Fiat Currency Always Fails

[vv181]

There is no doubt FIAT currency is broken, and cryptocurrencies are definitely a solution for what has been flawed. I do hope many people become more educated and soon will realize how broken the system is.

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[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.

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.

What matters here is whether the economy grows over the long term. If it comes about through manipulation, then so be it. It looks like you fail to understand that the manipulators ("the elites") are in the same boat with the manipulated ones. They are also vitally interested in the growth of the economy at large. Or do you really think that kings and rulers lived better lives than most people today in the developed world?

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.

Try telling that to people who bought at December highs. Personally, I would stick to gold since as I said, I'm pro-gold deep inside, long-term wise. For the record, I'm pro-Bitcoin too, but I would never trust my life and my wife on it. If you have some funds you want to multiply while your well-being in no way will be affected by losing this money, then Bitcoin as well as other cryptocurrencies may be a right choice after all, depending on your risk tolerance. But no matter how much you are willing to expose yourself to the risks associated with Bitcoin, it remains a highly risky asset.

[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.

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?

I never mean something is wrong simply because it comes from the establishment.

This argument comes from the establishment, yes, and I only mention that because our system is fundamentally deceptive, in the sense that intellectual dishonesty is incentivized across the society, so that, for example, all 'top' economists, if they value their career, will not expose that fact that we really live under socialism.

Deception likely also means plenty of online commentators are secretly paid to propagate the establishment arguments.  I have no evidence of it (because I'm clearly not one of them!) but all the incentives are there.

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.

As I wrote often, and I would like you to respond to it this time: deflationary pain as we know it is only because various demands in the economy have been inflated artificially during the inflation phase of the asset cycle.  And this artificial inflation is what state-controlled money does.

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.

So you make a 'moral' argument that money 'should' be flexible, for the common good.  But when someone brings up a counter-argument that money should be market-based for the common good, you argue that the world is what it is, and there's nothing anyone can do about it?

People don't always act rationally, true.  But generally speaking, people don't want to lose money in the financial markets.  The fact that market booms and busts happen all the time over the modern centuries can be simply explained by savers' reaction to state-driven monetary inflation to benefit the elites, and yet mainstream economists have resorted to all kinds of psycho-based theories to explain how people like to throw their own money away.  When there's a simpler explanation, let's stick with it.

[BobK71]

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.

What matters here is whether the economy grows over the long term. If it comes about through manipulation, then so be it. It looks like you fail to understand that the manipulators ("the elites") are in the same boat with the manipulated ones. They are also vitally interested in the growth of the economy at large. Or do you really think that kings and rulers lived better lives than most people today in the developed world?

This is a key point.  Growth is a function of advances in technology, management, etc. and in its natural state needs have nothing to do with the monetary system.  What state-money has done is to create artificially fast growth, during the inflationary phase of the asset bubble.  We are incentivized to buy things we don't really need.  When the asset bubble eventually crashes, we have economic pain.

The way the system works is that the best benefits always flow to the top during 'good' times, and the worst pain always flows to the bottom during 'bad' times.  So, you're correct that the elites prefer the inflationary phase too; it's just that the system they set up guarantees that the deflationary phase will follow.  On balance, the average member of the elites does much better than the average person, over the long term.

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.

Try telling that to people who bought at December highs. Personally, I would stick to gold since as I said, I'm pro-gold deep inside, long-term wise. For the record, I'm pro-Bitcoin too, but I would never trust my life and my wife on it. If you have some funds you want to multiply while your well-being in no way will be affected by losing this money, then Bitcoin as well as other cryptocurrencies may be a right choice after all, depending on your risk tolerance. But no matter how much you are willing to expose yourself to the risks associated with Bitcoin, it remains a highly risky asset.

Hindsight, as they say, is always 20/20.  When you're at the December highs, you can't tell if it was a high water mark, or it was like last spring and summer when Bitcoin kept going up and up.  Just forget all that, see the big picture, and hold on to your Bitcoin for the long haul.  Of course, always diversify your bets, since even if you're correct about the way the system is going, there's always a chance the elites can change the game.

[Vatimins]

There is no doubt FIAT currency is broken, and cryptocurrencies are definitely a solution for what has been flawed. I do hope many people become more educated and soon will realize how broken the system is.

