Post
Topic
Board Economics
Re: The problem of a depreciating currency
by
lonelyminer (Peter Šurda)
on 26/03/2013, 23:12:33 UTC
One would be Gresham's Law where "Bad money drives out good", in that all the world's fiat (the bad money) drives the good money into hiding.
Gresham's Law is a special type of price fixing effect. It occurs when the state fixes exchange rates of two monies at a level different from the market ratio. This creates an arbitrage opportunity (two markets with different exchange rates) and the overvalued money will push out the undervalued money abroad.

Without price fixing, this effect does not occur. It is also uncertain whether that would work if there are technological differences between the two.