Fiat Currency: Using the Past to See into the Future
The Daily Reckoning Presents:
Fiat Money -Toilet Paper Money
The history of fiat money, to put it kindly, has been one of failure. In fact, EVERY fiat currency since the Romans first began the practice in the first century has ended in devaluation and eventual collapse, of not only the currency, but of the economy that housed the fiat currency as well.
Why would it be different here in the U.S.? Well, in actuality, it hasn’t been. In fact, in our short history, we’ve already had several failed attempts at using paper currency, and it is my opinion that today’s dollars are no different than the continentals issued during the Revolutionary War. But I will get into that in a moment. In the meantime, I will show you that fiat currencies have not been successful, and the only aspect of fiat currencies that have stood the test of time is the inability of political systems to prevent the devaluation and debasement of this toilet paper money by letting the printing presses run wild.
Fiat Money -Rome — The Denarius
Although Rome didn’t actually have paper money, it provided one of the first examples of true debasement of a currency. The denarius, Rome’s coinage of the time, was, essentially, pure silver at the beginning of the first century A.D. By A.D. 54, Emperor Nero had entered the scene, and the denarius was approximately 94% silver. By around A.D.100, the denarius’ silver content was down to 85%.
Emperors that succeeded Nero liked the idea of devaluing their currency in order to pay the bills and increase their own wealth. By 218, the denarius was down to 43% silver, and in 244, Emperor Philip the Arab had the silver content dropped to 0.05%. Around the time of Rome’s collapse, the denarius contained only 0.02% silver and virtually nobody accepted it as a medium of exchange or a store of value.
Fiat Money -China — Flying Money
When the Chinese first started using paper money, they called it “flying money,” because it could just fly from your hands. The reason for the issuance of paper money is simple. There was a copper shortage, so banks had switched to the use of iron coinage. These iron coins became overissued and fell in value.
In the 11th century, a bank in the Szechuan province of China issued paper money in exchange for the iron coins. Initially, this was fine, because the paper money was exchangeable for gold, silver, or silk. Eventually, inflation began to take hold, as China was funding an ongoing war with the Mongols, which it eventually lost.
Genghis Khan won this war, but the Mongols didn’t assume immediate control over China as they pushed westward to conquer more lands. Genghis Khan’s grandson Kublai Khan united China and assumed the emperorship. After running into some setbacks with paper currency, Kublai eventually had some success with fiat money. In fact, Marco Polo said of Kublai Khan and the use of paper currency:
“You might say that [Kublai] has the secret of alchemy in perfection…the Khan causes every year to be made such a vast quantity of this money, which costs him nothing, that it must equal in amount all the treasure of the world.”
Even Helicopter Ben would be impressed. Marco Polo went on to say:
“This was the most brilliant period in the history of China. Kublai Khan, after subduing and uniting the whole country and adding Burma, Cochin China, and Tonkin to the empire, entered upon a series of internal improvements and civil reforms, which raised the country he had conquered to the highest rank of civilization, power, and progress.”
Wait a second, I thought we were bashing fiat currencies here…Can anyone say crackup boom? Since Marco Polo experienced this firsthand, and has been very helpful to us thus far, I think I will allow him to finish his analysis of China’s paper money experiment.
“Population and trade had greatly increased, but the emissions of paper notes were suffered to largely outrun both…All the beneficial effects of a currency that is allowed to expand with a growth of population and trade were now turned into those evil effects that flow from a currency emitted in excess of such growth. These effects were not slow to develop themselves…The best families in the empire were ruined, a new set of men came into the control of public affairs, and the country became the scene of internecine warfare and confusion.”
I wonder if Keynes read Marco Polo’s experiences with Chinese fiat currencies when he said that the U.S. government should just bury bottles full of money in old mine shafts to spur economic growth.
Fiat Money -France — Livres, Assignats, and Francs
The French have been particularly unsuccessful in their attempts with fiat money.
John Law was the first man to introduce paper money to France. The notion of paper money was greatly helped along by the passing of Louis XIV and the 3 billion livres of debt that he left.
When Louis XV was old enough to make his own mistakes, he required that all taxes be paid in paper money. The currency was backed by coinage…until people actually wanted coins.
The theme of the day…the new paper currency rapidly became oversupplied until nobody wished to own the worthless junk anymore and demanded coinage for their currency.
Oops. It looks like Law didn’t think that anyone would actually want coins ever again. After making it illegal to export any gold or silver, and the failed attempts by the locals to exchange their paper currency for something of actual value, the currency collapsed.
John Law became the most hated man in France and was forced to flee to Italy.
In the latter part of the 18th century, the French government again tried to give paper money another go. This time, the pieces of garbage they issued were called assignats. By 1795, inflation of assignats was running at approximately 13,000%. Oops.Then Napoleon stepped on the scene and brought with him the gold franc. One of the good things that Napoleon realized is that gold is the way of a stable currency, and that’s what pretty much ensued during his reign.
After Waterloo had come and gone, the French gave it another go in the 1930s, this time with the paper franc. It took only 12 years for them to inflate their currency until it lost 99% of its value. History has proven a couple things about the French: 1) They are quick to surrender and 2) They are very talented at making worthless currency.
Weimar Germany — Mark
Post-World War I Weimar Germany was one of the greatest periods of hyperinflation that ever existed. The Treaty of Versailles was essentially a financial punishment placed on Germany to make reparations.
The sums of money to be paid by Germany were enormous, and the only way it could make repayment was by running the printing press. (Huge unpayable debt — that sounds familiar. I wonder what the solution in the U.S. will be.)
Inflation got so bad in this period that German citizens were literally using stacks of marks to heat their furnaces. Here is a brief timeline of the marks per one U.S. dollar exchange rate:
April 1919: 12 marks
November 1921: 263 marks
January 1923: 17,000 marks
August 1923: 4.621 million marks
October 1923: 25.26 billion marks
December 1923: 4.2 trillion marks.
Fiat Money -More Recent Times
In recent times, fiat failures have become more common occurrences. For the sake of time, I won’t go into extensive details of all these examples of paper money failures, because there are SO many. But here you have it:
In 1932, Argentina had the eighth largest economy in the world before its currency collapsed. In 1992, Finland, Italy, and Norway had currency shocks that spread through Europe.
In 1994, Mexico went through the infamous “Tequila Hangover,” which sent the peso tumbling and spread economic hardships throughout Latin America.
In 1997, the Thai baht fell through the floor and the effects spread to Malaysia, the Philippines, Indonesia, Hong Kong, and South Korea.