     I believe so too but I think that crypto currencies cannot offer a solution yet since crypto currencies as of this moment has more flaws than the fiat. I think that fiat is still better than cryptos in terms of easiness or usage and availability. And out of all the things that has happened in the past, it would be really impossible if people on top never really learnt anything from the past. I think it would be safe to say that as more mistakes happen, more is learned and improved.

[karanggatak]

Yes it is very true, this is happening right now in my country, fiat exchange rate has decreased over time due to inflation or others, it is really very sad, I am very afraid to have a lot of fiat because the decline is very drastic lately this. now i begin to divert to cryptocurrency money i hope the future will be more stable than fiat.

[onemoretime8520]

fiat money when is not backed by a standard as stated in the post is something with low resistance but at the same time no one wanted to try that resistance and hope btc will be the one.

[BobK71]

There is no doubt FIAT currency is broken, and cryptocurrencies are definitely a solution for what has been flawed. I do hope many people become more educated and soon will realize how broken the system is.

     I believe so too but I think that crypto currencies cannot offer a solution yet since crypto currencies as of this moment has more flaws than the fiat. I think that fiat is still better than cryptos in terms of easiness or usage and availability. And out of all the things that has happened in the past, it would be really impossible if people on top never really learnt anything from the past. I think it would be safe to say that as more mistakes happen, more is learned and improved.

I think it's likely the major thing that has been learned over the last 40+ years by the elites is that totally fiat money makes for an unstable world (not just financial troubles but wars and terrorism.)

As I wrote many times, the elites would love to go back to something like the gold standard, where they still rip off the world, but more slowly and with more stability.  At this point, it seems likely that cryptocurrency will be used as the new gold, since the Western countries don't have much gold left (since most of their gold has likely been spent in the four decades of suppressing gold prices.)

[chrisculanag]

It does not matter because of the fiat problem so there are such problems, as you say. There are also problems in our country not just because there is already a fiat. There are so many good things to do with our fiat, we use it for trading or anywhere in the country. There are just a few countries that do not really accept fiat as a currency, then the war begins. Kung ang cryptocurrencies ay magsisilbing ginto napakalaking tulong nito satin. 

[Bugsbey]

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.

Problems is just a part of our daily lives. So I could not say that the reason behind that is because of fiat money. We are using it for good. But if there are other ways to solve the worlds problem and it will be using other currency instead of fiat, and if it will be for the common good then why not?

[Angna27]

Fiat currency has aways been there since the bginning and it stil there up to now for as long as people could use it for their everyday transactions in life it would still be there not unless there is changes in currency that government itself abolish it and exchange it to virtual currency...anything can happen we never know.

[BobK71]

Fiat currency has aways been there since the bginning and it stil there up to now for as long as people could use it for their everyday transactions in life it would still be there not unless there is changes in currency that government itself abolish it and exchange it to virtual currency...anything can happen we never know.

Physical gold and silver are objectively the best money.  The 'problem' for the elites is that they can't profit much from a gold and silver monetary system.

This is analogous to medicine in a sense.  Cannibis (marajuana) is a natural pain killer that has proved itself over the centuries.  The 'problem' is that there's no profit for drug companies and not much extra power for politicians who regulate it.  So it has been banned until popular demand is so great in the US that the ban is slowly being removed.

The system prefers artificial pain killers, with all their side-effects and problems of addiction, because they give power to the elites.  It's the same with money.

[Hell-raiser]

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.

What matters here is whether the economy grows over the long term. If it comes about through manipulation, then so be it. It looks like you fail to understand that the manipulators ("the elites") are in the same boat with the manipulated ones. They are also vitally interested in the growth of the economy at large. Or do you really think that kings and rulers lived better lives than most people today in the developed world?

This is a key point.  Growth is a function of advances in technology, management, etc. and in its natural state needs have nothing to do with the monetary system.  What state-money has done is to create artificially fast growth, during the inflationary phase of the asset bubble.  We are incentivized to buy things we don't really need.  When the asset bubble eventually crashes, we have economic pain.

