Demonetization of the Dollar

The dollar will no longer be used as a money if deficits are printed over.  The purchasing power will continue to fall and will eventually break down entirely.  If the purchasing power continues to fall, the money may continue to be used, but the transaction doesn’t resemble honesty.  International trade will appear to benefit in the short term, but in the long run, another money must be used.

Every holder of cash will become fearful and must dispense of his cash balance.  If not, the holder will continually lose money.  Thus, demand for cash holding is reduced.  All money in the account, and incoming money, will be spent as quickly as possible while it still has value.  Money is spent just to get rid of it.  Money is spent on goods with value that will last longer than the cash.  Mises referred to this as the “flight to real values.”

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