Pretend for a moment you have been digging in your backyard.
You discover a very large and perfectly cut gem with the appearance of a diamond, but giving off a large and beautiful rainbow of colors. Experts agree it is the only gem in the world with these features.
Discuss: If a diamond of comparable size and quality was valued at $1 million, do you think the value of this gem would be more or less than the diamond? Why?
Discuss: What would happen to the value of this gem if someone else found one just like it so there were now two in the world?
Discuss: What if everyone suddenly started finding them so the world supply was flooded with billions of these gems and they went from a rare item to a simple commodity that everyone had dozens of?
Continue for older ages
The U.S. Constitution only permits payment of legal obligations in gold and silver (or a currency backed by physical ownership of these metals). America abandoned the gold standard in the 1970s and went to a “fiat” system where currency is backed only by the confidence of the provider (i.e. “America’s good for it.”). This allowed the government to print more money than was backed by actual gold and silver held in our nation’s vaults.
Discuss: If the amount of dollar bills in the system was dramatically increased by printing additional paper money, what would happen to the value of each dollar in circulation? Could you buy more or less goods and services with your dollars?
Thomas Jefferson said, “If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered.”
Discuss: Should America return to a gold standard? Why or why not?