The history of fiat money, to place it kindly, has been one of failure.
In fact, EVERY fiat currency since the Romans first started the practice in the first century has finished in depreciation and eventual collapse, of not only the currency, but of the economy that housed the fiat currency as well.
Why would it be different here in the U.S.? Well, in actuality, it hasn't been. In fact, in our small history, we've already had several failed attempts at using paper currency, and it is my opinion that today's dollars are no different than the continentals issued during the RevolutionaryWar. I will show you that fiat currencies have not been successful, and the only aspect of fiat currencies that have stood the test of time is the inability of political systems to prevent the depreciation and sullying of this toilet paper money by letting the printing presses run wild.
Example – to be aware of. Weimar Germany & Mark Post-World War I Weimar Germany was one of the greatest periods of hyperinflation that ever existed. The Treaty of Versailles was in effect a financial punishment placed on Germany to make reparations. The sums of money to be paid by Germany were enormous, and the only way it could make repayment was by running the printing press.
(Huge unpayable debt hmmnn that sounds familiar. I wonder what the solution in the U.S. will be.)
Inflation got so terrible in this period that German citizens were literally using stacks of marks to heat their furnaces. Here is a brief timeline of the marks per one U.S. dollar exchange rate: April 1919: 12 marks November 1921: 263 marks January 1923: 17,000 marks August 1923: 4.621 million marks October 1923: 25.26 billion marks December 1923: 4.2 trillion marks.
More Recent Times
In recent times, fiat failures have become more common occurrences.
In 1932, Argentina had the eighth largest economy in the world before its currency collapsed. In 1992, Finland, Italy, and Norway had currency shocks that spread through Europe.
In 1994, Mexico went through the infamous “Tequila Hangover,” which sent the peso tumbling and spread economic hardships right through Latin America.
In 1997, the Thai baht fell through the floor and the effects spread to Malaysia, the Philippines, Indonesia, Hong Kong, and South Korea.
The Russian ruble was not the currency you wanted your funds denominated in 1998, after its depreciation brought on economic recession.
In the early 21st century, we have seen the Turkish lira experience strokes of hyperinflation similar to that of the mark of Weimar Germany.
In present times, we have Zimbabwe, which was once considered the breadbasket of Africa and was one of the wealthiest countries on the continent. Now Mugabe’s attempts at price controls, combined with hyperinflation, have the nation unable to supply the most basic requisites such as bread and clean water.
Lessons to Be Learned
Here in the U.S., the lessons have not been learned. There are many consistencies from the above-mentioned tales that led up to the eventual collapse of the currencies.
The scary thing is that the U.S. has some of these above-mentioned characteristics, the ones that lead to toilet paper money becoming just that. More on that in just a second. I would first like to give a brief look at the U.S. attempts with paper money in our small history.
The first attempt with paper money came in 1690 with the issuance of Colonial notes. The first Colonial notes were issued in Massachusetts and were usable for gold, silver, corn, cattle and other commodities.
The other Colonies quickly jumped on the toilet paper money bandwagon and started issuing their own paper currencies. Like a broken record, the money quickly became overissued. The lessons of John Law and others were certainly not learned. It is not excellent enough just to say that a currency is backed by commodities. It really HAS to be backed by commodities. In effect, it was still a fiat money, and in a small period of time, Colonials became as excellent as toilet paper.
The next experiment came during the Revolutionary War. Huge surprise — the issuance of paper money was used to finance the war efforts. This time, the currency was called a continental.
The crash of the continental was spectacular, and the phrase “not worth a continental” was coined. This brought on a large distrust for paper currency, and until 1913, toilet paper money in the U.S. wasn’t used.
Enter the infamous Federal Reserve and its monopoly on money and interest rates. Now we have the greenback.
Although the money was “officially” backed by a gold standard until 1971, it wasn’t a right gold standard. When the regime found it inconvenient to have a gold standard, it just made it illegal for U.S. citizens to hold gold or exchange dollars for gold.
As reported on Strike-the-root.com:
“Under the infallible leadership of President Franklin Roosevelt, it was made illegal to own gold. On March 11, 1933, he issued an order forbidding banks to make gold payments. On April 5, Roosevelt ordered all citizens to surrender their gold — no person could hold more than $100 in gold coins, except for collector’s coins. He also made it unlawful to export gold for payment abroad, unless done through the Treasury. The penalty for defying Roosevelt was 10 years in prison and a $250,000 fine.”
But the official demise of the dollar was locked into place in 1971 when “Tough Dick” Nixon completely severed all ties between the dollar and the gold standard. During the decade that followed, the U.S. experienced some of the worst inflation in its history, only matched by today’s U.S. monetary and fiscal irresponsibility.
The U.S. of A. has all the characteristics set in place that have led to the collapse of every other fiat currency money in history.
We are currently at war, and the financing of this war is extremely inflationary. In fact, if you look back at our history, since 1914, the U.S has engaged in 16 military conflicts. We have been involved in some form of violent global accord in 44 of the past 93 years. The overwhelming majority of military conflicts result in monetary inflation.
The U.S. has a debt similar to that of Weimar Germany. All though the reasons for the debt are completely different, it appears that this Mount Everest of IOUs is going to be impracticable to pay back. I guess the U.S. could just print 10 trillion dollar bills and hand them out, but the implications of such actions are obvious.
We are currently rising the supply of dollars at a rate of 13% per annum. This over-issuance of a currency has been the leading indicator of a currency on the brink.
So what’s in the future for the dollar?
Some might say that the dollar has already failed. It has lost over 92% of its value since its initial issuance in 1913. After the revaluation in 1934, the dollar dropped another 41%. In my opinion, it already is toilet paper money, but for the above-mentioned characteristics, which are alarmingly similar to the circumstances that led up to the eventual collapse of the dollar’s toilet paper predecessors, I believe that we have seen only the tip of the iceberg of the dollar’s inevitable path toward becoming toilet paper money.