FIAT money - could it really happen/ has it happened?

FIAT money - , is this the inevitable path toward becoming wall-paper money.

President Franklin Roosevelt in 1933 signed an order stopping banks to make gold payments. Roosevelt a month later ordered all citizens to surrender their gold — no person could hold more than $100 in gold coins, except for collector’s coins.

38 years later in 1971 Nixon cut all links with the dollar and the gold standard? Inflation went crazy.

2016 America has today FIAT - paper money, from Roman days this is paper money with no backing has in the past led to the collapse of the currency.

One would consider that the U.S. monetary and fiscal authorities would not be irresponsible and would have learned even from that of Weimar Germany. Maybe now in the end neither will be able to repay their IOU’s. The USA maybe could print 1 trillion dollar bills and hand them out, then what would happen?

What is the growth of the $ yearly? This currency has been the leading indicator of a currency on the brink. So what’s in the future for the dollar?

China has stopped buying U.S. Treasuries and instead is purchasing large quantities of gold, and people in Japan are buying gold. Perhaps Americans should too. The Chinese and Japanese characters for money and gold are the same.

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The $ has lost 95% of its value since 1914. Post the revaluation in 1934, the dollar dropped another 42%. Is this WRONG? Is the $ already on the way to wall-paper money? is this the inevitable path toward becoming wall paper money?


Jeff

 

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No.

 

The money in your pocket and in your bank accounts is only as good as the government that issued it.

Just ask someone that lived in 1933 Germany.

As for the US Dollar, folks had better hope it keeps its value in the World Economy since, anymore, that's all that really counts. It is, after all, no longer a National Economy but a World Economy that the US participates in.

And please, leave inflation out of the equation since it makes about as much sense as quoting "wind chill temperatures" instead of saying what the real temperature is.

IF folks really wanted the dollar to have as much buying power as it did back in 1914 then they better be prepared for only making $25 a week at their 60 hour a week job. If they even had a job. The more you make, the more you want and people need to understand that everybody cannot be a millionaire. If that were the case, bread would cost $10,000 a loaf.

 

This is the kind of stuff I see on Facebook.

 

You seemed to have skipped a few history classes. To start after the New Deal was signed the U.S. Saw one of the greatest periods of economic growth ever. Inflation is a naturally occurring thing that will happen in any society that uses a currency. But let's pretend we're in you paradise. There is not enough gold in the world to allow every dollar to be backed by it. Not to mention that the U.S. Would have to go through multiple revaluations each time the gold market shifted. What in the world is wall-paper money? Fiat money is just money that is backed by trust. If I trust the government and you trust the government then the U.S. Dollar has value. If you don't then you might want to think about moving because I don't know anyone who would accept 1/20th of a gram of gold for your coffee.

 

Can we see some references for that statement?

 

I would like to present the other side of the argument, that the New Deal did not in fact "end the Depression" as many people have been taught.

See article here, for example. While your graph is accurate, I do not believe that it tells the whole story. I.e., I do not believe that the GNP taken by itself is a valid indicator that the New Deal was instrumental in ushering in the economic growth that was to follow.

I am, of course, open to opposing views and constructive criticism. (Both of which can be found here, I'm sure!)

 

Gold/Silver is CASH, and in a proper note system, notes certify a real quantity of gold/silver. However, we don't have a proper note system, but a system where government promises are printed as fiat notes, and it is confidence in government's ability to redeem those promises that 'backs' those notes. In our pure-fiat system, nothing is considered "cash" but dotgov debt scrip, and the system is failing b/c the government has printed so many of these promises that confidence is failing in its ability to back those promissory notes with its taxation of future labor. The term "cash" has been deliberately corrupted in our economic system, to mean government promises printed on fiat. (The steps below treat gold/silver as the hard cash it is, and treat dotgov fiat as, well, NOT cash.) This definition is the first thing to get straight, and then the rest becomes clear.
SO, step 1, in a fiat system, don't acquire gold/silver unless your hands are strong enough to keep it. If you have to trade it back for a bunch of fiat, then all you have done is use your REAL cash savings to support the fake system a little longer, and someone savvy with strong hands (such as, oh, say, a guy from China) winds up exchanging a bunch of fake fiat for this hard cash. (Using it as cash for other investments such as land isn't a bad idea, BUT a pure fiat system necessarily undervalues cash, so do this ONLY if you are comfortable with overpaying for that land/other investment by a degree measured by how much fiat has been printed into the pricing system.)
Step 2, timing is everything. Wait until the fractional reserve fiat tumbles down from its own unsupported weight. (Again, if you sell your gold into a fiat economy, you are nothing but a trader and may as well be trading ETFs, since your REAL cash has just been swallowed up by the black hole of fake fiat.) Fiat currencies must be replaced by some degree of asset backing. So, your strong hands should not let go of your real cash savings until the bad currency (fake cash) falls to earth and is replaced with a proper asset-backed note currency system.
Step 3, when the asset-backed currency replaces the dotgov-fiat currency, THEN you allow your asset to be officially valued according to this system (that is, insofar as you have confidence in the government's ability to value it adequately). For some, that will mean using their cash (gold/silver) to buy other investments such as land, or art, or stocks, whatever. The cash is real, so you better be using it for real assets. For others, they may want to hang onto these same cash savings, either for retirement or medical emergency or capital expense someday, or just b/c they like banked savings. Some may still keep their gold/silver secret, if they lack confidence in government's ability to value it fairly and adhere to a fair valuation system. So its disposal in an asset-backed currency system is up to you, as the owner of your cash holdings.
Step 4, make sure you and yours, especially your kids, know the difference between cash and government debt promises. Make sure they know enough that the government does not get away with trying to tax your CASH SAVINGS, which of course, is your banked gold/silver.
Step 5, when the asset-backed currency falls back into government control and the government (inevitably) begins trying to dilute it back down to a pure fiat system, avoid letting their "schools" confuse your kids about the difference between real, hard money savings; and speculative investments of any kind; and the worst kind of currency, which is pure government promises printed on notes or issued by computer keystrokes, fake 'wealth' created by counterfeiters out of thin air and backed by nothing but confidence in government's future power to tax. There's a good reason that "full faith and credit" is known as a "confidence" game.

