Tag Archives: Fiat currencies

The Bitcoin Revolution & How Fiat Money Ruins Civilization, by Jimmy Song

Any currency whose quantity and value can be adjusted at the whim of a government is inherently immoral and will eventually be tossed into the garbage bin of history. From Jimmy Song at bitcoinmagazine.com:

Fiat money leads to a degradation of incentives, creating a society motivated only by the consumption of resources and zero value production.

This is an opinion editorial by Jimmy Song, a Bitcoin developer, educator and entrepreneur and programmer with over 20 years of experience.

We want nice things. We want to live in a nice house, eat good food and have fulfilling relationships. We want to travel to exotic places, listen to great music and experience fun. We want to build something that lasts, achieve something great and leave a better world for tomorrow.

These are all part of being human, of participating in society and of progressing humanity. Unfortunately, all these things and more get ruined by fiat money. We want nice things, but we can’t have them, and the reason is because of fiat money.

Governments want the power to decree prosperity, fulfillment and progress into existence. They’re like the alchemists of yesteryear, who wanted to turn lead into gold through some formula. Actually — they’re worse. They’re like a five-year-old that thinks by wishing hard enough, that she can fly.

Being the delusional power-drunk politicians that they are, the elites think that by decreeing something to be so, it magically happens. That’s indeed where the word “fiat” comes from. The word literally means “Let there be,” — in Latin and in English, it’s become an adjective to describe creation by decree. This can be most easily seen in Genesis 1:3 in Latin. The phrase there is “fiat lux” which means “let there be light.”

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The people who engineered record inflation want to control cryptocurrency, by Simon Black

It’s just as easy to inflate a central bank digital currency as it is to inflate the fiat we’ve come to know and despise, perhaps easier. From Simon Black at sovereignman.com:

On the First of May in the year 1716, a swashbuckling Scottish entrepreneur was making this pitch of his lifetime to the head of the French government in Paris.

The entrepreneur’s name was John Law. By all accounts he was incredibly charismatic and had a flamboyant, larger than life personality. He was something like Adam Neumann, formerly of WeWork… the kind of person who could talk anyone into anything.

And John Law’s pitch that day was to launch an entirely new financial system.

King Louis XIV had just died eight months before, leaving France in terrible financial ruin. Decades of endless wars, palaces, and profligate spending had bankrupted the French government.

The situation was so dire, in fact, that there was hardly any gold left in the French treasury. So the new head regent of the government, Duke Philippe II of Orleans, was desperate for a solution.

Law made him a bold proposal: the Duke would provide Law with a special banking license. And in exchange, Law would create a new system of paper money that would bring more gold into France and help pay off the crippling national debt.

Philippe agreed. And, only a few weeks later, John Law’s new Banque Generale Privee was in business.

It turned out that people loved the idea of paper money. And within a year, his paper bank notes were circulating widely throughout the French economy, and the government even accepted them for tax payments.

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History Repeats: Abandoning Sound Money Leads to Tyranny and Ruin, by Jp Cortez

You can tell all you need to know about a country by the quality of its money. Fiat debt instruments whose usage must be compelled via legal tender laws are pure garbage, the last resort of corrupt and dying governments. From Jp Cortez at soundmoneydefense.org:

Money is one of the most misunderstood topics of our time, and we’re seeing the implications of this play out every day.

To understand money, one first must first understand that human beings have always been incentivized to participate in exchange. If humans could not, or did not, trade, the majority of people would die young: whether by starvation, disease, or exposure to the elements.

The survivors would be left with an extremely low standard of living; not a world any of us would want to live in. This means that exchange is a necessary condition, not only of our economy, but of human flourishing.

Origins of Money

Before there was money, there was barter (also known as direct exchange) – a system in which every good is traded directly against every other good.

A small island economy could function this way: a couple of coconuts traded for fishing line, or a bushel of bananas in exchange for bamboo with which to build a shelter.

