Benefits of Using Silver Backed Currency
Silver is one of the commodities used to backed currency so that the value of money is derived from it. Fiat currency system is the alternative to silver backed currency where money value is not backed by any physical asset. The value of money is not affected by the government under the silver backed currency system. Thus silver backed currency ensures that money value is not affected by so many external factors. A physical commodity determines the value of money used in a country under the asset-backed currency. The following are benefits of using silver backed currency.
Silver crypto-currency is essential to countries that aims to regulate the amount of money in circulation in the economy at any given time. Inflation is when too much money is chasing after too few good as a result of too much money in the economy. Inflation is one of the cause of lose value in a country’s currency. Deflation on the other hand is caused by low money supply. Inflation and deflation are two of the major concerns affecting economic growth negatively. Asset-backed currency offers a way to prevent these problems from occurring. This is because silver is limited in supply thus the only way to increase money supply is to increase silver mining activities. Money supply is key to have a stable economy. Use of fiat currency system have seen some countries experience economic difficulties. This is where the government falls to manage the value of the country’s currency thus creating negative impacts on the economic. Therefore these countries are advised to consider using asset-backed currency.
Asset backed currency also helps in the prevention of economic bubbles. The reason is that the physical commodity such as silver has a fixed value at any given point that appreciates steadily. In the past there have been several economies that have collapsed due to these economic bubbles. The reason is that people acquire debt to buy assets that increase in value rapidly with hopes of selling later at a profit. Therefore the banks seem like they are making money out of the air. The problem is that the rapid increase in value of the asset is not stable and will suddenly drop leading to substantial loses. Silver backed currency offers a way to prevent economic bubbles from happening the first place. The scarcity of silver is what makes it ideal for backing currency. This means that all the assets in the country will have a stable value because there is stable demand for money is also limited in supply. This means that the asset value will only rise at the rate of the stable demand avoiding instances where it doubles in value a concise period.