"Any economic collapse is a psychic collapse. Once people stop believing in the economy, it ceases to function. " ☛ Big Think

Any economic collapse is a psychic collapse. Once people stop believing in the economy, it ceases to function. A question of more-than-academic interest nowadays, then, is: Why do they stop believing?

One important school of thought focusses on governments' ill-advised decision, during the 1920's, to peg their currencies to gold. When its currency's value is defined as a fixed amount of gold, a nation's supply of money is limited by its gold reserves. That's a defense against inflation, but when faith is failing, inflation isn't the problem. To get people buying, loaning and investing, governments inject cash into the system (as the United States did with the stimulus plan, which, as far as it went, seems to have worked).