by Bitcoin Magazine News Staff at Bitcoin Magazine
MONETARY DEBASEMENT
Debasement refers to the action or process of reducing the quality or value of something. When talking about fiat currencies, debasement traditionally refers to the practice of reducing the precious metal content in coins while keeping their nominal value the same, thereby diluting the coin’s intrinsic worth. In a modern context, debasement has evolved to mean the reduction in the value or purchasing power of a currency — such as when central banks increase the supply of money, in the process lowering the nominal value of each unit.
UNDERSTANDING DEBASEMENT
Before paper money and coins made of cheap metals like nickel, currency consisted of coins made of precious metals like gold and silver. These were the most sought after metals of the time, giving them value beyond government decree. Debasement was a common practice to save on precious metals and use them in a mix of lower-value metals instead.
This practice of mixing the precious metals with a lower-quality metal means authorities could create additional coins with the same face value, expanding the money supply for a fraction of the cost compared to coins with more gold and silver content.
Today, coins and notes don’t have inherent worth,…
Continue Reading