Why must we define it?

Reader comment on: Greece and Gold
in response to reader comment: Wow -

Submitted by ben (United States), May 7, 2010 10:04

I am so far out of my understanding of economics to comment intelligently, but what is a blog for other than to write about things we don't know about?

I don't see why we need to "define" the value of a dollar. The dollar should be able to float in value so that the economy has the flexibility to adapt to changing circumstances. During the Great Depression, countries that clung to the Gold Standard for longer (they pretty much all dropped it eventually) had a much harder time coming out of the depression because monetary policy was so limited by the need to have gold reserves. Countries that were able to print more money could grow their economy (and inflate away the debt). Currently, my understanding is that the dollar is defined in relation to other currencies. A dollar is defined as "whatever a dollar can buy." This circular reasoning (much like the efficient market theory - which by the way may have taken a bit of a hit yesterday with the 800 point drop in 7 minutes - doesn't seem so efficient) doesn't feel so complete to me. If people lose faith in the US government because it is printing too much money, the dollar declines in value. I don't see why it needs to be backed by gold. If people want to buy gold on their own, that is their choice, but having a set relationship between gold and the dollar sounds like an unnecessary and debilitating straightjacket on our economy's ability to adapt to changing circumstances. But again, I have no idea what I am talking about. . .

Note: Comments are moderated by the editor and are subject to editing.

Other reader comments on this item

Title By Date
Wow -
[w/response] [16 words]
benMay 7, 2010 08:07
⇒ Why must we define it? [272 words]benMay 7, 2010 10:04

Comment on this item

Mark my comment as a response to Why must we define it? by ben

Email me if someone replies to my comment

Note: Comments are moderated by the editor and are subject to editing.