As Tho Bishop from the Mises Institute illustrates, imagine that a farmer wants to buy a pair of boots, so he visits the town cobbler and tries to trade a dozen eggs in exchange. However, the cobbler in town doesn’t want eggs. The cobbler might want beef, but the farmer isn’t willing to slaughter his cow for boots.

A trade where both parties are happy is now difficult. It’s easy to see how unmanageable this system is as populations grow, and as needs and wants expand.

Let’s revisit our farmer: Instead of offering eggs, he realizes that what the cobbler really wants is butter. So he goes out and trades for butter, and then uses that butter to trade for boots. If enough people also want butter, our farmer may buy more—not to use it, but to exchange it for other goods and services. This is called indirect exchange.

Many goods throughout history, with varying degrees of effectiveness, have filled the role of “butter.” Salt, wampum, and tobacco have all been used as money, just to name a few. However, gold and silver emerged as universally accepted monies by the free market because of their durability, transportability, fungibility, and scarcity.

Emerged is the key. The process through which money is “created” is not one of central planning or of creation at all, but rather one in which money is “discovered” by markets.

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Ron Paul Reveals Exactly How Much the Federal Reserve Has Already Robbed You, by Ron Paul

Central banking and fiat banking rob people blind. From Ron Paul at birchgold.com:

Ron Paul Reveals Exactly How Much the Federal Reserve Has Already Robbed You

Photo CC BY-SA 2.0 by Gage Skidmore
Even after decades educating Americans on economics and liberty, I’m still amazed by the number of people who have no idea what the Federal Reserve is or what they do.

Sometimes, if put on the spot, folks will hazard a guess.

“They’re a bank, right?” Sort of, but not really.

“They’re the ones who make the stock market go up.” While that’s true, it’s not actually their job to pull the strings on Wall Street.

“They print money, don’t they?” True! Technically, the Bureau of Engraving and Printing, a subsidiary of the Department of the Treasury, physically produces greenbacks (or Federal reserve notes, or dollars).

What the Federal Reserve does is decide the total supply of dollars, and then create or destroy (but usually create) however many dollars they think the world needs.

Thus, as I explained in my article Forget about the gold standard, let’s talk about the copper standard, the Federal Reserve is in charge of either creating or destroying inflation. Mostly creating!

Today, I’m going to show you exactly how the Federal Reserve has abused their inflationary powers to steal from you. If you’re not absolutely furious by the time you’re done reading this article, well, call the Pope – you must be a saint!

If, like me, you’re not a saint, get ready to feel your blood boil…

Inflation robs responsible savers, rewards debtors

When my father was getting ready to retire back in the 60s, his nest egg was invested very conservatively in CDs at the bank. That made sense for him, because at the time, banks paid 2-3% over the rate of inflation. He didn’t have to worry about the value of his money declining faster than it grew.

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Doug Casey on the Rise of Alternatives as the US-Led Global Order Falters

Gold will emerge as the world’s money because nobody trusts fiat currencies. From Doug Casey at internationalman.com:

US-Led Global Order

International Man: Since the invasion of Ukraine, we’ve seen the US and its European allies institute unprecedented sanctions on Russia. In a bold move, the US government also froze the US dollar reserves of the Russian central bank.

In response, Russia demanded payment in rubles in exchange for its energy.

What’s your take on this new phase of economic warfare?

Doug Casey: It’s a massively stupid and destructive move on the part of the US. There’s no upside to what the US is doing in fighting this economic war against Russia—or, for that matter, in backing the Zelensky regime in the Ukraine—but huge downside from every point of view.

Essentially the US and Western powers have confiscated hundreds of billions of dollars of assets from the Russian government, as well as individual Russians. It’s theft, pure and simple. It acts as a warning shot to everybody in the world: Your assets are not safe in Western countries. It’s a reason to get out of the US dollar and use something else.

