Fiat Currency Always Fails

[BobK71]

Looking at economic history one can see that different societies from different parts of the world during different times has been swinging from quality money (gold, silver) to paper money. Today we have Bitcoin and other crypto currencies that one can choose from.

As an Austrian I would like to make the proposition of free money, that is let the market (in other words us) decide what we want to use. If someone want to use Bitcoin that is great, gold, silver - be my guest. If someone want to use paper why not? But don't force anyone... with that said Fiat always fail!  :

Btw Very interesting thread and great opinions.

The difference between fiat and natural money, as I see it, is like the difference between natural and artificial medication.

It has come out that the US government knew 20 years ago that marijuana (as a natural pain killer) is harmless, but it's only now that it's forced to slowly legalize it.  The powers-that-be prefer us to use artificial drugs (or money,) because there's no way to profit much from the natural.

If there are side effects and addictions due to the artificial stuff, it benefits the elites who can then put their power to good use by allowing this and regulating that.  One way or another, their power will become valuable and they can profit from it.

[Dudeperfect]

Agree but still, it has grown at a level where I don't see that people leaving it at least in next 100 years. There will be the people who will keep using fiat currency irrespective of the advantages of other payment systems including blockchain based currencies. The biggest problem with fiat currencies is that there is a centralized power that controls it and it doesn't have any sense of freedom, to be honest. On the other hand, the banking system is soaking all the benefits of the real value of money.

[Hell-raiser]

I would agree that in many cases, failing states and/or bad policies lead to hyperinflation and collapse of the currency.  But these aren't the only examples of paper money.  The most recently strongest paper money is the dollar.  Yet its purchasing power today is on the order of 1% of what it was at the founding of the Federal Reserve in 1913.  If it has 'not collapsed' yet, it is because of bubble dynamics alone.

As we have seen with the Spanish, Dutch, British, and now American money bubbles, state supported bubbles might last a long time (and maybe much longer than outfits like ZeroHedge predict!) but the nature of bubbles is to burst -- no exceptions.

Indeed, we shouldn't exclude from consideration the cases when a government is made up of criminals who just use their power (this is to the question of the value of power) to steal the nation's wealth. I remember a few years ago some African ruler ran away with the treasury of his country, something like 9 million dollars all in all, if I'm not mistaken. Obviously, I didn't mention these cases as they seem to be self-evident. I'm talking specifically about the cases when government doesn't want to kill their money unless they have no other choice left, like in a war or revolution.

[Bitcoincole]

Here in my country fiat money is good with digital wallet so i think our country are so different base in your post actually all has worth so i don't believe in fiat money that failed because if the things exist of course it has worth like bitcoin it run because users,traders and investors use this an investing tools so that's why it continue to grow

I think fiat money value differ in every state since economic stability and government protocol differs as well including cultural values which is also another factor that affects economy. In my country fiat money does not always fails but like cryptocurrency it does increases and sometimes decreases too. However, the flactuation rate is not as high as bitcoin.

[BitHodler]

I think fiat money value differ in every state since economic stability and government protocol differs as well including cultural values which is also another factor that affects economy. In my country fiat money does not always fails but like cryptocurrency it does increases and sometimes decreases too. However, the flactuation rate is not as high as bitcoin.

It might slightly differ per country, but the general picture is still the same. It's nothing more than a system that's based on debt and continuous creation of more fiat that's overflowing the economy with long term consequences.

The fluctuations of fiat currencies might not be as severe when you compare them in a direct face to face manner, but if you look further, fiat currencies experience crazy volatility as well, but no one talks about it.

I remember when I was buying stuff from the US (not crypto related) €1 was worth almost $1.40 per conversion, where last year, when purchasing Bitcoin, €1 bought me significantly less than $1.10 worth for a short while.

If these aren't insane fluctuations, then I don't know what is. Bitcoin goes through insane fluctuations in a quick fashion, while fiat does it over longer periods of time, which means that fundamentally, there is no real difference.

[jaocoincrypto18]

See:

There Is No Escaping History.  Fiat Currency Eventually Fails.