I somewhat agree with you that a monetary system should not create an artificial growth, though this is a separate and very complex topic in itself, with arguments both in favor and against such growth. But how does it challenge my point that the elites are also interested in the common good over the long term? Besides, the problem with a limited-supply monetary system is that it heavily interferes with the economic growth. Basically, money should make economic relationships easier or, at the very least, not stand in the way. However, a limited-supply currency takes away some percentage of economic growth as it rewards holders for just holding that currency.

But if you reward someone, you should necessarily take from someone else. There is no free lunch. In this case you take some share of the revenue from producers who are actually doing something useful and give it to someone who doesn't do anything productive, who does nothing apart from sitting on their money. Why should they get rewarded?

[David Way]

Paper currency encourages violent crime by making robbery pay off and drug dealing and illegal immigration profitable; by giving criminals an easy to use means of payment, Rogoff pointed out. In The Curse of Cash; he noted that the Swedish government greatly reduced the number of bank robberies by simply lowering the amount of cash in circulation, which made such crimes less profitable.

Ironically, this is a claim that is leveled at Bitcoin and other Cryptocurrencies, that they facilitate crime when it reality cash is by far the largest method or exchange for criminals.

[dunfida]

Fiat currency has aways been there since the bginning and it stil there up to now for as long as people could use it for their everyday transactions in life it would still be there not unless there is changes in currency that government itself abolish it and exchange it to virtual currency...anything can happen we never know.

Physical gold and silver are objectively the best money.  The 'problem' for the elites is that they can't profit much from a gold and silver monetary system.

This is analogous to medicine in a sense.  Cannibis (marajuana) is a natural pain killer that has proved itself over the centuries.  The 'problem' is that there's no profit for drug companies and not much extra power for politicians who regulate it.  So it has been banned until popular demand is so great in the US that the ban is slowly being removed.

The system prefers artificial pain killers, with all their side-effects and problems of addiction, because they give power to the elites.  It's the same with money.

A very precise illustration or connection that you do mention on here which i do completely agree on this one. On all sorts of things which elites wont see any benefits or money profits for them then its normal for them to make a move to get rid of it and do let get inside on things which will make them more wealthy. We cant do anything about it but to witness that dumb thing this why its always been part of the society on this kind of system.Making a change would definitely stay up on my own dreams.

[yusupjatigumilar]

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.

can not be denied that the FIAT currency is experiencing a lot of dark history, but in my opinion it is also influenced by many fator such as war that happened, then it will automatically weaken the exchange rate of the currency, it is just one example of things that affect the strength FIAT money currency, I think it will be the same with digital currency value is greatly influenced by many facto, if only now the war and some mines are destroyed then the value of digital currency will also be destroyed

[spongegar]

Fial is outdated yes it's true, but fiat is stable more stable than bitcoin. But i still believe that crypto currencies will actually catch up and dethrone fiat as a way to exchange goods and services. I just hope that fiat will crash the same time as crypto currencies become strong enough to be a global currency.

[Dimon8]

Interesting article about fiat. It can be concluded that a constantly growing amount of paper money leads to a global crisis as a bomb with a deferred action. Perhaps we are a generation that will witness and take part in the global change of the monetary system.

[yoseph]

Fial is outdated yes it's true, but fiat is stable more stable than bitcoin. But i still believe that crypto currencies will actually catch up and dethrone fiat as a way to exchange goods and services. I just hope that fiat will crash the same time as crypto currencies become strong enough to be a global currency.

Gone are the days when countries print money due to the Gold deposits, but now they just print almost whenever they want and from what the articles goes on to say it means that the entire world economy is in crisis.

[BitHodler]

Gone are the days when countries print money due to the Gold deposits, but now they just print almost whenever they want and from what the articles goes on to say it means that the entire world economy is in crisis.

The thing with endless money printing is that governments can basically keep stretching (delaying) the destructive effects, but eventually the system will implode where the entire world economy will suffer badly.

It's not for nothing that those who are smart enough use gold as preferred hedge. In recent years Bitcoin has been gaining importance as hedge as well, and that awareness will only keep increasing.

Physical gold requires people to store it in a bank's safe deposit box, which in some cases applies to paper gold as well, and so do I think Bitcoin will end up like that ~ people just don't feel comfortable holding that much wealth.

It definitely wouldn't surprise me. I know people who store their hardware wallets in safe deposit box, which is definitely a no go for someone like me.