Fiat Currency Always Fails

[BobK71]

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.

In the best of these countries, the USA, the dollar has lost at least 95% of its purchasing power over the last 100 years.  So, yes, a fiat currency may not have totally failed yet, but it is only a matter of degree (and time -- since the key financial assets of past global empires like Spain, the Netherlands, and Britain have all been defaulted on.)

[BobK71]

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/

The inspiration for my post was that, through most of the modern age, state-issued money has been tied to gold or silver.  Totally 'fiat' money is a relatively rare occurrence, and when it did occur, it always failed miserably.

Today, we have the historically strange situation where the top-dog money in the world is totally 'fiat.'  Granted, the top-dog country still has a lot of power, but the history of totally 'fiat' money should serve as a warning that collapse might come faster and more violently than in the past.  (That is, all past top-dog countries issuing reserve currencies/debts have been brought down by that issuance, even though the issuance was backed by gold and silver: Spain, the Netherlands, and Britain.)

[BobK71]

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.

Yes, going to hard money now would make the economy implode, but how do you answer my point about distortion and addiction?

[BobK71]

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).

This is one of the key arguments by the establishment, and I'm afraid there is no truth to it.

The issue is never hard vs. soft money, whatever money we use, or whatever money might come out of innovation.  The real issue is always, who has the power to decide?  Who sets the price and value of assets?  When it's the state and not the free market, there will be big trouble.

The real trouble with state-issued money, and especially with state-issued fiat money, is that the central planners have the power.

[BobK71]

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.

It is in the interest of the establishment to manipulate all price levels to make it *appear* that their issued money has the most stable value.  This has been going on for about 500 years and is nothing new.  The gold and silver standards over the centuries were just very good versions of today's not-so-elegant manipulations.

But don't be deceived.  Hold on to your Bitcoin and gold despite all the ups and downs, and you'll be fine unless you're too old to see the long term.

[BartS]

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.

You are completely correct, now the question should be, what we can do in order to protect ourselves when fiat currencies finally fail? And I think the solution is very easy we need to find a store of value, one of the most famous stores of value is gold and while I consider it to be a decent store of value in my opinion is not the best after all you cannot eat or do anything with your gold while if you invested in real estate then you can use that house and that terrain to live there for some time and if you have enough space you could even produce food there in the case things got really ugly.

[sampalokmix]

I mean let's face it, it's easier to handle money electronically than with papers in the hand. And if we compare fiat on the bank account and the blockchain money guesses who have the advantage...well not quite yet, but the potential for the blockchain is huge.

Well ro hold it physically yes fiat is more hassle, but I think if there was no fiat it is impossible for us to come up with the digital money from using goods as our way of payment , we will never come into digital age, without step by step being in that period. I guess the fact Bitcoin is here already, let us keep the fiat for the unbeliever to used, there is no certwin competition for that if both sides were useful.

[BobK71]

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.

No, of course it's not Bitcoin that suggests fiat currencies fail.  History, and the perverse incentives built into state-issued money, suggest that.

[BobK71]

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.

"Humans need to be changed first." -- No.  The ultimate argument of the establishment, their final line of defense, after their deception has been exposed, is that humans are dishonest by nature, so if the system is dishonest, it only reflects their core nature.  If the system ever gets better by accident, human nature will reverse the progress anyway.

The trouble of this argument is that it's beside the point.  What is required is not human honesty, but human awareness of their *dishonesty.*  If we are aware of the games the elites play with the power we give them, we'll simply refuse to give it.  Taking the power of money from governments and central banks requires no more fundamental understanding than taking economic power from former socialist governments.  It's as simple as understanding that power corrupts.

[Noelbetty12]

The point was correct and agreeable to some extent. In any manner paper is never comparable to anything in value like silver and gold. It's just a piece of paper with no actual value except for the cost of its printing and it could be put into flames like woods in a fireplace. But we should also understand that what makes it valuable is how the state or country created it as a back up the real valuable reserves. That is why they are too careful not to over print it or the econmy of a country could collapse by the imbalance created. Should its value goes to zero, one thing is for certain, the country had collapsed or have replaced it with another form of currency, or maybe the world ends.