It’s backfired on the US. It’s helping devastate Western economies by cutting off the flow of Russian oil, and especially natural gas, to Europe. Further, the Russians now demand payment in rubles. The ruble is now a much stronger currency because, in order to pay the Russians, the world has to buy rubles. The Russians have taken a page from the US playbook. Decades ago, the Saudis said they would only accept US dollars in payment for oil. And so, people had to buy dollars if they wanted Saudi oil.

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Inflation, recession, and new currencies, Alastair Macleod

The best economist on the Internet analyzes the fiat-money landscape, its inevitable collapse, and what could potentially replace it. From Alastair Macleod at goldmoney.com:

Central bankers are trying to steer markets away from higher interest rates, citing growing evidence of the harm they are doing to economic growth. Quantitative tightening is dead on arrival.

Predictably — because it is a repetitive cycle — bank credit is beginning to contract. But contracting bank credit is associated with periodic systemic crises. The credit contraction crisis promises to be even worse than the Lehman failure and any that came before it. And because central banks are sure to protect financial asset values from collapsing, their currencies are likely to suffer instead. Being entirely fiat unbacked by legal money, currencies are dependent entirely on the public faith in a financial system which lacks the backing of real money. 

We are all rapidly drifting onto the rocks which sank John Law in 1720. Central bankers, like John Law with his Mississippi bubble, are prioritising support for financial asset values over their currencies, which is what interest rate suppression is all about. Just as Law’s fiat livres rapidly became worthless, so will today’s fiat currencies.

Therefore, in the interests of one’s own self-protection, it is time to fully understand the difference between legal money, fiat currency and the importance of bank credit.

Central banks refuse public access to legal money, which is their gold reserves. Nor is access demanded by the investment establishment, which has thrived on monetary inflation. Instead, there is a developing debate about collapsing currencies being backed by commodities instead. This article puts these developments into context.

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The failure of fiat currencies and the implications for gold and silver, by Alasdair Macleod

Fiat currencies are going to their marginal cost of production—close to zero. That should increase the allure of Real Money, gold and silver. From Alasdair Macleod at goldmoney.com:

This is the background text of my Keynote Speech given yesterday to European Gold Forum yesterday, 13 April.

To explain why fiat currencies are failing I started by defining money. I then described the relationship between fiat money and its purchasing power, the role of bank credit, and the interests of central banks.

Undoubtedly, the recent sanctions over Russia will have a catastrophic effect for financialised currencies, possibly leading to the end of fifty-one years of the dollar regime. Russia and China plan to escape this fate for the rouble and yuan by tying their currencies to commodities and production instead of collapsing financial assets. The only way for those of us in the West to protect ourselves is with physical gold, which over time is tied to commodity and energy prices.

What is money?

To understand why all fiat currency systems fail, we must start by understanding what money is, and how it differs from other forms of currency and credit. These are long-standing relationships which transcend our times and have their origin in Roman law and the practice of medieval merchants who evolved a lex mercatoria, which extended money’s legal status to instruments that evolved out of money, such as bills of exchange, cheques, and other securities for money. And while as circulating media, historically currencies have been almost indistinguishable from money proper, in the last century issuers of currencies split them off from money so that they have become pure fiat.

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The evolution of credit, by Alasdair Macleod

The West’s fiat currencies are reaching the end of the line. From Alasdair Macleod at goldmoney.com:

After fifty-one years from the end of the Bretton Woods Agreement, the system of fiat currencies appears to be moving towards a crisis point for the US dollar as the international currency. The battle over global energy, commodity, and grain supplies is the continuation of an intensifying financial war between the dollar and the renminbi and rouble.

It is becoming clear that the scale of an emerging industrial revolution in Asia is in stark contrast with Western decline, a population ratio of 87 to 13. The dollar’s role as the sole reserve currency is not suited for this reality.

Commentators speculate that the current system’s failings require a global reset. They think in terms of it being organised by governments, when the governments’ global currency system is failing. Beholden to Keynesian macroeconomics, the common understanding of money and credit is lacking as well.

