The whole system works because people produce things and services that others want.
It is very difficult to carry around 1,000 bushels of corn so we use money to represent our labour in order to trade conveniently.
When the supply of goods and services stays the same, but the money supply is increased, once that money goes into circulation the value of each unit of currency falls as traders compete for the same limited supply of goods and services.
Despite an abundance perceived by a few, unlike currency gold cannot be created out of whole cloth or alchemy. Nor does it decay or corrode. Deflating its value by increasing its supply is usually a gradual process rather than one that can be accomplished overnight. And gold is not issued by a government that may default on it. And it is compact and portable.
Ultimately, of course, gold too is just another commodity and its value over time reflects the vagaries of demand based on complex and varied factors.
Still, when presented with a choice of Zimbabwean dollars vs. gold, which would you pick? Gold, of course. Even if Zimbabwe prints more and more money and it becomes virtually worthless, one take take their gold anywhere in the world and it will have value, unlike a currency issued by a particular government.
I’m sure the OP is not alone in looking at the USA and wondering at what point is the dollar significantly weakened or the debt so unmanageable that default or hyper-inflation looms. When the amount of gold reserves are examined one might understandably worry that our system is truly propped up by a belief in growth, rather than hard assets.
Hence, this past year many nations have bought large amounts of gold for their reserves along with exploring other currencies to hold.
