long Phase-Out of Gold

In this and the next few posts, I will examine how money determines the price level. It seems quite appropriate to start with the silver standard first. Let’s start by assuming that our unit of account is a pound of silver or “PS” for short. When defining money, we can use many different criteria such […]