WI the American Dollar keeps its value

danwild6

What if the US Dollar roughly maintains its 1774, 1850 and 1900 buying power? What changes to the American economy can bring this forth?

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It's not economically beneficial to avoid inflation on the long run

So it's pretty much impossible, it goes against economics.
 

danwild6

I take your point but the Dollar kept its value up into the 20th century with no really negative effects. Between its 1774 valuation of $1.00 and its 1900 valuation of $0.96 the population increased from roughly 2.5 million to over 100 million people since then the population has only tripled but the dollar is now worth 1/25 its original value.
 

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danwild6 said:
I take your point but the Dollar kept its value up into the 20th century with no really negative effects. Between its 1774 valuation of $1.00 and its 1900 valuation of $0.96 the population increased from roughly 2.5 million to over 100 million people since then the population has only tripled but the dollar is now worth 1/25 its original value.
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Why do you say there weren't negative effects?
 

danwild6

Well I'm unaware of negative effects. I understand that a strong dollar means American industries have a hard time competing abroad but that can be mitigated with a strong tariff too protect the home market and a massive population(enabling economies of scale)to lower production costs. It also forces American corporations too improve efficiency as a way of lowering costs and increasing production.
 

xchen08

Here's the thing. The Dollar kept roughly the same value until the 20th Century because the U.S. was on and off, mostly on, the Gold Standard. This included all the negative effects of the Gold standard, including long periods of deflation between major gold strikes, contributing to the boom and bust cycle, and generally hurting the poor at the expense of the rich. You should have read about in school, for instance, of the free silver movement, which grew out of populist dissent arising from precisely one of those periods of deflation.

Now that we have the ability to maintain a fiat currency and still retain popular confidence in the monetary system, there's absolutely no reason not to maintain a small positive inflation rate which has a whole series of benefits.
 
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