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

Comparing failed regimes of small countries to the U.S. is comparing apples to oranges.

There are many great points being made in this thread and it's interesting to see the different perspectives on this topic. IMO, the U.S. Fiat currency is only as strong as people's belief in the strength of the country.

Recently, the Chinese RMB was awarded reserve currency status by the IMF. So who's countries leadership do you have more faith in, the U.S. form of government or the Chinese form of government? IMO, that will dictate where you "park" your money.

 

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So when the U.S. Dollar was backed by gold and silver, there was never any depressions?

No they don't. I have many junk silver coins that would beg to differ to this statement.

No it does not have to have some record. But even if it did, as many people pointed out, the Roman Empire used Fiat.

Why do they need this? The cotton sheets we carry in our pocket have no major use beyond being money. But it's still money.

I'm going to pick on you but it's only because you were the first person to really say it. At the end of the day, no matter how many of you say that fiat is worthless and silver and gold are the only way, still get a piece of paper from your boss that you take to the bank and get a bunch of pieces of cotton and use it to buy things. Until you can get over 50 percent of all the people who participate in the world economy along with most major banks and the world super powers that gold and silver is the way to go and you have a system that will work, we're using fiat.

 

So if our currency collapses, I'll use whatever people trust in its' place.

 

I may not have alot of book learning but even I was learnt in skool that a dollar is money.

 

Germany's paper currency, the system established in 1871 with the creation of the Second Reich under Bismarck lasted until just after WWI, The French franc of the Third Republic from its post Franco Prussian War establishment until the outbreak of WW II. Neither an insignificant country or period of time. US paper currency, except for very small emissions in the War of 1812 and the Mexican War, is a creation of the US Civil War and its original Greenbacks were a fiat currency which at one point in that war plummeted to about 40 cents on the gold dollar and did not reach par with the gold dollar until they were withdrawn from circulation after the war. The various other forms of early US paper, National bank Notes, Coin Notes, silver and gold certificate were convertible to specie on demand. After gold redemption was made illegal (within the US, not abroad) US paper could still be exchanged for silver bullion into the mid 1960's. So with the withdraw of all other notes, except for the federal reserve notes, our currency has been a fiat currency actually for less than 50 years. How does this compare in longevity with the Pre inflationary German mark or the WWII French Franc?

 

Sooo, which country could one move to receive their earnings in gold or silver today? That a person could go to a bank and write a check for payment in silver? If fiat is so bad and metals are so good, there must be at least one with enough sense to follow that dogma.

 

We'd have to loot a whole_bunch of medical equipment and computers to make it possible, as the majority of gold and silver are employed in industrial uses these days. Not to mention, of the rest, who's giving theirs up?

 

No modern state could tolerate a currency tied to a commodity like gold (or silver) because that would limit the amount of paper they could issue. A specie backed currency is limited to what specie reserves a country has. It imposes a discipline on the government that no government wants to adhere to. They much prefer a monetary system that allows them to spend whatever they want by legislating the increase and then creating the paper and now electronic and digital credits to pay for it.

 

The United States - http://leaderbank.com/PersonalBanking/PreciousMetals.aspx

And maybe India.

 

Again another terrible example for the point you are trying to make. Creating a massive world war has a tendency to destroy ones currency.

You still haven't been able to come up with an example that is comparable to the modern US because there isn't any. This is really the first time in history that the entire worlds economy has been dependent on one country. The USA is essentially the biggest buyer of everything that other countries export. China needs us buying their exports more than we need them to make it.

 

OR that is not based on a "fiat" currency?

Just One. That's all I want.

 

The first just offers what is already available from any bullion seller. Try to cash a check, even on their bank for $562.21 of silver. They will politely say, no, it has to be full ounces, so it is not based on the metal, still fiat exchange. India and China both once said they would, but never followed up on it, as the BRIC consortium crashed. Bank of China ripped off depositors who had gold accounts by saying it was in the documents the BOC could pay off in fiat if they desired, which they did with devalued yuan. Same with gold funds in US like GLD and SLV, it is in the documents they can pay off in fiat if they want if they don't have the metal. Same all over. There is no free golden lunch.

 

They really do discourage anyone actually trying to use it to acquire cheap metals as opposed to just playing the metal price. I believe they also have a minimum amount that prices pretty much everyone out you have to have before you could even request delivery.

 

So perhaps the right move is to convert one's own paper into specie, not gold "accounts" but actual specie, and then keep your mouth shut. By the way it is fascinating to see old contracts and bonds from before 1933 that stipulated that they were to be paid off or redeemed in gold. The US courts invalidated those financial instruments and permitted them to be paid off in devalued paper, not the gold the holders were "guaranteed". The advantage of "on demand" redemption in specie is that the bearer may cash in the paper for the bullion while he may. The only real guarantee of bullion possession is actual, physical bullion possession.

 

There is none, for the reason I wrote above. No modern state's government will submit itself to the discipline of limiting its spending ability by limiting its spending to its bullion reserves. Without that limitation they can create the funding for whatever they want to spend it on.

 

It is possible in Hong Kong and Shanghai, but last I heard it wasn't in mainland China except through the Bank of China accounts.

And that is what most who worry about fiat do.

Why should they? What good does bullion reserves do if there is no spending for infrastructure, defense, health, education, and other needs of the population?

Jim

 

So let's convert the US to a Gold Standard. First, we have to corner one-eighth of all gold ever mined in history to cover what we have in circulation....

 

Heck, we've had 'Federal Reserve Notes' since when? The thirties? That's a heck of a lot longer than the fifty years that Mr. McGonigal points out........oh dear, don't know why........something just came to mind. I associate many things with many things........

 

To which I say "Great!"

Once a fiat currency goes upside-down, try spending that bullion at the local 7/11. I'm sure they''' credit you for "ONE DOLLAR" as displayed on the Silver Eagles, "50 DOLLARS" as displayed on the Gold Eagles and then turn their noses up at the silver rounds which, technically, have no value associated with them.

Also, given the fact that most can't even count out the correct change without their registers, good luck to you bullion hoarders in getting accurate, non fee based (we charge 10% on all bullion transactions) bullion valuations for their fiat based products.

 

John Maynard Keynes.........