[BobK71]

You are completely correct, now the question should be, what we can do in order to protect ourselves when fiat currencies finally fail? And I think the solution is very easy we need to find a store of value, one of the most famous stores of value is gold and while I consider it to be a decent store of value in my opinion is not the best after all you cannot eat or do anything with your gold while if you invested in real estate then you can use that house and that terrain to live there for some time and if you have enough space you could even produce food there in the case things got really ugly.

I would predict that when 'the system fails,' there are multiple possible scenarios that are very different from each other.

The worst one is economic and societal breakdown.  I certainly don't hope for that, since I don't know anyone, myself included, who is really prepared for that scenario.  Even if you grow or store your own food, it can be taken from you.  Even if you protect it with guns, you can get killed.  (Also, I believe the other scenarios are far more likely, as the elites actually have a back-up plan.)

At the other extreme, the least disruptive scenario is loss of faith in core financial assets, caused by the collapse of some big asset class or financial institution.  In this scenario we still have law and order, and money is still good in the economy (and likely too good,) but the elites will need to take a no. of drastic actions to keep what remains of their system together.  Part of the mix will likely be a de-facto devaluation of their state money against non-state money, to stabilize state money.  This happened, for example, in 1934, when the dollar was devalued by about 50% against gold (and other currencies did even worse, as they had to be taken off gold.)

Somewhere in between the two extremes would be a change of the global monetary regime.  The last time this happened was across World War I, when the US took over global empire from Britain, and a dollar-based gold exchange standard replaced the classical gold standard.  Unless the system lives long enough to see a rising India mature enough to take over the role of the US, this option is not available this time.  A massive devaluation against non-state-issued money, and/or using crypto as the chief non-state-money (if crypto can mature fast enough in the public imagination,) is the likely response.

The trouble with investing in things like real estate and base commodities, thinking they are 'real things,' is that the demand for these is propped up by the elite-controlled system from day one.  So you're not only buying over-priced assets, in a collapse, there's a better than 50/50 chance that the lack of demand from the loss of the asset bubble will drive their values down.

In the two latter scenarios, non-state-issued money like gold, silver and Bitcoin should do well.  Among the three, Bitcoin is especially cheap today.

The key thing to remember is that, during 'good' times, the elites always manipulate non-state-money values down (perhaps with the exception of cryptos, since the elites must allow them to rise to a level that makes them a player, but that's only for now.)  This presents us with an excellent price level to buy non-state money for the long haul.  They won't let good non-state money totally collapse, because that's their back-up plan. The net effect of all this is that we have a one-way bet, for the long term.

[rafaelyarulin]

"If the crypt can mature quickly enough in the public imagination "! What should be done to make this mini revolution occur in the minds of ordinary layman? How to attract an ordinary buyer to enter the Crypto market? My friends had a little experiment: asking a question on the streets to young people, outwardly quite educated: how do they think if there is a future for crypto currency? Is it ever going to win over Fiat money? So, less than 10% of young people were skeptical about the progress of the crypt. How is it necessary, what ways, what actions and efforts it is possible to promote the crypt? How to attract the maximum number of people to this sector, so that the Crypto currency was the same everyday payment means as Fiat?

[BobK71]

The point was correct and agreeable to some extent. In any manner paper is never comparable to anything in value like silver and gold. It's just a piece of paper with no actual value except for the cost of its printing and it could be put into flames like woods in a fireplace. But we should also understand that what makes it valuable is how the state or country created it as a back up the real valuable reserves. That is why they are too careful not to over print it or the econmy of a country could collapse by the imbalance created. Should its value goes to zero, one thing is for certain, the country had collapsed or have replaced it with another form of currency, or maybe the world ends.

