Inflation if Santa was Real: how it advocates for the Gold Standard

The classic tale of Santa Claus: an old man who lived at the North Pole and would spend joy and cheer around the world by delivering presents to children every Christmas. Now, as older students, we know that Santa Claus is not real. However, if the tale of Santa was not, in fact, a tale, it would produce an interesting problem for all economies of different countries worldwide. What WOULD happen to the economy if 8 billion presents were dropped out of the sky? Well, I’m glad you didn’t ask.

In order to answer this question, we need to make a few generalizations to make calculations easier. Let’s say that each one of the 8 billion people on Earth gets something worth the average amount of money spent on Christmas for a single person. This averages to about $512 per person, and this would occur 8 billion times, once a year.

This would end up with a total of around $4,112,000,000,000.

 What would happen if this much money was inserted directly into the economy? In less developed countries without sectional banks (such as Venezuela), the amount of money would most likely destroy their economy in around a year or two, with no recourse against it other than simply burning the money.

In more developed countries that do have sectional banks (United States, China, Canada), the damage would be far less severe but still very impactful. Interest rates, the amount of money that you are required to pay when withdrawing money from the bank, would skyrocket due to the sudden injection of money.

These economies would recover in around 5 to 10 years, but money as we know it would cease to exist. Bills would become worthless as there is so much more of it than before, therefore the economy would need to become rooted within something non-renewable and still valuable, such as gold and silver. Many monetary systems in the past have actually been rooted in a fixed amount of gold, which is well known as the gold standard.