I’m studying US history with my daughter, and there’s a section which discusses “soft money” backed by silver and “hard money” backed by gold. The book seems to presume that the reader understands how one or the other is preferred by either farmers (borrowers) or bankers (lenders.) Their presumption is incorrect, as I certainly do not understand it! If the paper money represents the value of a certain numeric quantity of a precious metal, then what difference does it make what kind of metal it is?
So, could one of you fine scholars out there explain it like I’m five and not approximately ten times older than that? Thanks in advance!
In: Economics
There is/was a much more limited supply of gold than silver so if you’re going to use the gold standard that is going to limit the supply of money far more than if you base it on silver.
Limiting the money supply, frankly, benefits those who already have it. Creating new money, by basing it on a more abundant metal like silver, would lower the value of existing currency which was obviously a threat to those who had already created vast fortunes for themselves. It would, however, allow those without large reserves of cash to establish themselves more advantageously in the growing money economy of the 1800s. It should be remembered that for a long time many people in crop production had relied heavily on barter as money was in short supply. This obviously put farmers at a huge disadvantage against wealthy people who were threatening to buy up land and control the agricultural industry.
Latest Answers