You misstated the US National debt by a factor of 10. It is actually 25 trillion, not 2.5 trillion; and could hit 40 trillion before Trump leaves office.
“The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a [government]policy.” — Ludwig von Mises
Inflation is not an intrinsic good. There will not be inflation without government influence. Prices going up due to a supply shortage is not inflation.
Quoting You: Free Market Exchange Rates
— The value of a country’s currency was not always determined by the free-market (i.e. what people are willing to pay for it) though.
— The US originally based the value of its currency proportionally to gold. So, a certain amount of US dollars could always be equated to a certain amount of physical gold.
— This proposed a problem when gold reserves started running low.
— The next system which was adopted was a fixed price exchange rate. Governments of various countries would decide what their currency is worth and when you wanted to buy the US dollar as a British citizen, you were forced to pay the going rate.
— This soon fell away and gave rise to the free market economy in use today where prices of currencies are based on their economies.
The entire section quoted above is not reality-based.
People in the past were not confused about what money actually is: It is gold or silver and everything else debt. Currency is created by banks when they create loans against their reserves and ask the public to trust inter-bank relationships to maintain a sufficient reserve to offset spikes in withdrawals. Therefore, when currency was priced against gold THAT was when there was a free-market in currency because if one wanted to NOT participate in the market for debt, they could extinguish debt by reverting to gold or silver.
Gold reserves did not “run low”. What ran low in 1971 was the rest of the world’s willingness to accept dollars instead of gold to balance trade deficits. The default by the United States to honor its promise to back the dollar with gold under the Bretton Woods agreement, and the simultaneous agreement by the Saudis to require all oil purchases be in dollars in exchange for US military protection, was basically a way for the US to force the rest of the world to use the dollar as an international reserve currency for the balancing of trade deficits without any constraint on the US government’s willing to run deficits (both budget deficits AND trade deficits)!
All currencies today are subject to inflationary printing (i.e. Zimbabwe)by governments through their central banks. All currencies are basically a derivative of the dollar (indeed many countries just give up and use the dollar instead of bothering with a national currency). What this means is that the dollar will eventually strengthen against all other currencies as the demand for dollars increases to service the rising amounts of international dollar-based debt and to counteract global economic disruptions. The US dollar is trapped, it will become more and more obvious that the US debt (and most large government and private debt worldwide) will never be paid and that interest rates can’t rise without tanking the worldwide economy. A monetary reset is on the horizon. The dollar and all fiat currencies will be re-priced to gold. Whether it takes $16,000 or $32,000 to entice a saver to accept your currency for their money, it doesn’t matter. When the US is forced to return the value of its currency to the free market once again, no one will ever gaslight people by talking about a “shortage” of gold. In a free market, there is never a shortage of gold, only a shortage of currency valuable enough to satisfy savers to relinquish their gold.
Leading up to this reset there will most likely be a deflationary spiral followed by hyperinflation and also a worldwide debt jubilee where those with debt will have it forgiven and those without debt will be given a currency handout by governments in order to lubricate commerce. Most gold after that will be used by kings, nations, and large corporations to settle trade imbalances. Small savers not willing to hold debt will also accumulate small gold and silver holdings. This is how the world worked for thousands of years before the discovery of cheap to extract (high EROI)oil which provided the productive capacity to support ever-expanding debt. We have reached peak high EROI oil and peak debt in unison, which is fitting because they are inextricably connected.