The Russian ruble was not the currency you wanted your investments denominated in in 1998, after its devaluation brought on economic recession. In the early 21st century, we have seen the Turkish lira experience strokes of hyperinflation similar to that of the mark of Weimar Germany.
In present times, we have Zimbabwe, which was once considered the breadbasket of Africa and was one of the wealthiest countries on the continent. Now Mugabe’s attempts at price controls, combined with hyperinflation, have the nation unable to supply the most basic essentials such as bread and clean water.
Fiat Money -Lessons to Be Learned
Here in the U.S., I should say the lessons were not learned. There are many consistencies from the above-mentioned stories that led up to the eventual collapse of the currencies.
The scary thing is that the U.S. has some of these above-mentioned characteristics, the ones that lead to toilet paper money becoming just that. More on that in just a second. I would first like to give a brief look at the U.S. attempts with paper money in our short history.
The first attempt with paper money came in 1690 with the issuance of Colonial notes. The first Colonial notes were issued in Massachusetts and were redeemable for gold, silver, corn, cattle and other commodities.
The other Colonies quickly jumped on the toilet paper money bandwagon and began issuing their own paper currencies. Like a broken record, the money quickly became overissued. The lessons of John Law and others were definitely not learned. It is not good enough just to say that a currency is backed by commodities. It actually HAS to be backed by commodities. Essentially, it was still a fiat money, and in a short period of time, Colonials became as good as toilet paper.
The next experiment came during the Revolutionary War. Big surprise — the issuance of paper money was used to finance the war efforts. This time, the currency was called a continental.
The crash of the continental was spectacular, and the phrase “not worth a continental” was coined. This brought on a large distrust for paper currency, and until 1913, toilet paper money in the U.S. wasn’t used. Enter the infamous Federal Reserve and its monopoly on money and interest rates. Now we have the greenback.
Although the money was “officially” backed by a gold standard until 1971, it wasn’t a true gold standard. When the government found it inconvenient to have a gold standard, it just made it illegal for U.S. citizens to hold gold or exchange dollars for gold.
As reported on Strike-the-root.com:
“Under the infallible leadership of President Franklin Roosevelt, it was made illegal to own gold. On March 11, 1933, he issued an order forbidding banks to make gold payments. On April 5, Roosevelt ordered all citizens to surrender their gold — no person could hold more than $100 in gold coins, except for collector’s coins. He also made it unlawful to export gold for payment abroad, unless done through the Treasury. The penalty for defying Roosevelt was 10 years in prison and a $250,000 fine.”
But the official demise of the dollar was locked into place in 1971 when “Tricky Dick” Nixon completely severed all ties between the dollar and the gold standard. During the decade that followed, the U.S. experienced some of the worst inflation in its history, only matched by today’s U.S. monetary and fiscal irresponsibility.
The U.S. of A. has all the characteristics set in place that have led to the collapse of every other fiat currency money in history.
We are currently at war, and the financing of this war is extremely inflationary. In fact, if you look back at our history, since 1914, the U.S has engaged in 16 military conflicts. We have been involved in some form of violent international accord in 44 of the past 93 years. The overwhelming majority of military conflicts result in monetary inflation.
The U.S. has a debt similar to that of Weimar Germany. All though the reasons for the debt are completely different, it appears thatthis Mount Everest of IOUs is going to be impossible to pay back. I guess the U.S. could just print 10 trillion dollar bills and hand them out, but the implications of such actions are obvious.
We are currently increasing the supply of dollars at a rate of 13% per annum. This overissuance of a currency has been the leading indicator of a currency on the brink.
So what’s in the future for the dollar?
Some, myself included, might say that the dollar has already failed. It has lost over 92% of its value since its initial issuance in 1913. After the revaluation in 1934, the dollar dropped another 41%. In my opinion, it already is toilet paper money, but for the above-mentioned characteristics, which are alarmingly similar to the circumstances that led up to the eventual collapse of the dollar’s toilet paper predecessors, I believe that we have seen only the tip of the iceberg of the dollar’s inevitable path toward becoming toilet paper money.
Until Next Time,
Nick Jones
Thank You Finally I find someone who understands the money issue. It’s not that hard. With this crisis we have the chance to fix this problem if only our leaders would do something right. Lead Follow or get the Hell out of the Way. Please keep up the good work. Kim Beyeler
thank you , everyone needs to know this, and prepare acordingly.
IN CASE? if possible?? [i.e.?] IF EVER is and can BE POSSIBLED(?)….. A GIVEN COUNTRY! “”NEEDS TO BE INVESTING IN! AND ALWAYS NEEDS TO BE ALWAYS BE INVESTING IN SILVER!(and not this-gold)”"
A simple Explanation:- thisGold(?) is for themGREEDY-BANKERS!(leave themBankers ALONE!)….. WHILE! “”SILVER! IS A POOR(aka RICH!-INVESTMENT!!)INVESTMENT per poorPEOPLE!”"
||AMEN||
Read Brown’s Web of Debt and Richard Cook’s We Hold These Truths:The Hope of Monetary Reform toget the other side of this story.
I believe it was Dec 1999 when Argentina went into crisis and the Peso dropped from 1 to 1 with the dollar. In the next year or two I saw “Patacones” notes looking like pesos issued by Provincial goverments in Buenos Aires. Maybe Gov. Arnold should issue some Bear State Dollars! It doesn’t bode well for our kids.
It is totally unfair to blame Mugabe for the hyperinflation and lack of food in Zimbabwe.
This tragedy was caused by the British putting greater and greater sanctions on Zimbabwe until it has had a worldwide blockade for 7 years. There is NO country that could withstand this. And the British are doing it to back the old fascist-apartheid regime’s landowners, who should be shot, not helped.
Very well researched & written.
History is full of lessons but, do we heed them? Some say Don Quixote was crazy, how are we battling our windmills?
As economics is cyclical, looks like we have to ride it out – lets learn to ride better!
The only thing that’s new, is the history you havn’t read (or something like that).
Good spread of relevant historical comparison. Held summurused to contemporary issues.
HARD TO SWALLOW BUT TRUER WORDS WERE NEVER SPOKEN.
I’VE SAID IT A HUNDRED TIMES BEFORE: “IF YOUR MONEY BENDS WHEN YOU PUT IT IN YOUR POCKET, THEN FRIEND YOUR HOLDING THE WRONG KIND OF BARTERING MATERIAL.”
