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The monetary policy of the world is one that is racked with little bits of financial information that when combined, make up a giant system of economic gains and losses. When gold and silver are used as money, the money supply can grow only if the supply of these metals is increased by mining.
This rate of increase will speed-up when the gold-rushes occur and the discoveries by pioneers such as Christopher Columbus and Hernando DeSoto, get their eyes on gold. This did cause inflation, as the price of gold went way down. However, if the price of gold cannot keep up with the spread of the economy, gold becomes simply more valuable, and prices will drop, causing deflation.
The case in point was the Great depression. The monetary policy of the United States during the early 1930's was one that saw gold as the major driving force in the economy of the nation.
Modern day monetary systems are based on fiat money and are no longer tied to the value of gold as they once were. The control of the amount of money in the economy is known as monetary policy. Monetary policy is the process by which a monetary authority such as a central bank or government manages to achieve certain tasks or goals.
Usually the goal of monetary policy is to accommodate economic growth in an environment of stable prices. For example, it is clearly stated and should seek to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates. A failed monetary policy can have significant detrimental effects on an economy and the society that depends on it. These include high, shortages of imported goods, inability to export goods, and even total monetary collapse and the adoption of a much less efficient barter economy.
This rate of increase will speed-up when the gold-rushes occur and the discoveries by pioneers such as Christopher Columbus and Hernando DeSoto, get their eyes on gold. This did cause inflation, as the price of gold went way down. However, if the price of gold cannot keep up with the spread of the economy, gold becomes simply more valuable, and prices will drop, causing deflation.
The case in point was the Great depression. The monetary policy of the United States during the early 1930's was one that saw gold as the major driving force in the economy of the nation.
Modern day monetary systems are based on fiat money and are no longer tied to the value of gold as they once were. The control of the amount of money in the economy is known as monetary policy. Monetary policy is the process by which a monetary authority such as a central bank or government manages to achieve certain tasks or goals.
Usually the goal of monetary policy is to accommodate economic growth in an environment of stable prices. For example, it is clearly stated and should seek to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates. A failed monetary policy can have significant detrimental effects on an economy and the society that depends on it. These include high, shortages of imported goods, inability to export goods, and even total monetary collapse and the adoption of a much less efficient barter economy.
About the Author:
Adela Teaches about how you can welcome finance into your life, and also how to welcome car finance into your life.
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