Fiat Currency Always Fails

[deisik]

in some countries there is a lot of inflation with small or large numbers, but in my opinion it has nothing to do with the failure of fiat money because fiat is money that is used and controlled by the government so a good government will still maintain the exchange rate of its currency

Then you don't really know what is inflation, inflation is nothing more than the expansion of the money supply, for example bitcoin suffers inflation every year since miners mine new bitcoin every day, but this is a controlled process, but the governments just print as much fiat currency as they like and then they want to establish price controls which always fails, we have seen that story many times already, we know how it ends, and it always ends with the destruction of the fiat currency.

But do you? Do you really know that there are many definitions of inflation, and the expansion of money supply as you call inflation is only one of them, and a minor one at that? In the vast majority of cases people use the term in the context of rising prices, which means depreciation of the currency, i.e. price inflation. Typically, people who raise the issue of terminology, and especially in the case of inflation as monetary expansion versus currency depreciation (as you are far from being the first such) have nothing else to say apart from saying just that (which as they expect should give them substance and authority)

It is almost always clear from the context in which meaning the term is being used, so no need to show off here. In most cases it doesn't work as expected

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[maxreish]

Every fiats are evaluated to become successful. If crypto fiats are most likely to be ignored and failed, that is because it doesn't fit the standard and didn't pass the required characteristics. We all know crypto fiats are still unstable with inflation and deflation attitude.
But well, their are still some country who are very much open about bitcoin.

[orayorayan2]

but I see the fact that currently the country still relies on fiat money, although in reality there are still many shortcomings in fiat money, the government is still thinking of breaking away from fiat money and turning to digital currency, they may not have found a strong reason to do that, but hopefully it will happen sooner and become a solution so that the monetary crisis will not occur due to the weakening of the exchange rate of my country's current currency

[LigwagGanern]

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.

Fiat currency is not always fails there is just an incident that fiat currency fails. But not always time they are fails. Fiat currency is the most currency that is use many people or in the whole world. It is first type of currency that use by the people. Crypto currency was built because many people think that fiat currency is not safe, but crypto currency is not totally safe. Digital wallet or crypto wallet is the key to keep your bitcoin safe from the hackers or bad people.

[goaldigger]

The problem of fiat is that, the paper bills' value is greater than what the value it is made of and coins value is vice versa. We also are the ones who produces our own money by printing it unlike gold who needs to be mined. On the contrary, we wouldnt need to print more because of some chaos of the oversupply.

[blackbold]

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 so, because everytime fiat currency has loss their value for purchasing any things, at this time, goods are not expensive but the value of fiat currency that has decreased

[tulezua]

As the dollar rises, it has a huge impact on the prices of products all over the world. It is complicated when life with material value increases while monthly salary does not increase. And there is national currency inflation, there are even central banks printing too much money to make the currency lost value.

[gorodi]

I think fiat and cryptocurencies have more in common than we generally assume because they both rely exclusively on trust and the law of offer and demand. That said fiat are also indirectly backed by networks of banks and central banks and many other institutions yes. What I like  the most in crypto is the transparency of the rules (codes) and the endless possibilities in the real of smart economies and digital scapes.

Sure, traditional and digital money will be always connected. I do not understand why fiat should fail. Yes, the cryptocurrencies will be used more often in future but it will not change much.

[MMysterious]

I think fiat and cryptocurencies have more in common than we generally assume because they both rely exclusively on trust and the law of offer and demand. That said fiat are also indirectly backed by networks of banks and central banks and many other institutions yes. What I like  the most in crypto is the transparency of the rules (codes) and the endless possibilities in the real of smart economies and digital scapes.

Sure, traditional and digital money will be always connected. I do not understand why fiat should fail. Yes, the cryptocurrencies will be used more often in future but it will not change much.

Fiat is failing that their purchasing power or their value is keep decreasing when the time passed. Maybe you are right that fiat and digital money will co exist in the near future but not necessarily fiat will die. Is just that fiat fail because of the one who controls it. The bank and the government, and the one who control it control the world. Crypto in general cannot be control thats why people like it and believing that this will be the new currency.

[Motokonomo]

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.

[BobK71]

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?

"The elites are interested in the common good over the long term." -- This is true only to the extent that growth and a better organization of society benefit the very top elites (even if true competition causes harm to some rich and powerful people.)  This is because growth is the ultimate support for the value of the money and debt issued by the top elites.

The way you can tell if they're truly interested in the common good is to observe what they do after a financial bust.

