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Every Single Fiat Currency in History Has Failed. All For The Same Reason. Let That Sink In.

Fiat currency, a system by which a currency only retains its value by “fiat” or decree by a government, leaves a central bank free to create money from thin air, reducing the value of the currency already in circulation. [According to a study of 775 fiat currencies](https://www.dinardirham.com/the-rise-and-fall-of-fiat-currencies/), there is no historical precedence for a fiat currency that has succeeded in holding its value. Every single one of them has failed. And all for a single fundamental reason: Unsound monetary policy i.e. overprinting of the fiat currency to fund deficit spending. This is mind blowing to me.

The issuers of FIAT money always print more of it in order to try and solve other problems other than just being money. Whether it is printed for social welfare, to pay for wars to bail out banks or to manage markets, we are currently witnessing government issuers of paper money attempting to solve more of the world’s problems with printed money. This inevitably leads to its failure. It gets much more sinister though. Due to [the Cantillion Effect](https://mattstoller.substack.com/p/the-cantillon-effect-why-wall-street), that basically states whoever is closest to the money printer benefits the most from inflation, this is a way of transferring wealth from the general public to the wealthy elite. This is why we need crypto.

This is why Satoshi Nakamoto created Bitcoin. And this is why he included the message *“Chancellor on Brink of Second Bailout for Banks”.* Cryptocurrency solves this age-old problem of allowing the common plebs like us to have a mathematically verifiable technology to preserve our wealth over time.

tl;dr – Fiat currencies are the real shitcoins.

Edit – Here’s a quote by Thomas Jefferson on central banking and fiat currencies that I feel is relevant:

*”If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered…. I believe that banking institutions are more dangerous to our liberties than standing armies…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”*

**- Thomas Jefferson**



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13 Comments

  1. Well, that is kind of the point of fiat currencies. They aren’t supposed to keep their value. It is the entire reason why governments like them. They can easily be manipulated.

  2. And from the time that the fiat is created until it collapses … the average person has to suffer from the banks and wealthy getting first access to the newly printed fiat before devaluation sets in. Thank goodness for crypto!

  3. Fiat currencies aren’t meant to be *forever* solutions. The USD hasn’t been commodity backed since ~1961 but what it is *technically* backed by is global debt and the forex market, which doesn’t apply to almost all the fiats that have failed in the past.

    Even if it does *fail* sooner than expected, there’s no reason to think that cryptocurrency will just be the default solution. One can hope, though.

  4. I mean it should have been known for basic of personal finance that never store your value in the form of fiat unless you are not able to risk that money. Any financial advisor will never ever tell you to do that (not necessarily because they want to sell you something but there is truth on that).

    The thing is fiat is geared towards spending, and its “distribution policy”, is supposedly a “sweet spot” where people are still spending and yet they don’t lose too much on inflation. A country would not be prosper if everyone just hide their money under the bed. Take note this is an “ideal” case, first world country rarely have issues controlling inflation compared to say second or third world country like venezuela or turkey.

    It is not failure per se as we (especially those first world) are actually are rather in a prosperous time, even with corona.

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