RAGWHEEL
marty-read this –johnny
I have recently invented a totally new kind of money.
I am looking for nations to be my customers.
It is called, “Intrinsic Value Added Monetary Unit.”
The Official initial paperwork from the US Patent Office arrived last week.
It will fix the economy of any nation that uses it.
I pray the people of the USA will use it FIRST.But I can not wait long.
We MUST, here within the USA, QUARENTEEN ALL Federal Reserve Notes,
They are intrinsic, economic poison!
Federal Reserve Notes have NO intrinsic values whatsoever.
They never will.
We must and we CAN replace them with this new currency.
The IVAMU’s erect the bridge back to the safety of sound money.
They also insure enough precious metals do exist in large enough quantities
to support a large and growing economy!
They will calm the markets and the public, as it were, overnight. They can be implemented painlessly over a span of 60 days.
We will see inflation rolled back by the IVAMU’s no less than 500%.
The REAL Dollar, the IVAMU’s, and not these Federal Reserve Note COUNTERFEITS, will swiftly become the world standard.
It will stabilize and eliminate the slow burn of rage and panic now engulfing the people of the USA and of the entire world.
Please, Investigate my claims!
Scary stuff. Those who forget history must repeat the same mistakes. My thought is this. If it’s OK for the government to print money to help me, then why don’t they let me print my own and save them the inconvenience of having to do it on my behalf? It seems to me that there is a double standard here somewhere! All the people without access to the money printing press are further impoverished so that Goldman Sachs can continue to collect huge commissions as they ‘help’ us all to recover from what central and merchant Bankers caused to happen in the first place.
I agree the economy has collapsed, you have to invest in better resources. Great Video to watch
Watch Here!
Nice history of it all, and easy to understand. I saw New Zealand debase its coinage a few years ago and started thinking about this then.
So that’s why I’m seeing so many Cash for Gold Scams!
this article should be mandatory for all economics students or in fact any student!
The facts cited in this article are consistant with those cited in other sources. The implication for a strong increase in the US$ price of Gold is compelling. The feasibility of such purchases is evident by the numbers of professional sellers advertising in the various media.
But, is this idea, buying gold a good idea? I have heard, that some venders are selling “non-confiscatable” gold coins, i.e. old or collectable ones. Since these sellers deal mostly by mail, they of course maintain a customer list with notation of sales to each customer.
How convenient!
Imaagin when a local government official knocks on your door and asks for a specific list (which he has in his hand)of gold and silver coins and/or bars. But don’t worry, this policeman (probably already known to you if you live in a small town) will be happy to write you a receipt promising you compensation from the Federal government. He can’t pay you now because the government must value them first. (actually this may work a lot like the ‘cash for clunkers’ program. Note how fast the car dealers are getting paid as promised. They are happy aren’t they? Aren’t they???
So, Is buying gold and silver such a good idea after all? Who wants to be on the wrong end of a government show like Waco? I would be interested in a response from those of differing points of view.
How do people not get this?
The reason the continental became worthless is that the British were counterfeiting the continental to destroy the rebel economy
When money is based on a commodity such as gold the people who control the commodity control the money.
Frightening, our inability to learn from history. In fact, they don’t even teach History in our education system anymore. Instead, they teach “mmm, mmm, mmm, Barack Hussien Obama.”
because history tells us that currency fails then what is installed for countries like Australia?
i myself have begun acquiring Silver bars along with my brothers because i believe we will feel the affects HERE.
what do you think? i would like to here from you on this subject in order to increase my action.
Regards
Simon
Very interesting reading.
i remember that in Australia many gold mines borrowed gold and paid it back with a 2% interest in gold. Similarly the rate of return on farm land in Australia is about 2%. I suspect this is the only sustainable interest rate and that anything above and beyond is actually a real rate of return plus an inflationary compensation
Dear Nick
Great report. I enjoyed reading it very much.
Another great reading is the book from Andrew Dick written in 1896 (!) called Fiat money inflation in France.
Regards
Stefan
This information encapsulates, in my opinion, the obvious problem with our current congress (administration)it is better at comedy than financial acumen.
every persons that voted for obama should read this article.
There is something I do not understand.
If the demise of the dollare is almost a certainty and the prevailing wisdom is to invest in gold, then this leads me to the following conundrum.
If I purchase $100K of GLD a Gold ETF, with the purpose of it increasing in value as the dollar weakens, What do I sell the gold ETF shares for?
What would be the point of selling it for US dollars that will be worthless.
With that in mind, what will any of the stocks on the stock exchange be worth if they are valued in US dollars? What will anything be worth if it is valued in US dollars?
So, what is the point of buying gold and silver? What do I do with it? At some point I have to sell it to redeem it into a currency that I can use to purchase things.
What’s the answer?
Rumor has it that Martin Luther King day 2010 is the Reckoning Day for the dollar as that is a pre-ordained bank holiday. Any thoughts?
I ought to read Marco Polo’s report! Very good essay. My grandfather plastered the bedroom wall with the german marks in 1924. The paper quality was better then the newspaper! KB
crayzee…
I want some REAL metal.
I would go further and suggest that it’s not just fiat money but money economies per se that are unsustainable. No monetary economy has ever survived except by constant growth into new territories, even when most people traded by barter in addition to money. Mercantilism forestalled the money problem by shipping excess goods and importing gold. Colonialism forestalled the problem by opening up new continents to development. Rome forestalled its problem by looting treasure from its conquests. Nobody has ever “solved” the money problem. They just kicked it down the road until they ran out of road and the system collapsed. In a barter economy people trade like for like, goods for goods. As productivity makes more goods available there is automatically more “trading medium” available as the goods themselves function as the “money”. When you try to superimpose a fixed-supply money system like gold on an increasingly productive trading economy you get the absurd situation where your producers need to get rid of the nation’s real wealth–its goods–to get enough money so that everyone can recover their investment and earn monetary profits. Producers’ “costs” become the nation’s “incomes”, so clearly not all producers can get their invested gold back out of the economy AND get more gold as profits, unless consumers are drawing down their hoards of gold savings. When gold savings run out, you can only get as much gold back out in sales as you put in as costs/incomes. Then you go mercantilist to suck gold out of everyone else’s economy until that strategy hits its wall, then you invent fractional reserve gold-based money to increase the money supply to maintain the illusion that monetary profits are possible in a money economy, and finally you go pure fiat when the gold-backed illusion restricts your desire to finance a Viet Nam war, for e.g. Money can’t work. It is an arithmetic impossibility. Credit-fueled consumption can keep up the illusion by steadily increasing people’s and government’s debts, but the debts can never be repaid and the illusion eventually hits the wall. The ONLY way a money economy can be sustained is if some exogenous source of non-debt money is regularly added into the income stream to allow people to spend more than they earn, because people can only earn what businesses spend as their costs of production, and people can only spend as much as they earn, and monetary profit becomes arithmetically impossible within a money system like this. Do the arithmetic. People’s only sources of money are incomes and debt. All incomes are paid out by businesses as their costs, including the cost of taxes by which governments redistribute incomes. So costs = incomes. There is no additional “money” to recoup as profits, no matter how many additional “goods” you produced for sale. If you want to trade your goods for money, you can only get as much money out as the amount you put in. Fixed-supply money like gold cannot avoid this problem, only forestall it. Fiat money can fix the problem if government creates money, not as debt, as pure fiat money creation, and gives it to everyone to supplement their earned incomes. That’s the only way you can make profits possible, and savings, and consumption of all that you produce, and all that other good stuff that “sound money” must be able to facilitate. Nobody has ever “solved” the money problem. But the solution is as simple as I just outlined.
