Hypothetical Situation:
Within a country, there were 2 political parties. Each had its own central bank, one whose bank notes or money was based on value of stored gold etc (assuming the bank kept its note to gold ratio at 1:1), and one that was based on debt, like the Federal Reserve.
Would this system work within that country? Which currency would be worth more at what times? Would the value of the bank notes (averaged between the 2 banks) be more or less than if the country had 1 central bank?
It would fall apart. People would stop using the worthless paper money and use the gold instead.
That's the reason it's mostly illegal to use gold and silver as money.
Also gold-backed money is pointless unless people also have the right to redeem their paper for gold. From 1933-1971, the USA had a gold standard but people weren't allowed to redeem their paper for gold, making it really fiat money.
I have my own blog at FSK's Guide to Reality. Let me know if you like it.
fsk: It would fall apart. People would stop using the worthless paper money and use the gold instead.
Didn't people in the Renaissance use ducet bank notes instead of gold for commerce because it was easier to carry around? That's an honest system, why can't we go back to that?
fsk: Also gold-backed money is pointless unless people also have the right to redeem their paper for gold. From 1933-1971, the USA had a gold standard but people weren't allowed to redeem their paper for gold, making it really fiat money.
I agree with you that it should be legal to redeem money for gold, I mean that's essentially how the system worked in the first place. Fiat money is bogus man
Also, what if the two banks were both based on value? Or if they were both based on debt?