Notice that this is a critique of fiat money -- not a critique of state-issued money under a gold/silver or other standard.  Fiat money is a rare occurrence in modern history.  (We live in strange times!)  As we can see, the examples found by the author are a small number of short periods here and there.

I have my own critique of gold/silver standards, but that's another issue.

If there are recorded histories that paper money failed a country before but i think these are only few compared to the present day in which these countries that have mentioned are now one of the most powerful economies of today and these was they used money too. Germany, France, China and USA are now belongs to the most powerful nation in talking of military and economy therefore i will not be convince that these are failed countries because they just rely on money.

[kwarto]

See:

There Is No Escaping History.  Fiat Currency Eventually Fails.

Notice that this is a critique of fiat money -- not a critique of state-issued money under a gold/silver or other standard.  Fiat money is a rare occurrence in modern history.  (We live in strange times!)  As we can see, the examples found by the author are a small number of short periods here and there.

I have my own critique of gold/silver standards, but that's another issue.

what exactly the author means by saying falling of fiat money? as i read the article it just simply changing the component of the physical money from 85%silver to iron and now paper money, but i dont not see any decrease of its value or purchasing power.. fiat money whatever its form is only have one important role in the economy and that is use to exchange goods and services...

if the author is worried about too much printing of physical money.. it could not happen because too much physical money  could hurt the economy and the country in general. it will only result to inflation...

read this article below.

https://www.americanbullion.com/what-actually-happens-when-a-government-prints-money/

[cahbagus555]

See:

There Is No Escaping History.  Fiat Currency Eventually Fails.

Notice that this is a critique of fiat money -- not a critique of state-issued money under a gold/silver or other standard.  Fiat money is a rare occurrence in modern history.  (We live in strange times!)  As we can see, the examples found by the author are a small number of short periods here and there.

I have my own critique of gold/silver standards, but that's another issue.

The problem with fiat money is always printed by central bank and they reason is they want to boost growth. They dont care about inflation and peoples assets always reducing because that inflation, and thats why always crisis on our global economic

[vinz7229]

See:

There Is No Escaping History.  Fiat Currency Eventually Fails.

Notice that this is a critique of fiat money -- not a critique of state-issued money under a gold/silver or other standard.  Fiat money is a rare occurrence in modern history.  (We live in strange times!)  As we can see, the examples found by the author are a small number of short periods here and there.

I have my own critique of gold/silver standards, but that's another issue.

We all know that whatever happen people would prefer to convert their Bitcoin into Fiat currency, but the problem is, if we talk about the advantages of Fiat vs Bitcoin,  Bitcoin is more ahead than Fiat why? Bitcoin could use in many transaction we're in you can make several transaction without limitation and also it is good in trading cause you can make high profit in just a couple of months, that's are the factor why Fiat currency failed to go on top of the market nowadays.

[Hydrogen]

Indeed, we shouldn't exclude from consideration the cases when a government is made up of criminals who just use their power (this is to the question of the value of power) to steal the nation's wealth.

I love what Ronald Reagan said on this.



Politics are structured in a way which rewards politicians for selling out their own values and beliefs in favor of special interests who provide campaign funding and other monetary incentives. No matter which nation on earth we're discussing, its extremely common for the most successful politicians to be the ones willing to sellout the most and whore out themselves for anyone with money and an agenda. Its a race to the bottom and opposite of free markets, competition in politics breeds failure for everyone rather than positive rewards.

What may be needed is some form of restructuring. Removing the degree to which special interests are able to influence politicians with lobbyist incentives, greater safeguards and accountability. We've seen the trend be strongly in the opposite direction of the last x number of decades. The quality of legislation has greatly suffered as a result as we've seen standard of living, education, wages and other metrics fall substantially in recent times.

[talldude]

 I disagree with you in this regard. Fiat currency is actually the backbone of the current market system and every country around the world has printed a huge amount of fiat currency or paper money backed by gold. Only the inflation in general and hyperinflation in particular in Venezuela in the last years pose a threat to the demand of the paper currency.

