Saturday, December 21, 2013

Historical Examples of the Flaws of Fiat Currency

“Paper money eventually returns to its intrinsic value — zero.” ~Voltaire

Fiat money, or paper money, has demonstrated this notion in Voltaire's quote throughout history. Even in the Roman Empire, the emperor Diocletian debased the Gold money supply, yet it was not "paper money". The results were devastating, as discussed in this article," Comparison: The Rise and Fall of the Roman Empire and the United States."

There are two more historical examples of how paper money has created chaos and conflict. The first example, is the use of paper currency in late 18th Century France, as Frank Hollenbeck discusses in his article, "Revolutionary France’s Road to Hyperinflation".

The second example of how inflation created chaos was during Germany during the late 19th and through the early 20th century. Dr.Thorsten Polleit provides an analysis of this monetary activity in his article, "90 Years Ago: The End of German Hyperinflation"

In all of these instances, what happened to the poor and middle class? While prices increased, wages did not. In short, the poor and middle class paid the cost of the State printing more paper currency. The state would increase the money supply to support its egregious spending efforts for war or other mercantilism style endeavors.

No comments: