Sure it could. England piled up a higher debt to GNP ratio while they were on the gold standard. Congress can promise that your children will pay in gold just as easy as they can promise that your children will pay in fiat dollars.
Fiat money is actually the best answer. The dollar has been more stable on a year to year basis than it was under the gold standard. Not only is it more stable, but deflation has almost been eliminated, along with the depressions they cause, which is actually a very good thing.
But those who think the dollar should be a long term store of value (it shouldn't) get really scared when you see a 60 year chart of the cummulative effect of 2% inflation a year.
I think that more than one reform is needed to resolve this problem. I mentioned a couple of other causes in the message I posted above. I suspect if money was convertible back and forth, it might cause a little better scrutiny on those who spend it in the public name.
Fiat money is actually the best answer. The dollar has been more stable on a year to year basis than it was under the gold standard. Not only is it more stable, but deflation has almost been eliminated, along with the depressions they cause, which is actually a very good thing.
Gasoline was $0.25 in the 1970s. It is now ~ $3.50. I don't think inflation is under control at all. I am not an economic theoretician, but I suspect the economic bumps of which you speak might be better regulated in a larger economy. I *DO* know something about the effects of positive feedback. (that is what causes oscillations in a system.) The best way to deal with it is to introduce characteristics which promote negative feedback.
Fiat money is how we got 100 trillion in debt. (if you count Social Security commitments as part of the debt, which I do. ) I cannot comprehend how any other system could be worse than this, economic bumps included. I note that Roosevelt made the ownership of Gold illegal. Can you tell me that Roosevelt was right about anything?
But those who think the dollar should be a long term store of value (it shouldn't) get really scared when you see a 60 year chart of the cummulative effect of 2% inflation a year.
You do not need to tell me. Using the dollar as a store of value is a horrible idea right now, unfortunately there are many people who are in positions such that they have no alternative as of yet. It is the distorted economic theories of John Maynard Keynes which has led us to this fast approaching economic meltdown. (I say distorted theories, because not even John Maynard Keynes would have regard such folly as a consequence of his ideas.)
“But those who think the dollar should be a long term store of value (it shouldn’t) get really scared when you see a 60 year chart of the cummulative effect of 2% inflation a year.”
Then why don’t they put warning labels on Dollar bills they way they do cigrattes.
It is the intention of the Federal Reserve to cause inflation which will dilute the value of this dollar. A 3% inflation rate will reduce the purchasing power of this dollar bill by 1/3 over 20 years. etc.
They only get away with this system because most people don’t have a clue what inflation is or what its effects are. I showed a pretty smart guy at work an inflation calculator. He was shocked at how much value the dollar has lost since 1990.
The FR isn’t going away anytime soon, so maybe the next best answer is to educate people so they can better protect themselves. Take the profit out of the game...