[Hell-raiser]

In my view, Bitcoin can exist along with fiat but it can't exist instead of fiat. Such a question has been raised numerous times here, and many distinguished posters, with whom I certainly agree, pointed out that if Bitcoin were to substitute fiat, if purely hypothetically, the economy would quickly come to a halt and then implode. To sum it up, Bitcoin as well as other cryptocurrencies is a bad means of exchange, but this is what makes money into money. 

IMO money must primarily be a store of value.  It is a means of exchange only because it is a good store of value, as no one would take a money in exchange for goods if that money isn't perceived to keep value.

From my perspective, when a currency token (a hard asset like gold or a value token like Bitcoin) is a good store of value, it will impede its application as a means of exchange since people will be incentivized to keep it instead of spending it. In other words, a small and predictable rate of currency inflation is sort of a must-have for a good means of exchange in order to prevent people from excessively hoarding it. Let them hoard deflationary assets like gold or Bitcoin instead (or whatever).

Bitcoin can't be a good means of exchange because the blockchain architecture, by its trust-free nature, has too much overhead to be used in everyday transactions.  But it's this very trust-free nature that enables it to be a store of value.  A world one can envision is where savers hold most of their wealth in Bitcoin, but continuously convert a small portion to/from state currencies for spending.

Even if it was perfect like instant and free of charge transactions with no price volatility, it would still remain a poor means of exchange due to its being too good as a store of value. It would be deflationary, and that would make the economy implode.

BTW, by distinguished posters, do you mean all the top economists who used to praise the gold standard when the elites were in favor of it?   I would agree that the economy would implode if we somehow, magically transition quickly to a hard money.  But this is only because prices and production levels have been distorted by the modern fiat money inflationary system.  Thus, keeping this system going, because we're afraid of the pain of stopping, fits a classic definition of addiction.

Actually, by "distinguished posters" I meant forum posters like Anonymint or whatever name he had been posting under then and a few other dudes here. I remember heated debates over this question a couple years ago. Or was it four years ago?

[stayeduptolate]

See:

There Is No Escaping History.  Fiat Currency Eventually Fails.

Notice that this is a critique of fiat money -- not a critique of state-issued money under a gold/silver or other standard.  Fiat money is a rare occurrence in modern history.  (We live in strange times!)  As we can see, the examples found by the author are a small number of short periods here and there.

I have my own critique of gold/silver standards, but that's another issue.

It’s  true that bitcoin is gaining a lot of popularity among the people throughout the world. But it does not mean that the fiat currency are failing. And still I do believe that fiat currency is better than bitcoin at this time because firstly, fiat currency has way more users than bitcoin all over the world. Then fiat currency has way more popularity among the people all over the world. People have a trust in fiat currency whereas there are only limited people who trust bitcoin.

[ladydark]

Yes.Fiat currency is vulnerable to deflation as it is nowadays printed infinitely and not based on the volume of gold which they hold.A lso if the government suddenly wants to devalue the fiat currency by demonitising as it was done in India,fiat currency would just fail leaving its holders in a misery.

[Hell-raiser]

I think fiat money value differ in every state since economic stability and government protocol differs as well including cultural values which is also another factor that affects economy. In my country fiat money does not always fails but like cryptocurrency it does increases and sometimes decreases too. However, the flactuation rate is not as high as bitcoin.

It might slightly differ per country, but the general picture is still the same. It's nothing more than a system that's based on debt and continuous creation of more fiat that's overflowing the economy with long term consequences.

The fluctuations of fiat currencies might not be as severe when you compare them in a direct face to face manner, but if you look further, fiat currencies experience crazy volatility as well, but no one talks about it.

I remember when I was buying stuff from the US (not crypto related) €1 was worth almost $1.40 per conversion, where last year, when purchasing Bitcoin, €1 bought me significantly less than $1.10 worth for a short while.

If these aren't insane fluctuations, then I don't know what is. Bitcoin goes through insane fluctuations in a quick fashion, while fiat does it over longer periods of time, which means that fundamentally, there is no real difference.

