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January 13, 2013, 06:04:17 PM |
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I agree that the term fiat is somewhat hollow at the moment. I see three factors that supports the fiat term for modern paper money:
1) It is used in accounting. Could a foreign fiat be used? Probably, but there is a problem with the floating value. Say a company buys something for 100 in the beginning of a year, sells it for 120 mid year, and then calculates a profit of 20 at the end of the year. If this was done with dollars in a euro country, this would be for instance
bought : 100*1.3 = $130
sould : 120*1.35 = $162
profit : $32 converted back to dollar at 1.4 = €22.85
The difference of 2.85 have to be decided upon, is it taxable profit or is it something else?
2) Some transactions like taxes and considerations decided in courts, have to be made in the fiated currency.
3) The alternatives, commodity moneys, like gold, are opposed in diffent ways, by confiscation, consumption tax, and lack of retail services for storing and connection to debit cards. Large amounts of gold are stored in central banks, effectively taking the gold out from the gold money supply. In the recent letter from the treasury (USA) alerting the Congress (USA) of the debt limit, selling the gold was considered, but rejected, because it would dangerously disrupt the markets (read: The public might grasp what is going on with the money).
The current regime of free floating currencies contradicts the fiat decree, but this could quickly be retracted, which we routinely see in countries where trust in the local fiat dwindles.
So I think the fiat term is still relevant, and bitcoin is not fiat, rather a commodity money.
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