What would be the downsides of each country having a constant net amount of currency?
In: 0
100 years ago, your country has a population of 1 million people.
Today, your country has a population of 20 million people. Are they each supposed to have 1/20th the money that previous ancestors did? Does that also change the cost of goods? Eg. Bread 100 years ago cost $1; now it costs $0.05?
If this is the case, your currency is experiencing deflation; prices are going down. This is bad in modern economics because it means that people really don’t want to spend money. Why buy a TV for $500 today when I can wait a month and get it for $495? Or wait a year and get it for $425?
The end result is nobody spends money on anything except the necessities. Everyone employed in industries that don’t provide those necessities will lose their jobs because no one is buying TVs, books, or new cookware. The newly unemployed have less money to spend, so they spend even less. Less money being spent means more people lose work, and the cycle continues until the government collapses due to food riots, political upheaval, or economic collapse.
Latest Answers