 

Excerpt from the WSJ:

"Every Democratic president from Truman to Obama has believed it, and each has used FDR's New Deal as a model for expanding the government. It's a myth. FDR did not get us out of the Great Depression—not during the 1930s, and only in a limited sense during World War II. Let's start with the New Deal."

Link

In fairness, here is an article that supports the claim that the New Deal ended the Great Depression. I do not agree with it, but here it is:

http://www.dailyfinance.com/2009/03...pression-history-says-deficit-spending-works/

 

All currencies are FIAT currencies. The metal does NOT monetize the currency, the currency monetizes the metal at a value declared by the government. That declaration is a government FIAT!

The currency of the United States is the dollar.

 

Thank you, gentlemen (all males to this point, I believe), for this respectful discussion. I'm no moderator, of course, just an old geezer who some days worries about fiat currency for me and me children & grandchildren, and other days believe that because there is NO metal-backed currency in the world today my worries about the future are groundless. I'm more open-minded now in my 60's than I was decades ago as young man and middle-aged man. I appreciate these kinds of discussions because I am exposed to a variety of opinions (and some facts thrown into the bargain), instead of personal attacks. CT is, in itself, a "valuable asset."

Steve

 

Sure there is, the question is how much gold would that be per dollar? A very small amount. And if you issue more dollars then the amount of gold per dollar gets even smaller.

 

There isn't enough metal to cover the money in circulation. Fiat is the only way to do it in today's huge economy, so any argument against is moot. Anyone aware of the reason for the Pittman Act understands you have to back the currency 1:1 if you're backing it at all.

 

Out of all the things to worry about in the world whether or not gold and silver are in coins is not one that should ever get on the list. Money is has been and always will be whatever humans say it is economics after all are nothing more than a made up human construct.

Metals do have their uses but the whole if it was in money we would have no problems is just pure nonsense just like all the nonsense that no one wants the dollar anymore.

 

A country that has a paper currency pegged to precious metals as its medium of exchange has imposed upon itself a discipline no modern state will accept, that is limiting its expenditures to its income. Whether it be the later Roman Empire creating a fiat copper coinage nominally worth far more than its bullion value, a Continental Congress flooding the economy with an increasingly worthless fiat currency, the Confederacy trying the same thing, the Weimar republic trying to liquidate its domestic debt from the Great War with million Mark notes and Notgeld, all such fiat currency schemes eventually run into the reality of the public growing skeptical of its money's worth. We cannot ultimately escape what we almost experienced in 2008 (it was a close thing) that is, the people realizing that purely paper assets may become as worthless as yesterday's newspaper.

 

Money has to have certain properties.

1. scarcity – You cannot create supply out of thin air unlike fiat which causes the boom and bust cycles in the economy

2. durability – gold/silver last almost forever which makes them a great store of value

3. fungible and divisible – they can be cut up into smaller denominations and minted into coins for trade

4. portable – Their store of value allows you to carry substantial amounts in your pocket

5. proven record– gold/silver have been money for over 6000 years of recorded history.

6. value of use – both gold/silver have tremendous value in commercial industry, but the highest value is in the role as money

 

No it doesn't money is a made up concept by humans. Weather is a natural force, conception is a physical process, those types of things have to have certain properties to occur. The only property money has to have is that people accept it as money

 

True, but when the state compels its citizens to accept its paper as having value, it no longer has a value other than keeping the state off your back. If you think this impossible take a look at what the state of Connecticut did in the mid 1780's. It printed and distributed an avalanche of paper notes and made them legal tender by state fiat. Naturally the more notes it printed and threw into circulation the more reluctant Rhode Islanders became to accept it. When merchants refused to accept it R.I. passed laws making it a CRIME not to accept its money in commerce. Debtors mercilessly pursued their creditors to pay off their debts with worthless money. Oh, by the way, the penalty for not accepting R.I. fiat currency was confiscation of the merchants' goods. This wrecked the R.I. economy and was probably the main reason why R.I. did not attend the Constitutional Convention of 1787 and only reluctantly ratified the new Constitution (which removed from the individual states the power to issue a paper currency)in 1790 and only after the US said it would treat R.I. as a foreign country if it did not ratify. Our whole monetary system is based on a house of cards, a willingness to accept the belief, some would say suspend reason, that paper is as valuable as tangible goods. And it is getting worse. Our "money" is rapidly being converted to digital bits with the ability of financial institutions (and government) to render it valueless with the press of a keystroke. Anyone who collects paper currency knows from the hundreds of varieties of obsolete notes, of collapsed currencies, of notes reneged on and repudiated by their issuing governments that putting faith in fiat currency is like putting faith in the promises of political leaders to keep their word (like debt ceilings). The possession of objects with tangible and useful elements, precious metals, precious stones, and some other, more controversial objects, render individuals independent of the state for their well being. The state hates this independence and will do whatever it needs to dispossess its citizens from these objects by making it seem foolish and "old fashioned" to want a currency based on anything but faith and credit. Fiat currency renders to the state an enormous reservoir of power. You think not? Those of you reading this post who are young enough will see it in your lifetime.