On 2011-09-26 5:13 AM, lodewijk andré de la porte wrote:
The gold standard was fine as far as I know, as long as the gold flow was steady.
And when the gold flow was not steady, inflation and deflation was generally less than 1% a year.
I conjecture that the expectation that value of the currency would remain stable in the long term stabilized the value in the short term - that when there was asset inflation, people started to prefer to store value in gold, and when there was asset deflation, people started to prefer to store value in other things, such as housing, whereas the present value of fiat money is destabilized by the fact that its future value could drop a great deal.
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