Very nice historical perspective of how nations have tried to pawn off their debt onto the citizens of the nation. It is also so unsettling, to see the parallels of history’s failures and our national debt and how they are trying to resolve this little problem. Will the “average” American wake up? We are in an era of enlightenment where this economic scam that has been run in this and other nations can no longer be kept a secret.
Well, at this point we can’t go back to the gold standard, and we’re doomed with fiat currency. So what is the solution?
Green toilet paper is unusual. After Bernanke gets through with it, it will have turned brown. How does WAR figure into the equation?
Quite a sobering read & historicly factual but I must remember that Nick Jones (if indeed that’s his real name) is promoting/selling the commodity of Gold. So the grander picture becomes one of credibility, by knocking down the dollar & linking it to fiat currencies of the past Mr.Jones makes the case buying Gold. I wonder if Mr.Jones is is compensated for his work in Gold or Dollars ? If in Gold then I’d say he’s being true to his principals but if Mr.Jones accepts his compensation in Dollars (usd) while knocking it…then I have to respectfully say he’s a hypocrite. The system we have is only as good as the people (read: nation) it serves…if the dollar is worthless then so is it’s people & I’m not ready to believe that yet.
I just googled successful Fiat currency systems throughout history and did not see any. Anyway I think one action that is necessary is overthrowing the Fed and other financial interests that have a lock on our present fiat currency system. Unfortunately getting this done will be the hardest thing that this nation has ever done but it is the right thing to do. We have a Tucson’s audit or end the Fed group in Tucson. Google it if you have time. Ideas and suggestions would be warmly appreciated.
An excellent report. I truly hope that you are incorrect in your outlook, but my personal views prettymuch mirror your comments.
Evidence of the dollar’s decline is everywhere but I wonder how many are truly paying attention. An obvious way to see it is to notice the rising cost of food and how much less each package contains.
If you have an old cookbook you will even noticed that the contents of canned goods have been reduced. I recently made a pumpkin cake and the old cookback calls for 16oz cans but now they only hold 15oz. Few will notice that.
The U.S. dollar is bound to continue to slide. Besides possibly buying gold growing your own food or supporting someone who will grow it for you such as Consumer Supported Agriculture or Organic Food Coop.
When hyperinflation hits people will once again clearly understand the difference between a true necessity and all the luxuries they think are necessities today. For those who aren’t aware, they are water, food, and shelter in that order.
There IS a solution; support local and small online businesses instead of the plutocrats who control Corporations. Every time you shop at Wal-Mart you are digging deeper to your own disaster.
Paper money always advances to the value of the paper and ink that was used to print it. Nothing has value unless you place a value on it. The old saying “one mans’ junk is another mans’ treasure” comes to mind. The time has come again for people to gain an understanding of what they value. Money and monetary wealth are nothing more than illusions that you create.
while paper (made from wood or plants) will always be paper – no matter what’s printed on it, so also will gold always be a metal. gold will not feed you after the collapse or during this apocolypse. gold or paper will not give you air to breathe or water to drink. these monetary systems are all a huge illusion. it is sad that we put so much of our energies into this love of mammon. gold has practical uses in teeth, jewelry, electronics. paper can be used to wipe one’s arse, but when there’s no paper, we find something else to use. go ahead – keep playing yourselves into the illusion of economy. render to ceasar what is ceasar’s. if one knows the spiritual truths, all of this shouldn’t matter much. but go ahead, GAME ON !!
How can we have inflatiion the onset of American deflation? With $48 trillion of debt chasing only $900 billion of cash Federal Reserve notes? Where the U.S. HAS $48 trillion in debt and obligations chasing only $900 billion in cash (.02%)?Where the largest investment of the Federal Reserve is U.S. Treasuries which would lose their value if the Treasury was printing money? Where “smart money” (Central Bankers of the world) have increased their demand for Treasuries by 34%? With the world’s main medium of exchange we need only look back of the statement of Barron de Rothchild told the British king “You give me control of a countries money I care not who makes the laws. Where over 60% of all of the dollars ever printed are outside of the U.S.? Rome was able to perpetuate the use of the Dinar for hundreds of years? Where the prime mover in wealth creation is not normal capital accumulation but in Intellectual Capital (real wealth) which the U.S not only possesses the greatest amount thereof but is increasing geometrically, is not seizable by government, untaxable and is the reason for our gigantic lead.
Glenn Hautly
What an excellent exegesis of the demise of the “Bastard of Bretton Woods”. I would like to link with you for the future if okay with you.
Hyperinflation & Obama
The current administration has already added over 1 trillion in new money into circulation. This is roughly equal to the total amount of money in circulation. History tells us that new money added to circulation doesn’t always manifest its inflationary effects overnight, so we may have another year or so, but it could happen sooner – a TRILLION is a lot of money. How can we not have hyperinflation??
Once high rates of inflation are apparent, foreign governments will see the value of their US bonds falling and will probably begin dumping their holdings of dollars, thus accelerating hyperinflation. Once the cost of everything is skyrocketing, the government will not be able to collect taxes fast enough, and it will have to resort to printing even more money (as happened in Germany about 100 years ago when 99% of their government spending was with printed money and only 1% from tax receipts) further speeding up the hyperinflationary death spiral.