These fluctuations of less than 30% over a time span of a few years are nothing when compared with Bitcoin volatility where you can see that much in a matter of days a few dozen times within a single year (not even speaking about other cryptocurrencies). Honestly, I can't even imagine how you can call such fluctuations insane. In my view, they are nothing out of the ordinary, while insane is on order of thousands %% like price first grows 10 times, then falls 3 times all within a few months.

[siti25]

Inflation prone has proven the case of inflation due to too much money being printed by the government. Things that will lead to chaos and the fall of value of money, although still sells as a means of transaction. Of course, if this happens, the country will suffer enormous losses

[carlisle1]

Agree but still, it has grown at a level where I don't see that people leaving it at least in next 100 years. There will be the people who will keep using fiat currency irrespective of the advantages of other payment systems including blockchain based currencies. The biggest problem with fiat currencies is that there is a centralized power that controls it and it doesn't have any sense of freedom, to be honest. On the other hand, the banking system is soaking all the benefits of the real value of money.

Yups,fiat will always remain as medium for payments even in time that cryptocurrency took over the main stream,because for sure until that mentioned years of 100 there will still uses fiats for transactions internet wont be all over the world..thats one thing for sure

[Hell-raiser]

Politics are structured in a way which rewards politicians for selling out their own values and beliefs in favor of special interests who provide campaign funding and other monetary incentives. No matter which nation on earth we're discussing, its extremely common for the most successful politicians to be the ones willing to sellout the most and whore out themselves for anyone with money and an agenda. Its a race to the bottom and opposite of free markets, competition in politics breeds failure for everyone rather than positive rewards.

What may be needed is some form of restructuring. Removing the degree to which special interests are able to influence politicians with lobbyist incentives, greater safeguards and accountability. We've seen the trend be strongly in the opposite direction of the last x number of decades. The quality of legislation has greatly suffered as a result as we've seen standard of living, education, wages and other metrics fall substantially in recent times.

I don't think there is a way to change this for the long term. Of course, if some responsible, conscientious and dedicated guy comes to power, he can make some changes and improvements (though even his very rise to power seems highly unlikely on its own), but they won't last after he resigns from his office or just gets shot down like Kennedy. I want to say that what is done by one man can be undone by another, and any improvements will be temporarily only. Then they get dismantled, and everything  eventually comes back to where it should in fact be given the human nature. In other words, things you are talking about cannot be changed by issuing a decree or imposing safeguards. Humans need to be changed first.

[BobK71]

Agree but still, it has grown at a level where I don't see that people leaving it at least in next 100 years. There will be the people who will keep using fiat currency irrespective of the advantages of other payment systems including blockchain based currencies. The biggest problem with fiat currencies is that there is a centralized power that controls it and it doesn't have any sense of freedom, to be honest. On the other hand, the banking system is soaking all the benefits of the real value of money.

Yes, but the elites taking a big cut of the fruits of labor is a relatively small part of the problem.

The bigger part is the use of geopolitical power to drive conflicts, terrorism and wars, as we're seeing today, in order to force governments and countries around the world to follow Western dictates, that is, do what is necessary to support the value of the fiat money issued by the West.  (Read a book such as 'The Confessions of An Economic Hit Man,' or 'War Is A Racket,' for example.)

That is probably why inflation in Western fiat money is slow and gentle, as you seem to imply.

[BobK71]

Indeed, we shouldn't exclude from consideration the cases when a government is made up of criminals who just use their power (this is to the question of the value of power) to steal the nation's wealth. I remember a few years ago some African ruler ran away with the treasury of his country, something like 9 million dollars all in all, if I'm not mistaken. Obviously, I didn't mention these cases as they seem to be self-evident. I'm talking specifically about the cases when government doesn't want to kill their money unless they have no other choice left, like in a war or revolution.

Criminality is relative and varies by degree to a large extent.  Every money issuer is criminal to some extent, and the job of 'wise' Western elites is to ensure the outer-ring countries are always more criminal than those in the core.