Yes, absolutely.  The likes of Weimar Germany, Zimbabwe, etc. are rare.  The trick is to keep a limit on printing money, so the system stays alive.  And the top of the imperial system (which is the US, today) is the best at this game.

Among the major tricks in the bag are:

- Giving a good and proportionate share of the fruits of the theft to appropriate large groups (e.g. professionals, educated people, the entire Western population to some degree), so that they consciously or subconsciously help support the system.

- Having an international political, military, trading and financial setup where the economic pain from burst bubbles at the top of the system can flow out to countries lower down the system.  (And at the low end, like Syria or Yemen, we can have war.)  The elites want to have this pain in order to avoid too much money-printing to inflate away the problem, which would quickly destroy trust in the system.  Pain always flows down, and value always flows up.

But the core nature of this system is that the incentives always lead the elites to destabilize their own system.  Ultimately, the US differs from Zimbabwe only by degree.

[Starscream]

The usual reasons to do that behind a war is conflict between two countries or areas and greediness for the resources. Then again bitcoin will recover

[Austin Alexis]

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.

I think as soon as we went off the gold standard in the 1970s the system was doomed to fail. This experiment will inevitably fail. Printing off money through quantitative easing is a short term fix to a long term problem!

[hessanseen]

I think the Fiat in many countries will fail, although it is essential for the exchange of money as a country, but we see that the frat in all the countries of the world in the past few decades is a vicious inflation, which is a plundering of the people. Maybe bitcoin can make that happen. We hope that bitcoin will at least reduce the inflation rate of Fiat.

[cluit]

The usual reasons to do that behind a war is conflict between two countries or areas and greediness for the resources. Then again bitcoin will recover

No matter what the reason of failing, there is always a room to recover as long as it still gives chances to the supporters and does still show developments then btc will really recover everytime it falls.

It is one of the biggest dilemma that we were only be seeing the paper money since centuries and that there was no other alternative which can help us in a better way.

However, with the introduction of the crypto currencies, we have seen a lot of positive change and the personal satisfaction but still there are so many people who don’t know anything about the crypto currencies and that it will take time to help them out as well.

[Sled]

That is why the cryptocurrencies are here to replace those fiat currencies in the future since they always fail and it is best for us to just wait and have a lot of patience because in the future like a few years from now, we will see a cashless society which have a lot of advanced technologies compare to our slow type of technology.

[Hell-raiser]

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).

This is one of the key arguments by the establishment, and I'm afraid there is no truth to it.

Regarding this and your following posts where you also make references to "key" arguments allegedly brought forth by the establishment, I can't take this as an argument in its own right. I rather consider it as an evidence of no more arguments. If someone belongs to the establishment and says something (note that this is not the case here since you basically just came up with an excuse), it doesn't mean it is false and has no value on its own. If someone whom you dislike very much says that the Earth is round, would you challenge that too?

Deflationary money is a hindrance to the economic development, it is a universal truth, no matter who says it. It can be argued whether a small rate of inflation is good for the economy and how small precisely, but with respect to deflationary money, there is no point in arguing how detrimental it is. In essence, deflationary money is money only in the part which is not deflationary, the part which actually gets circulated.

The issue is never hard vs. soft money, whatever money we use, or whatever money might come out of innovation.  The real issue is always, who has the power to decide?  Who sets the price and value of assets?  When it's the state and not the free market, there will be big trouble.

There is no free market, it is an abstract idea or notion which is used to build economic theories on, which may or may not hold in practice. In the end, it all comes down to individuals seemingly acting in their own best interests, but the problem is these actions are only seemingly rational, while in reality they are far from that even at the very cursory inspection.

[Tigorss]

The implications of the incident in the currency-devalued state-he has to pay more for products and services from abroad, whereas overseas people will be more products and services from countries devalued in their currencies. This is a real injustice, because of the inability of the government to maintain the value of its currency, due to the use of fiat money.