Hyperinflation is a local event; it does not affect currencies in foreign countries, and may even help their stock markets via shifting purchasing power to unaffected countries. I help people prepare for what is coming at the below site; it will be very bad for anyone who is not prepared.
http://swissbankaccounts.webs.com/
If you have access to your foreign money in a foreign country, you are safe from hyperinflation, as well as bank failures that may result. In today’s world, Swiss banks can issue debit or credit cards that are good just about everywhere, so yo can still spend as you need to. The money you spend via debit or credit card would not be converted into the depreciating currency until the instant that the sale takes place.
Could you please site your resources.
The prospect of runaway inflation is bad enough. I am equally troubled by the inability of the American electorate to see beyond the blandishments of the nanny state and to elect a president with the intelligence, eloquence, political savvy, and strength of will to turn the country around.
Far more troubling is the apparent inability of the electorate to turn out of office the senators and congress-men and -women who believe that the answer to every ill is another law and behave like the grasshopper in the fable. Voters’ anger reminds me of that of an addict: he may despise his dealer, but cannot live w/o the drugs.
No wonder many people are planning on renouncing their US citizenship and living elsewhere.
It’s appalling & disheartening how the average person is so ignorant in regard to even basic facts concerning the currency, economics & politics of our country. & the history surrounding these…fuhgettaboutit! This article should be required reading for EVERY U.S. citizen. It’s a wake up call. Thanks.
The trouble is, unfortunately, that gold is also a Fiat currency!
A huge buried treasure of gold was recently unearthed in Staffordshire, UK, several months ago. Valued at many millions of dollars.
Probably the gold had been stolen in battle by a group who probably murdered the other group. The thieves buried this ‘valuable’ stolen gold in the ground, to ensure their enemy did not find it and steal it back again. It seemed to me their enemy found the thieves and probably killed them. The gold, however, stayed hidden in the ground for hundreds of years.
So the gold was of no use to the origial owners of it. Nor was it of any use to the thieves.
Thanks for this 20-century history of fiat or flat money. It gives an excellent perspective as to what we may be facing, and the world too.
I have wondered for some time at what rate that we are printing dollars. You give a rate of 13% more per annum. What has that number been, and what do you project over the next few years?
Is it OK to put this article on my personal-Family Web site (www.degaston.org)? Links are almost always changing, and that is why I would like to copy and put this article itself on my Web site.
Excellent essay Nick. I have read many such, and yours is at once both brief and comprehensive. Kudos to you! Economics is often said to be the “Dismal Science”, but if you want to chuckle at a central banker, watch this video:
http://www.youtube.com/watch?v=ufzxWK6Plng
I agree. the problem is how long a wait
Great Article !!
The thing is I bet each time a fiat currency failed that there were the “bright minds” who claimed it will be different this time as we are much too smart and civilised for our currency to fail.
The laws of economics are like the laws of gravity. What goes up, must come down !
The best story, about history repeating itself over & over again,that I’ve read.
It proves that selecting inept politicians, who have access to government printing presses & unlimited ink & paper,has had predictible results since the days of Adam & Eve.
Islamic gold dinar & dirham is the answer!
We have had bubble this and bubble that and they just keep bubbling up. Now we have a bond bubble. As you point out in your article, inflation is going to get us. Isn’t it time to tell the world that we have a monetary bubble!
Its pretty shocking that this is top 10 for google searches for this matter of fiat currency. The shocking part now is that “NOONE” has commented. I myself believe in this fiat currency. My friend and I have been thinking of ways to turn the economy around, our currency is one of the number 1 reasons why we are seeing inflation and eventually hyperinflation. If you could respond to this for I know alot more and would love to learn from you about the economics of this evil we call money. Thanks.
Keep smoking that gold crack, pal. BTW, if those paper dollars in your bank account are so worthless, send them to me, I’ll be happy to get rid of them for you.
I need three paragraphs from you of “the history of fiat money”.If this is completed maybe you would have more people reading your site. The three paragraphs have to include why we have it,where it came from, and all other facts about it.Nothing negative!Thank you and I hope you would do this favor for me.
gold sounds good, how do i take it to the grocery store and purchase $127.78 worth of products? just take a knife and shave off what may be that amount?
Ive been looking for an article like this for a very long time thanks very much.
you forgot an important point, the 10 trillion dollars of “debt” is owed to the federal reserve who make dollars out of thin air. So if we found the federal reserve unconstitutional (as they are) and disbanded them then the “debt” would go to 0. Problem solved.
Great article. The boiled frog syndrome. I think this is a huge problem for the US, however it must be seen in context with other countries who have a similar problem. The developed world countries are all overspent, which leads more to a deflationary scenario when it all collapses (gov bonds?).
The best countries should be those with a positive trade and current account.
So what are we supposed to do with our dollars now? Buy gold? Buy another countrie’s currency? Buy real estate? The end of the dollar is near, so Please advise
Those currencies failed because the underlying economies failed not vice versa. Bad economic policy may have accelarated their demise, but any gold or silver backing their currencies would have been long gone by the time they eventually failed. The idea of backing a modern currency with precious metals is so unrealistic as to be laughable.
This is excellant information. This should be reqiured reading before anyone smiles as the kind bank tellure hands out money(currency)
The crime of creating paper money out of nothing is an art called counterfeiting. Counterfeiting is illegal and a felony in all countries, punishable by very heavy penalties. It is a crime because it dilutes the country’s currency and in effect “steals from the people’s trust in their money.”
Dilution of any fiat currency by legalized counterfeiting still steals from the people. Such activity now goes by such euphemistic names as “Quantitaive Easing.” But in this case, no crime is contemplated, and no criminal is imprisoned.
In either condition, it is the users of the currency who eventually are swindled.
Yes but…
Give Bill Still a listen on his video movie The Secret of Oz. He covers many of the same events in history but with an added kicker.. were the bankers involved in the issuance of the fiat currency and at what point in the cycle. State currency issued by banksters with the debt that goes with it always fails. State issued fiat money without banker intervention has worked for long periods of time and if the nation understands why bankers are not needed in the process, it would continue to work.
Very well said! Your entire article hit the nail square on the head!
As for the mountain of debt heaped upon the ‟Republic of Weimar” then, still lasting, the (Republic) all the way from 1918 – to about 1933, it took a long time to be payed off. It is true – in 1923 the American Dollar was worth about a Trillion German Marks, give or take a few pennies. It could have very well been a zillion, trillion Dollars; it wouldn’t have made a difference anymore. And the very last payment upon the mountain of debt forced upon Deutschland (by its neighbors and other allies) was made around September 2010. It took Germany some 92 years to pay its debt off, including interest – but, in the end they did it! A very true Story!
