Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud

by Ben McKenzie

The gold standard was meant to keep the supply of money limited, tightly controlled by how much physical gold a country held in its reserves. Because extracting gold from the ground is expensive and there is a finite supply of it in the world, actual gold also has a significantly inelastic supply. But elasticity is crucially important in times of crisis. In response to some unanticipated calamity (such as COVID, for example), the public’s first reaction is often paralysis, followed by panic. Fearing worse times to come, people hoard rather than spend. Economic activity nosedives, and less spending leads to less production, which causes unemployment to surge, resulting in even less spending and thus less production. The dynamic quickly becomes self-reinforcing, capable of plunging an economy into a downward spiral that can last years, as it did during the Great Depression.