Explaining what is an economy is a paradox, the reason why I say this is it is both simple and yet complex. The simple part is describing what a true economy simply is. An economy is the trade of desired work. No matter what you produce, cultivate, or perform it takes desired work to create any good or service. If something did not take any desired work to produce, cultivate, or perform it would be virtually free or impossible to obtain. When you work for someone you are trading desired work for desired work. Your employer sees the desired work that you perform as equal or more valuable than the desired work (or medium that holds desired work) that they give you in return; and hopefully you see the desired work you perform as equal or less valuable than the desired work you get in return.

There is no real way to objectively measure the value of any given desired work. The reason why I say this is if you see an object for sale and you think the price is too high; you see the value of the amount of money it takes to buy the object as more valuable than the object. On the other hand a another person may see the same object and think it is a good deal; that person will see the value of the amount of money it takes to buy the object as less valuable than the object itself. Who is right you or the other person, there is know right or wrong; just like beauty value is in the eye of the beholder.

Now to show how gold ties in to all of this, if you are working for someone and you start to think that you are giving more in desired work than you are able to trade your money for, you will usually do one or two things. One thing you might do is ask for a raise or two look for job with better pay. With fiat currency the above scenario is more likely then if the currency was backed by something like gold. Because of inflation the amount of desired work you could trade your money for becomes less and less overtime in relation to the amount of fiat currency. With gold the price of objects can fluctuate, but history has proven the desired work you could trade it for would not have a long term downward trend like all fiat currencies.

The reason for this is gold has been proven to be one of the best mediums to hold, store, divide, and combine desired work. That is what money is a medium to hold, store, divide, and combine desired work. Since it takes desired work to mine more gold there is a limit on how much new gold that can be introduced to a system at any given time. There is no such limit when it comes to fiat currency. Without this limit fiat currency in all cases becomes less and less able to trade for desired work until it can not trade for it at all. Like I stated above money is a medium to hold, store, divide, and combine desired work. If you can not trade fiat currency for desired work it becomes useless as money. In fact all fiat currencies become useless as money in less than one hundred years. In conclusion the paradox of an economy is both simple and yet complex. Also any place you see the words desired work you can replace it with wealth because they are one and the same.