For, America (and its allies) saw to it – that such monies would be paid in full. Anyways, it was also expected. The Argentineans, in the 80s, also had to pay, whatever they had borrowed – and the Mexicans too, even the Asians and the Russians were made to pay all of their debt/s, luckily for the latter, they stumbled upon some gas and oil in their holy grounds, but they all paid. America, its military and economic might and – the rest of the world would see to it.
Yet, please have no doubt – that from the very beginning when America brought home the first batch of cheap T-Shirt from China for us to enjoy or to wear – China knew, that America wouldn’t or couldn’t – stop buying because they also knew it would become an addiction – worse to shake off than their highly rated (home-grown) opium. And as for their (U.S.A.) military or even economic might, they also knew, it would crumble upon itself, just like every, other junkie does . And they (the Chinese) also knew of the Federal Reserve and its self-appointed oligarch and of all their little games and tricks – e.g. borrowing cheap and intending, wanting to pay off their debt fast and painlessly with highly inflated Dollars, like America always did. Are we not still buying our Bananas from Costa Rica or else – for 1970 dictated and arranged prices?
Only, when China insist for America to buy their IOUs back, they won’t take our inflated and diluted Dollars. Did nobody ever wonder why their currency, whatever it is worth – is pegged to our Dollar, going up and down and down and up with the Chinese Yuan? Bernanke’s game (with the printing presses, low interest and amateurish speeches) and – with exceptions, the gangsters before him and their friends from Wall Street – unfortunately for them, the whole world knew about the deceitful money charades being played at the Federal Reserve Bank, there on ‟L” Street between Gold’s Gym and Bally’s Total Fitness! And the Chinese knew it too (the games to be expected) from the first batch of T-Shirts they had sent us – smiling and with open hands. America is so predictable!
Bottom-line, America too – will have to pay off every Dollar they printed, squandered away or borrowed. Only it will not take 92 years, but much longer. And the other, old and proven ‟standby” – just starting another military conflict (one of America’s liking and timing), or that all the oil and/or airplanes in the world will only be bought and sold for U.S. Dollars, those days are also gone!
Yet, the rest of the world will be watch-ing us and insisting for us to make good! Unfortunately, and like always it will not be Mr. Bernanke, our prior presidents, Timothy – Mr. Obama and/or all their cronies and confidants paying, but like always – it will again be paid for – by the sweat of our) brothers and sisters, the (good) American workers!
But paying – America will, for China and their allies – they all will be watching us – walking softly and with a big smile on their faces! And rightfully so, for America’s self-appointed and self-servicing role as the world’s policeman and #1 bully – those days are also long over and gone forever!
so true,so true! if this doesn’t wake you all up’ nothing will.
Great work Nick! So what might you recommend as a sustainable replacement for the dollar?
In God we trust,but not when in comes to Fiat Money. Abolishing the Federal Reserve and instituting the gold standard would go along way toward getting my trust. Just going to the Gold Standard would take care of the Federal Reserve.
So the Fiat Automobile has no value?
An excellent record of financial history. It suggests early classes in basic economics. Was this learned in the London School of Economics, or Wharton?
It also suggests that the D.C.legislature is bloody clueless, and that the FED is grandly unaware of the plight, and blight, which they and Wall St.(primarily Goldman Sachs) have created; the entire collection of them ecouraged by the illustrious Rothschilds.
I am reading Barbariansof Wealth!
Thankyou !
The Daily Reconning…..you guys are a touch of sanity in an insane world !
Gold and Silver will do well, the real reason is that the foundation of most Mature Democracies (a Joke)has eroded,due to Legalized Evil, further currently we are on a race to a wage bottom, therefore the Middle Class, Poor and the new Slave Class are so poor they can either buy food or shelter.
Thus a new depression is on its way.
Adopting “Minimum Wage with Respect” would as a first step make a positive change, including changing Fiat Money into hard currency.
Without which, the RICH has better hire Security and PAY EXTREMELY WELL.
Currently Legalized Evil and a race to the bottom has eliminated RESPECT from our Actions.
So what’s new?
So what is the best advice on what do do with the money? I know buying gold, but what about paying off the mortgage? Creating a sustainable living environment?
This was a great article by the way.
The States shall use only Silver and Gold as legal tender for all debts public and private. There’s a reason that was put in the Constitution.
A dead dog laying in the street helps people more than any government.
Personally, I think that the use of gold over the paper dollar is a better idea. Check out this link for info: http://www.thegoldstandardnow.org/featured-articles/183-fiat-money-fiat-inflation-fiat-dollar
ANOTHER FIAT OF SORTS THAT IS THE COUNCEAL ON FORGEION RELATIONS THE CFR THEY GIVE TONS OF THE AMERICN GREEN BACK AWAY TO OTHER COUNTRYS AS SUPPORT BUY THE BUCKET FULLS AND YOU THINK THEY ASK FOR IT BACK I SAID THAT OUR CERRENCY IS TIE TO ABOUT EVERY COUNTRY AROUND THE WORLD AND WHEN YOU SEE THE ERUO FALL FIRST AND THEN THE DOLLAR COMING SOON TO THE BANKSTERS NEAR YOU AND IF YOU WANT TO GET RICH TRY INVESTING ON THE INK AND PAPER THAT THE FEDERAL RESERVE IS PRINTED ON FIAT = COLLASPE HISTORY HAS PROVEN THIS AND PS LOOK FOR WHEAT AND CORN AND OATS TO START TO CLIMB THE STAIRWAY TO HEAVEN
I found some interesting information on fiat money at this website if anyone wants to check it out….
http://www.thegoldstandardnow.org/history/what-they-are-saying
This printing of paper money will add up to the inflation and even may lead to hyper inflation. It is very important that people own some physical gold and silver to protect themselves against the inflation.
After some research into fiat money, the Rothchild Formula, – I have come to the conclusion that yes fiat money and fractional money is a cause for wars, economic problems, and social unrest. I also believe that gold and silver investment is not completly the answer, the problem is you can not eat gold or silver. It is theoritically possible that food could become worth more then gold or silver – something to seriously think about.
@Bob:
Certain quantities of food ARE worth more than certain quantities of gold or silver. Regardless of how much fiat currency, silver, or gold a person holds they will need to exchange some of it for food if they do not produce their own. That has always been true.
