[nsomaru]

I believe the argument goes like this: "fiat" depends on a declaration by a government that something has value. The way a government does that is by declaring something legal tender and accepting taxes denominated in that currency.

Contrast with a time when currency was pegged to a physical asset like gold and GBP so no depreciation in something like 300 years. Savings actually had meaning.

[dools]

Not quite.

The government imposes a tax, the tax is due in the state's unit of account. The government can then spend its unit of account into circulation, and later accepts it back in payment of taxes.

> Contrast with a time when currency was pegged to a physical asset like gold

Even when a currency is constructed from a commodity, it is not the commidity that is the money. It is a commodity that bears the stamp of the sovereign.

> and GBP so no depreciation in something like 300 years. Savings actually had meaning.

When money was constructed from a commodity there was a terrible shortage of coin to support the economy and it was a horror show for almost everyone.

It's certainly possible to have price stability and full employment, but if you're going to choose, a bit of inflation is much, much better than deflation.

[XorNot]

What happens to the price of bread if the rate of gold mining outstrips the rate of bread production?