Why Does Fiat Currency Always Die?
A lot of folks are asking when will the US dollar collapse.
The entirety of the history of fiat currency illustrates the fact that it has ended in devaluation and inevitable collapse. This is true of not only the currency, but of the economy that supported fiat money as well. The use of fiat currency in the U.S. is not any different. The fiat money definition spells out that fiat currency that supports a fiat economy will ultimately fail. The only question is when.
The US economy is very large and appears to be very strong so no one knows when the US dollar collapse will happen.
This article will demonstrate the fact that fiat currencies are unable to be sustained for long periods of time, and that the possibility of there being a U.S. dollar collapse sometime in the future is possible.
In order to understand this, one must first understand the fiat money definition. The term may be defined as a currency that a government has declared to be legal tender, though it is not backed up by a physical commodity. As a result of this lack of tangible value, the intrinsic value of fiat money is derived from the relationship of supply and demand, rather than the material that the fiat money is made of – such as gold, silver, or papyrus/fabric.
Since fiat money has no relation to physical reserves, it has a high risk of eventually becoming devalued and worthless as a result of economical inflation. If people cease to place value in a nation’s paper currency – such as the U.S. dollar bill – then the money will no longer hold any value. Many people consider modern paper currency to be a form of fiat currency and, as a result, are wondering is the dollar going to collapse.
Understanding how money works will create a greater understanding of why fiat currency is an issue. Furthermore, it will help you to answer your own concerns of whether or not the dollar is going to collapse.
A prime example of fiat money is the way in which cigarettes are often used as currency in prison. From a “big picture” standpoint, it’s fairly easy to understand how a cigarette-based currency system can be maintained: Cigarettes hold value and, as such, can be exchanged for goods and services. What many people don’t consider, though, is looking at it from a micro-perspective: The implication of the implementation of a fiat currency system.
In this example, currency is simply an agreed upon arrangement in which the item of currency is valuable. Any form of money – paper or cigarettes – are not valuable because of their material or intrinsic use, but because the government and users have agreed that it is currency.
We, as people, want to believe that things have intrinsic value, but value in a marketplace is determined by supply and demand. It makes people anxious to consider the fact that the U.S. dollar is not backed up by anything tangible, and neither is any currency system. It is all merely an agreement.
“Is the U.S. dollar going to collapse, and what does the future hold for fiat money?” This is a question that, as previously mentioned, many are wondering. Historically, when a nation’s debt exceeds its ability to repay even the accrued interest, the currency will collapse. The greater the level of debt, the more dramatic the inflation becomes. The more dramatic the inflation is, the greater the danger that hyperinflation will result. Governments have historically been unable to control hyperinflation so, if it does occur, it will happen quickly and bring down the entire economy with a loud crash.
A fiat currency system comes into existence as a result of excessive debt and the resulting hyperinflation. When the government is unable to repay all its debt in a physical form – gold or silver – then the idea arises to remove the physical backing. This is when the fiat money system is implemented and is one in which the value of money is based on confidence. However, once that confidence is gone, money becomes worthless. This is why gold has replaced every fiat currency every single time.
Older generations have shared their experiences of earning around $130 per month during their first job after college, the very high $30 they had to pay for life insurance per month, and the fact that a new car was $500. These were high sums at the time, but are considered jaw-droppingly cheap nowadays. This devaluation has taken decades to occur, but it can certainly speed up if the public’s confidence in the fiat money – including the US dollar – and the issuing government decreases.
Why would someone use tangible money for transactions when they can use intangible money instead? Over time, gold has moved from bureaucracies into private wallets, serving as a store of value and insurance against the failure of modern fiat currency. The U.S. dollar appears to be here for a while as recent statistics show that the future of the economy includes the U.S. dollar still being implemented.
We have strong empirical evidence to support the fact that every true fiat currency system – from cigarettes to beads and shells – has failed. The dollar currency system has not failed, and the modern fiat money system is far more strongly designed than the systems that came before it. It has a far greater amount of accumulated wealth to draw support from, and should continue to live for the long-term, as far as fiat money systems go.
In summation, historical evidence illustrates that fiat currency has ended in devaluation and collapse. The economy that supports fiat money crumbles down, and has proven to be a failed system of currency that does not adequately keeps up with a free market’s supply and demand relationship. The U.S. dollar, and the economy that supports it, will most likely continue to see a drop in value, but collapse is hard to determine.