I doubt we will ever reach a point where farmers will accept no ammount of silver or gold in exchange for food.
While the US’s economy may be hurting I do not think we have much to fear. Maybe less stuff in our lives and more work. We will still be able to produce enough food to feed our own. Perhaps we will need to find new and innovative ways to transport it.
I fear famine, something that could occur with or without a strong economy, FAR MORE than I fear economic problems. While our policies may have an effect on the latter, the former could occur any day.
@ Mark I know what your mean. In the current economy its difficult to find a career that pays well and is consistent. I have found that if you just work hard and are consistent you can go places . Look at the writer of this page , they are oviously a hard worker and have just been consistent over time and are now enjoying at least what would appear as somewhat of a success. I would encourage everyone to just keep hustling and moving forward.
is the Eurozone based on the fiat system?
There’s a reason why we switched away from Gold and it has nothing to do with these idiotic conspiracy theories you adult babies come up with. Gold is deflationary, which is never desirable, yet some amount of inflation always is.
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Lenders become reluctant to lend because they are repaid in dollars that are worth much less [...]”
Right because what we’ve witnessed over the last decade was a RELUCTANCE TO LEND. What are you people, head trauma victims?
None of these examples say anything about fiat money other than that it is vulnerable to appreciation hikes when it used to finance massive military campaigns, something that shouldn’t be happening anyway, or when it is manipulated by hostile neighbors. You people want a simple, single motion answer to complex problems. Gold isn’t it. It wasn’t the dollar that created a 30 year inflation in the 19th century. It WAS the Fed that was prevented from ammeliorating suffering in the Great Depression. Rigid ideology solves nothing, it causes more problems. Paper money is always “going to lead to hyperinflation” but it never comes to pass. Yes, if you look over 90 years it seems like a lot of inflation has occured, until you factor in how much was neccessary for economic growth and how much was due to the 1 or 2 enormous shockwaves that occured in the 20th century. The fact is that the flexibility is more important than stability. For all that “helicopter Ben” has ‘printed’ money (no one mentions how he also reverses the printing press), the rate won’t break 3%? Funny that.
Definitely some valuable insights and the parallels are undeniable. Has anyone noticed how tight LIBOR spreads are to Treasuries; in fact, the swap curve may be in negative territory at certain distant tenors.
At some point, conventional analytic and metrics yield to a broader philosophical discussion about money and value. If you haven’t noticed the wherewithal to consummate a transaction today is moving away from Fiat currency to a digital currency — witness Google Wallet.
An individual’s “currency” is their ability to contribute a service that is in demand by others. This produces a “debit” which can be used to eliminate a “credit,” be exchanged for another “debit” item, or “expensed” in the form of a consumable.
Believe me, I am still trying to figure out where I fit in to all of this!
I would argue that the situation is even more dire now than at any time in history…Why? All countries of the world are opperating on a fiat currency system. The value of the dollar is relative to other worthless pieces of paper. We are on a global path of hyper inflation and economic failure. The sovergn debt held by all the countries is astounding and like the above mentioned attempts at fiet currency, at some point it collapses. Only now it will not be a collapse of one countries monitary system but the entire wolds.
Lamb
Why is deflation not desirable? Becuase the system is only set up for “growth”? Because individuals wont eant to assume debt if the value of a dollar is increaseing instead of decreasing, making borrowing more expensive? There would not be a need to charge interest on a loan, as deflation would be the interest.
you are speaking about the success of human stupidity, not the failure of hyper-reality.
most humans (minus royal family, convicts and scammers) would be living in a tin shack without vapor cash.
and perhaps you will again. human stupid.
You do not realize the fundamental flaw in your reasoning — you claim that fiat currency has no intrinsic value, but NOTHING has intrinsic value. Not gold, silver, or any other commodity. Value is only generated when people are willing to exchange it for something else.
Your argument is kind of like a classic argument for the existence of God. “God must exist because there must be a creator.” But then comes the reply — “Who created God?”
You similarly believe that gold has inherent value that paper currency does not. But you fail to ask the question — where does gold’s value come from?
Who gives value to gold or silver or whatever else? The value of all commodities has gone up and down in crazy ways throughout history, too.
Your argument seems to rest on one fact — that some commodities are scarce, and governments can just keep printing money. Yes, that’s true of stupid governments. Or of governments that are under high external pressures and need to make payments in foreign currencies (e.g., the Weimar Republic). Or governments that introduce sudden reforms that destroy the economy as a result of policy, and then try to fix it by printing money.
You seem to think that paper currency will ultimately become worthless because governments will print more of it. But what if they don’t? If a government continues to enforce the status of fiat currency as the only legal tender (e.g., to pay for taxes, etc.), and it doesn’t print more of it, it will of necessity retain value.
On the contrary, if the government were (for example) to refrain from printing money, but suddenly start selling off gold reserves to settle its debts, you’d see the price of gold go into a tailspin.
Fiat money is commodity as long as governments require it for the payment of legal debts. If governments aren’t forced to make huge payments in other currencies or attempt to solve economic problems through the ridiculous strategy of printing more money (at least not at rates greater than a reasonable rate of inflation), fiat currencies retain value.
Human greed is at the root of all the worlds problems.
I dont want to sound like a hippy but you can put all of your faith in gold, silver or paper. It is all misplaced. Diamonds are a good exapmle. They have no inherent value beyond being one of the best cutting tools. That is their value.
Gold and precious metals really only have the worth we apply to them, just like paper. Theres the flaw. Precious metals probable real value is their conductance properties in circuit boards. Wearing it round your neck because you deem it as a precious object is a flawed perspective. It is precious because history tells us it is. But in reality its value is in its practical use.
The real commodities that are of value I would place at the top would be food and fresh clean water. You cant eat or drink paper or gold. Sadly I think the time is fast approaching where men will have to hold these commodities the dearest because of world food shortages etc. Things will only change and get better with a shift in perspective and priority in the individual. Combating our own individual greedy nature would be a good place to start.
