5 U.S. Banks Each Have More Than 40 Trillion Dollars In Exposure To Derivatives

originally posted by: zvezdar
How it would work is that prices adjust to the value of the currency. So if the money supply reduces from, say, $10 trillion to $1 trillion, the $10 movie ticket would cost $1 in the value of the new currency. You don't need the same amount of currency in circulation to maintain the size of the economy.

This is done whenever a new currency is issued, typically the old one is massively inflated and used to pay off all debts and then some and then a new currency is issued with an exchange rate of say 100 dollars = 1 new dollar. It doesn't actually change the economic situation because the amount of money in the economy still has the same purchasing power.

a reply to: Aazadan

I never said it did change the economic situation. You were the one who suggested that there were not enough precious metals to back a non-fiat currency.

If prices adjust, which they do, your concern is a non-issue.