The Affects of War on the Economy
Currency and prices is an ever changing subject that is very complex. Bylund begins his writings by explaining the effect that outside forces such as war can have on the economy and its currency value. One of the more popular and shared opinions is that war elevated the economy to bring the nation out of the Great depression. This outlook does not help the entirety of the economy but rather a few large corporations to own portions of the market.
The simple truth is that people, yet again, are the economy, and war exterminates them.(Bylund p.31)
This view makes more sense in my opinion because the more people there are in an economy, the more it can flourish. Exchanges between people is what makes the economy grow. With less competition after the war, only a few institutions are left to trade amongst each other and gain more leverage and control on the market. The currency itself can also change depending on situations and goods available. In post-war Germany, cigarettes became the primary source of currency which shifted the entire market and changed the source of value in the economic market. These are called mediums of exchange. There have been many different mediums on exchange, the most popular being gold and silver, even shells and wheat have been mediums of exchange throughout history. The US dollar is the current medium of exchange, or currency, in the United States which can increase or decrease in value depending on the saturation of the currency. Bitcoin is a great example of fluctuating currency that can not be used as a stable medium of exchange. If you agree to complete a job or even sell an item for bitcoin at one point in time, the coin can be worth a drastically different amount a month from then. When it comes to the value of money, you want to rely on the form that is the most consistent within the economy.
Bitcoin's fluctuations speak on its weakness as a currency as this is being written. put more bluntly, it's not money right now due to its wild instability.(Bylund p.36)
There can be multiple mediums of exchange, with dollars, gold, and silver all coexisting but all of those are consistent and sparse enough to uphold their value. All three are also wants that can be transferred between parties for a mutual benefit with minimal risk. Bitcoin does not uphold the six traits of money which are durability, portability, divisibility, scarcity, uniformity, and acceptability. Money also needs to serve as a store of value and unit of account as well as a medium of exchange.
Dollars or Gold?
Gold is one of the most stable forms of money that there is. That is why it was and is one of the main sources of currency. Christopher Leonard stated that the floating dollar is the currency that should be used and if the gold standard still worked then people would still be using it. Bylund claims that people are still using it and it has remained one of the most stable forms of currency throughout history, that is why the dollar amount was based off of the value per ounce of gold. Bylund compares gold's constant quality to that of the foot, pound, and minute.
Is it perfectly stable? No, but its as close as market actors have come to stability, which explains its use as a definer of money values across time.(Bylund p.36)
Unlike the dollar, gold is not man made and is a resource that has a limited quantity which is why its stability remains compared to the dollar that can be mass produced, reducing its value. Bylund says the dollar was first used as a supporting role to gold which was $35 per ounce while other countries would then compare their currency to the dollar which I did not know. It is interesting to learn that while the economic market has changed over the years, the actual currency that is being transferred and obtained has also changed which I had never thought about. Bylund also shared his disagreements with the notion that the gold defined dollar caused the Great Depression. I agree with Bylund's argument, if gold is the most stable form of currency, then how could the dollar's relation to gold cause the Great Depression? Economists argue if a gold based dollar or the floating dollar value is the most beneficial to the economy. I think blaming the Great Depression on the gold based dollar has forced the move to floating money but I believe from Bylund's writings that gold is the most consistent and globally accepted form of currency to base the economy around. Money is a means of survival and I believe that you would want the most consistent and most recognized form of currency to rely on for your benefit. Bylund's writings really opened my mind to subjects that I had not previously thought about and I now have a better understanding of the economic market and money and its value.