This article puts money, currency, and credit, and their relationships in context. It points out that the credit in an economy is far greater than officially recorded by money supply figures and it explains how relatively small amounts of gold coin can stabilise an entire credit system.

It is the only lasting solution to the growing fiat money crisis, and it is within the power of at least some central banks to implement gold coin standards by mobilising their reserves.

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The end of fiat hoving into view… by Alasdair Macleod

Skyrocketing food and energy prices, rising interest rates, crashing financial markets, and economic depression will spell the end of Western fiat currencies. From Alasdair Macleod at goldmoney.com:

Tragic though the situation in Ukraine has become, the real war which started out as financial in character some time ago has now become both financial and about commodities. Putin made a huge mistake invading Ukraine but the West’s reaction by seeking to isolate Russia and its commodity exports from the global marketplace is an even greater one.

Furthermore, with Ukraine being Europe’s breadbasket and a major exporter of fertiliser, this summer will bring acute food shortages, worsened by China having already accumulated the bulk of the world’s grains for its own population. Inflation measured by consumer prices has only just commenced an accelerated rise.

Because they discount falling purchasing power for currencies, rising interest rates, and collapsing bond prices are now inevitable. Being loaded up with bonds and financial assets as collateral, the consequences for the global banking system are so significant that it is virtually impossible to see how it can survive. And if the banking system faces collapse, being unbacked by anything other than rapidly disappearing faith in them fiat currencies will fail as well.

Unforeseen financial and economic consequences

Back in the 1960s, Harold Wilson as an embattled British Prime Minister declared that a week is a long time in politics. Today, we can also comment it is a long time in commodity markets, stock markets, geopolitics, and almost anything else we care to think of. The rapidity of change may not be captured in just seven calendar days, but in recent weeks we have seen the initial pricking of the fiat currency bubble and all that floats with it.

This is turning out to be an extreme financial event. The background to it is unwinding of economic distortions. Through a combination of currency and credit expansion and market suppression, the difference between state-controlled pricing and market reality has never been greater. Zero and negative interest rates, deeply negative real bond yields, and a deliberate policy of artificial wealth creation by fostering a financial asset bubble to divert attention from a deepening economic crisis in recent years have all contributed to the gap between bullish expectations and market reality.

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When normality is exposed as a Ponzi, by Alasdair Macleod

Putin could crash the global financial system by demanding payment in gold for Russia’s oil and gas. From Alasdair Macleod at goldmoney.com:

Putin’s hubris, yes-men for generals, lack of fighting conviction among the men, poor logistics and strong Ukrainian leadership and determination have combined to turn the Russian invasion of Ukraine into a military quagmire.

Meanwhile, the West has upped the stakes in a financial war. The underlying assumption is that the Russian economy is weak and those of the Western allies are stronger. A few key metrics shows this is incorrect. The underlying resilience of the Russian economy and its financial system is not generally understood, and instead EU sanctions could end up undermining the whole euro system and the euro itself.

This article looks at how errors on the battlefield are likely to bring the financial and economic war between the West and Russia out into the open. By suspending access to them, the West has made the mistake of proving to Russia (and all other national central banks) the ultimate uselessness of currency reserves and the benefits of gold. As well as leading to the likely collapse of the entire euro system, this article explains how this financial war could end up with a de facto gold standard for the rouble and call an end for the entire fiat currency Ponzi scheme.

The destruction of the global fiat Ponzi scheme is a step closer

Being increasingly debased, western currencies serve to conceal deteriorating economic conditions, particularly in the US, EU, UK, and Japan. In China, less so perhaps. But China faces an old-fashioned property crisis which is sure to lead to further currency expansion and therefore, debasement of the renminbi. In this article about the state of the financial war between the US, UK and EU on one side, collectively the West, and Russia on the other, we focus on how the invasion of Ukraine is evolving into open financial warfare.

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