Quote:
Originally Posted by jamesqf
Now if you took the same island, and all of a sudden someone discovers a major new gold mine (as with California Gold Rush) so that gold becomes more common... Now that would be inflation.
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No, that would be devaluation of a commodity, and it would be more theoretical than actual. The value of gold is based on several things, but principally on its scarcity and its usefulness as a metal. The finding of a new cache of it (such as a productive new mine) would increase the supply, thus decreasing the scarcity. But the overall effect on the value of it would be relatively small in that any impact it might have on the world supply would be very slight.
Inflation is also devaluation, but it usually pertains to monetary (paper) currency - which (when there is no precious metal backing it) is based purely on faith in the government that issues it.