Over the modern centuries, financial busts were generally followed by a policy of tightening the money supply.  This imposed even more pain on the public, on top of the wealth and jobs lost by the bust, and basically put all of the pain from the financial bubble on the shoulders of the public.  The excuse for doing this was to protect the peg of the currency against gold or silver, to guard the 'moral honor' of the elites in being able to redeem their paper with gold or silver.  (Or the fiat-period equivalent of this argument.)

But the real reason is to protect their system.  If the elites used inflation to lessen the pain to the public, by devaluing currency against gold/silver (or doing the fiat equivalent,) the long-term confidence in their system would be harmed.  They benefited most on the way up, but the public suffered on the way down.

The first time the public was powerful and aware enough to change the above partially was the Great Depression in the US.  The government eventually devalued against gold by about 50% and used fiscal expansion to lessen the pain.  But the core nature of the process never really changed.  The elites will always do the minimum required to maintain political stability, even to this day, and the evidence of this is the suffering during the Great Depression and (to a lesser extent) the Great Recession since 2008.

Now, this is not an accusation against any individuals or groups.  It's just human nature for anyone in those positions at those times.  The key for us to understand is that, the only way to better our lives, fundamentally, is by taking the power of money from the elites.

[BobK71]

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 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?

I think you have it backwards.  You first define an elite-controlled money supply as the natural state of affairs, and then say hard money tightens the supply and is thus harmful.

The natural and beneficial condition is a state-free money supply.  (Elite-controlled money creates artificial booms which always turn to busts.)  Asset values under a state-free money supply would expand or shrink to reward or punish good and bad decisions in investment.  As with anything else, any event or change in the system takes from someone and gives to someone else, but the difference between us is that  you define 'doing something useful' as whatever activity is favored by the central planners, whereas I define it as whatever is favored by the totally free choices of investors.

The big scare by critics of hard money is the vision of never-ending deflation.  The truth is, deflation ends somewhere: as we get older and our savings get bigger, and everything gets cheaper (remember we're talking about deflation!) we have more and more incentives to spend.  In real history, the only big deflationary pain has come from the elites' deliberate effort, after a financial bust, at tightening money to protect the reputation of their system, by making the economic pain even worse.  The 20th-century rise of public political power in the West has mitigated against this somewhat, but not nearly enough.  (Outside the core countries, even today, the IMF always ensures there is an economic bloodbath after a bust.)

Is it not ironic that elite-inflicted pain is used to justify giving more power to the elites?

[F_Ivanov1993_]

The minus of fiat is that it is not the main thing in its sphere.

[pinkliar]

I think fiat and cryptocurencies have more in common than we generally assume because they both rely exclusively on trust and the law of offer and demand. That said fiat are also indirectly backed by networks of banks and central banks and many other institutions yes. What I like  the most in crypto is the transparency of the rules (codes) and the endless possibilities in the real of smart economies and digital scapes.

Sure, traditional and digital money will be always connected. I do not understand why fiat should fail. Yes, the cryptocurrencies will be used more often in future but it will not change much.

Crypto will be part of our future and i want to study and learn about it while it's not yet popular just in case we can use it for the future so i don't feel ignorant if crypto will be accepted in many countries.

[BlueStackz]

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.

This is true but the big problem here is not that fiat currency fails but the terrible effects it has in the economy in general and in the economy of each person, when the fiat currency fails it tends to sink the country and everyone becomes poorer because of it and then you need to trust that the government is going to finally get it right when they issue a new currency.

Fiat currency is helping us in different ways of life or life activities so we can not neglect its value and role therefore fiat is strong and we will have it through out our life.

We can invest in the most popular and powerful fiat as well like dollar besides this cryptocurrency has catch the sight of investors as it is a huge profitable source and diversifying investment is also a good strategy so most investors follow this strategy.

[susuberuang]

I think all currencies have very unpredictable movements, sometimes the condition of cryptocurrency prices can be very expensive and sometimes it can fall like the current conditions so it's better to use all currency movements to get a profit.

[Hell-raiser]

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?

"The elites are interested in the common good over the long term." -- This is true only to the extent that growth and a better organization of society benefit the very top elites (even if true competition causes harm to some rich and powerful people.)  This is because growth is the ultimate support for the value of the money and debt issued by the top elites.

The way you can tell if they're truly interested in the common good is to observe what they do after a financial bust.

Actually, no one is particularly interested in the common good as everyone is after their own interests, obviously. And elites are no exception to this rule. You speak of them like they are aliens, while in reality they are essentially the same people only in a position which gives them a feeling or sense of superiority.

