First let me say that I understand how fiat currency encourages and makes very easy for central bankers to inflate the currency to fund the ever increasing size of government that always rises up under fiat money. I also have a general understanding of how the expansion of artificial credit leads to economic bubbles and busts.
Under a gold/silver standard I understand how the creation of artificial credit would be virtually impossible thereby making it very difficult for government to expand without directly taxing the people or borrowing as well as ridding us of the creation of huge economic bubbles.
For a system regulated by finite money supply under a gold/silver standard of money I have some questions:
-
Since credit could not expand artificially would the credit market be a zero sum game? In other words credit expansion in one sector could only come as credit contracts in another sector(s) of the economy. This seems like the case unless there was an increase in the supply of gold/silver, but I just wanted to make sure I am not missing something
-
Now assuming that what I said in question 1 is correct would the entire economy be considered a zero sum game? I mean credit would be extended to those ventures that could increase production and efficiency but does this create wealth?
I guess my ultimate question is what exactly is wealth? I know it sounds rather elementary to ask this, but if wealth is simply a measure of the supply of gold then wealth would never grow since the supply of gold is relatively constant. So is growth in wealth simply achieved through advancement in technology, production, and efficiency leading to greater value and purchasing power for individuals?
I hope I made this clear enough.