I am afraid that you have been misled. The monetary system doesn’t work like you think.In a fiat monetary system, spending has to come before tax. Kindof like the subway has to sell its tokens before it can collect them. how else do you obtain the currency of issue. taxes give the money value. If you did not have a tax liability in dollars why would you accept them? you wouldn’t. Taxes remove the demand from the economy that the government used in its spending. If it didn’t inflation would result. what it doesn’t tax it borrows by selling treasury bonds to the public. See, the government spends not by printing money but by changing numbers up in bank acooounts. It taxes by doing the opposite. Selling bonds just drains reserves from the system. this is how they adjust the fed funds rate. Inflation is not government spending or qe. I think that is obvious seeing our flirtation with deflation. What really causes inflation is when the government spends and doesn’t tax enough. this will drive the country to full employment. Any spending beyond the real capicity of the economy will result in inflation. Most inflations result during full emmployment with the exception of trhe seveties. we can blame that on a price shock from opec.
a warning to all buying gold and silver. I own some. It’s a bubble driven by fear. do not be the one holdin gthe bag when the price collapses.
Bob is right on the money. http://pragcap.com/resources/understanding-modern-monetary-system
Where everyone who tries to solve these ‘real’ money, fiat money, problems loses the track is that they relate them to ‘governments’, that is the ones they have been conditioned to relate to – in so called ‘democracies’(a misnomer) ‘elected’ ones, and all the others we will term ‘regimes’.
Their minds cannot conceive that there is another government, one which has existed for thousands of years, only its members change because of life expectancy. But the agenda goes on and adapts, as it expands, to the ever changing scene.
The massed mind has been conditioned to think small. It views parts as wholes, instead of as parts of a whole.
The ‘government’ I refer to sees the whole, and always has. It’s agenda has always been to control that whole and to move the parts together in a more integrated economic and political manageable entity, using trial and error, ‘different strokes for different folks’ whatever, to accomplish the ultimate goal.
In the beginning, it identified the singular qualities offered by gold to serve their purpose. They therefore made it their business to acquire, and control, the product, its production, and the market. It has served them well.
Their weapon of mass destruction that has built them the greatest ‘Empire’ ( the world has yet failed to identify) is DEBT!. It has crushed all other military built Empires painted colourfully on an Atlas, often using them to do their messy work – and now incorporates them within its own
Many have heard the adage ‘He who has the gold, makes the rules’. Yes they hear, but the meaning does not sink in.
The naive urge a return to the ‘gold standard’ as being the only way to cure the economic woes they believe is caused by financial folly. The only ‘folly’ is their inability to possess, and use, imagination to see that what they view as chaos, is cause and effect induced, and working for the good of ‘the Empire’. It is naive ignorance and viewing events out of context to reality, that sees folly.
We already have a gold backed system. For example the Oil Cartels sell their oil for gold, not dollars. If you check the price of oil over the years you will find it remains fairly constant to the price of gold. Only against fiat currencies does it change.
This was achieved by there being arranged a benchmark of so many barrels of oil to equal one ounce of gold.
The price of gold either directly, or indirectly, determines all other prices.
Gold is the fulcrum upon which economies are raised and lowered until the day arrives when more as one, they can be balanced.
The price of gold has to be controlled, and it always has been. Before 1971 it was held at $35 dollars for some considerable time.
( Why does it have to be? Because the world’s financial structure which ‘the Empire’ controls is so complex and sensitively attuned to gold that, if it were not, a chaos could develop that would be uncontrollable.)
Why else do you think the price of oil and gold is quoted in dollars. Any attempts to change this have met with swift retribution any nation that attempts it. The Arabs have NEVER trusted paper money – certainly not since the days of Rome.
In order to manipulate currencies, and economies as the parts (individual nations) are nudged little by little together, and create the chaos from which ‘their’ order will be restored, it was found necessary to have the mass on monopoly money which can be adulterated at will.
Unless this greater Empire (Financial Elite) existed none of this would be possible. It needs a powerful hand to control.
The only way there could be radical change would be by sending us all back to the stone age and starting again.. No one in their right mind would want this. And if this should happen, it would be my guess that within a century or two we would be back where we started, or with something worse.
What Tom said^
I like how you convinced all of these people that your opinion is valid by ignoring histories successful fiat currencies. Tally sticks lasted from 1100 to 1854, and stands as the most successful monetary system in history. Money, no matter what backs it, is only as good as the faith people have in it. If everyone agrees that gold is valuable, then it becomes valuable. If everyone agrees that paper is valuable, then it becomes valuable. The opposite is true in both cases. It is irrelevant what mineral, if any, money is based on. The issue that can make or break a form of money is who creates and controls the quantity and distribution of it. If our money were based on gold, economic growth would either be limited to the amount of gold in existence, or we would still have to utilize a fractional reserve lending system. If the second option is true, the fraction of gold our money is based on would eventually become so tiny, as credit expands, that it would be the same as not being based on gold at all. It is fractional reserve and private corporate control of money that destroys it -regardless of what it is based on.
I hear many people talking about food and other commodities becoming more valuable than gold or silver and that may be the case for a short while if chaos ensues… who knows? but the fact will remain that the world will need a currency that is measurable against it’s overall global supply and the only valuable materials of an unlimited nature that have the history and the capacity to fit the bill is Gold and Silver, it has done so for over 5000 years. Agreed that it would be unrealistic to circulate gold and silver coins as currency but eqaully we can’t simply go back to tribal and primative bartering for good’s, the world has become too advanced in a number of ways but each countries respective governments have shown that if each and every issued note isn’t accountable then we will see this scenario replay over and over again. There are however very real concerns about Water and oil too…
I suppose the question for me is why does money have to be backed by any commodity at all? How does backing money with gold or silver make it better? The flaw with commodity based money the quantity cannot be controlled beneficially and that it distorts the value of the commodity.
If we suddenly switched back to gold as the basis of our money, then the quantity is limited by how much gold exists. This would stifle growth and overall prosperity for all but those who have been hording gold. If we made up for the obscure quantity by continuing to allow fractional reserve banking we would still see all of the problems we experience today.
I point again to tally sticks, the most successful monetary system in modern history, a fiat currency that only ended because of intense lobbying from the Bank of England. Legal tender laws are what make money work, not what the money is based on. If governments simply create the money they need to run their nations and support their citizens, rather than banks, we would be in a situation where no one stands to profit from the money making process. Elected officials can be held accountable for creating too much or too little money -causing inflation or deflation- and the people know who not to vote for in the future. Money is a human construct, like any measurement of time, size or distance. It doesn’t matter what it is based on as long as the quantity is controlled proportionately to economic growth.
Real History!
Of all the reasons given above for our worldwide economic troubles, no one has named the real reason: Sin.
Sin has universal natural consequences; every economic collapse,evil,deprivation, war,plague, pollution, ETC. is a result of saying to God: I will not serve you, nor honor you, nor follow your laws. It’s not God’s punishment; it is natural consequences.