In essence, when I said they are interested in the common good over the long term, I meant they are of course interested in their own well-being before anything else. But they also understand (well, at least some of them) that their prosperity is inseparably linked to the prosperity of the whole society as they depend on it more than on anything else and more than everyone else does. The point is that to support their high standards of living, they have to rely on the whole society as their feeding ground, and thus they have to care for it.

Over the modern centuries, financial busts were generally followed by a policy of tightening the money supply.  This imposed even more pain on the public, on top of the wealth and jobs lost by the bust, and basically put all of the pain from the financial bubble on the shoulders of the public.  The excuse for doing this was to protect the peg of the currency against gold or silver, to guard the 'moral honor' of the elites in being able to redeem their paper with gold or silver.  (Or the fiat-period equivalent of this argument.)

Does it mean that elites dismantling the gold standard was the good thing for the public as there is no more "'moral honor of the elites" in the form of paper money redemption for gold?

But the real reason is to protect their system.  If the elites used inflation to lessen the pain to the public, by devaluing currency against gold/silver (or doing the fiat equivalent,) the long-term confidence in their system would be harmed.  They benefited most on the way up, but the public suffered on the way down.

You talk of them as if they really were aliens. Seen the V television series? Indeed, they are protecting their personal interests, but so does everyone else. So what's the point? This is not Lalaland.

[Coongcoongler]

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.

[BobK71]

Actually, no one is particularly interested in the common good as everyone is after their own interests, obviously. And elites are no exception to this rule. You speak of them like they are aliens, while in reality they are essentially the same people only in a position which gives them a feeling or sense of superiority.

Precisely, no one is arguing otherwise on this point.  No one is an alien.

In essence, when I said they are interested in the common good over the long term, I meant they are of course interested in their own well-being before anything else. But they also understand (well, at least some of them) that their prosperity is inseparably linked to the prosperity of the whole society as they depend on it more than on anything else and more than everyone else does. The point is that to support their high standards of living, they have to rely on the whole society as their feeding ground, and thus they have to care for it.

Leaders in Communist countries genuinely wanted the best for their country too, in the same sense that you're saying here.  Unless you can provide more specifics as to how the elites' interests are more aligned with society at large than at this generic level, we'll have to stop at this, and we know how well the Communist countries turned out.

Over the modern centuries, financial busts were generally followed by a policy of tightening the money supply.  This imposed even more pain on the public, on top of the wealth and jobs lost by the bust, and basically put all of the pain from the financial bubble on the shoulders of the public.  The excuse for doing this was to protect the peg of the currency against gold or silver, to guard the 'moral honor' of the elites in being able to redeem their paper with gold or silver.  (Or the fiat-period equivalent of this argument.)

Does it mean that elites dismantling the gold standard was the good thing for the public as there is no more "'moral honor of the elites" in the form of paper money redemption for gold?

If you're trying to argue that the dismantling of the gold standard was for the public good (as today's economists seem to argue,) you only have to look at how each gold standard was 'dismantled' only when the elites were about to lose all their gold, due to a rush by holders of the paper to redeem for gold.

Otherwise, please explain what you're getting at here.

Whether losing the gold standard was a good thing for society, is a much more complicated question, but I'll be happy to go into at some point.  Let's just say for now that the gold standard, as implemented by the elites of the time, was essentially a system of theft like the 'fiat' system we have.  But you could argue a future gold (or Bitcoin) standard, combined with the level of democratic power we enjoy today in the West, would potentially be a more stable and beneficial system than today's.

But the real reason is to protect their system.  If the elites used inflation to lessen the pain to the public, by devaluing currency against gold/silver (or doing the fiat equivalent,) the long-term confidence in their system would be harmed.  They benefited most on the way up, but the public suffered on the way down.

You talk of them as if they really were aliens. Seen the V television series? Indeed, they are protecting their personal interests, but so does everyone else. So what's the point? This is not Lalaland.

I hope we're not falling into a condition where in order to discredit the other person, you have to distort what they mean.  You can certainly do better than that!

In a certain sense, everyone is only after their own interests.  But we can certainly talk about what system best serves the interest of all, as in preventing murder and theft, for example.  And we can all agree to uphold such a system because it's in all our basic interest.

Understanding the power of creating money and the corruption it brings is the next major step in social awareness.  And it's important to explain to the average person the full ramifications of this money creation, in order to bring about proper understanding of the true nature of the system we're living under.  

[lendahawkins]

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 is that now all the money issued by countries is fiat after the United States went out of the gold standard in 1971 which means that if the main fiat currency around the world the dollar were to collapse that could in theory collapse the entire economy of the world.

Yes im agree all money are related to dollar. Its very strange and i do believe every country need to use cryptocurrency so we would see how the economy condition more easier and more transparant by blockchain technology.