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. In asset-backed currency the government plays a very minimal role in the overall value of money used in a country. The essence of using silver backed currency is to reduce the factors that influence the value of money. This is because the supply of silver is the primary factor that will determine the value of money under the silver backed current. Below are the main benefits of using silver crypto-currency.
Asset-backed currency play a major role in keeping the money supply in the economy at an optimal level. One of the causes of inflation is excessive money supply. Inflation is one of the cause of lose value in a country’s currency. Goods prices goes down when there is low money supply in the economy. Inflation and deflation are two of the major concerns affecting economic growth negatively. All these things can be avoided by using silver backed currency. This is because silver is limited in supply thus the only way to increase money supply is to increase silver mining activities. By controlling money supply a country is able to have a stable economy. Use of fiat currency system have seen some countries experience economic difficulties. This is because the loss of value of money may be caused by the activities undertaken by the government. Therefore these countries are advised to consider using asset-backed currency.
The most popular economic bubbles in the world could be avoided by using asset-backed currency. This is because the values of money is based on tangible assets such as silver that has fixed quantity of supply in the economy. In the past there have been several economies that have collapsed due to these economic bubbles. This is because to a sudden increase in value of an asset that many people borrow money to acquire. Therefore the banks seem like they are making money out of the air. Then it reaches a point where the asset value makes a sudden drop in value where all the people who invested in it make very huge losses. The use of asset-backed currency is ensured to preventing economic bubbles. The physical commodity used to backed the currency should have a stable value and limited in supply. Thus the value of money and assets acquired using more can only appreciate in value steadily. 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.