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In today's digital age, online payment options have revolutionised the way we transact, gradually replacing the traditional flow of cash. Experts and researchers speculate that this evolution may ultimately lead to the collapse of fiat money, and a resurgence of precious metals like gold and silver in the mainstream money market. In this blog post, ill delve into the factors that contribute to the potential downfall of fiat currency and why gold and silver are considered as the frontrunners for future money.
Fiat money, unlike its predecessor backed by physical objects such as precious metals, holds no intrinsic value. Instead, it derives its status as "legal tender" from the government. As long on the sheeple keep faith in the government, its currency continues to be accepted as "money". I see a day when a shift will come and even now, feeling are dwindling and trust in governments are collapsing globally. Paper-based fiat money has gained widespread acceptance as a mode of payment, albeit lacking the ability to be converted into other forms of currency.
VALUE FOR VALUE
The concept of fiat currency traces its origins back to China, where the scarcity of metallic currency necessitated the introduction of paper-based fiat money to sustain trade and the economy. Subsequently, private notes supported by monetary reserves emerged as the first legal tender. This idea gradually spread westward during the 18th century, with American colonies issuing paper-based bills of credit to facilitate tax payments. Notably, fiat currency played a role in preserving the value of gold and silver during the Civil War.
While fiat money serves as a widely accepted medium of exchange, it possesses certain drawbacks that diminish its desirability. History provides us with numerous instances of fiat currency collapse in different countries, each with its unique reasons and consequences. Let's examine some of these examples to better comprehend the factors contributing to their downfall. People still believe that it wont happen to them! The term "too big to fail" is often batted around, but honestly, we tred a very fine line between balancing the books and keeping the currency flowing. Like a stack of dominoes, once one starts to topple, unless direct involvement is taking by central banks, complete countires can see the valuenof their currency wiped to zero....
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Venezuelan Bolivar: Since 2010, Venezuela has grappled with hyperinflation and severe shortages of food and basic supplies. In response, the US government ceased new debt dealings with the Venezuelan government in 2017, leading Venezuela's president to introduce the digital currency known as "the petro" for oil sales.
Argentinian Peso: Political and civil disturbances, coupled with record-low budgets and trade levels, plagued Argentina following the OPEC Oil embargo in the 1970s. In an attempt to combat recession, the government resorted to printing more money. However, a military coup further exacerbated inflation and pushed the Argentinian Peso into a 12% decline by 1982.
Turkish Lira: In 2018, the Turkish Lira experienced a severe depreciation against the US Dollar, largely attributed to the country's mounting debts to other nations.
Icelandic Króna: The Icelandic financial crisis, spanning from 2008 to 2011, unfolded as the country nationalised three major banks due to their default on a foreign debt of approximately $62 billion. This event shattered public trust in the banking system, ultimately leading to the devaluation of the Icelandic Króna.
These historical instances of currency collapse highlight the significant likelihood of fiat money experiencing a similar fate in the future. Factors such as pandemics, geopolitical tensions, the rise of digital currencies, and alternative payment options can all contribute to this outcome. Consequently, attention naturally turns to precious metals, gold and silver, as potential replacements. Here's why:
Gold and silver have a storied history as mediums of exchange in both Europe and Asia. Their reliability and suitability in facilitating trade of goods and services make them strong contenders for future money. Furthermore, their wide acceptance as a form of currency ensures their effectiveness in a changing financial landscape.
In the event of fiat money's collapse, the state theory of money crumbles, rendering governments unable to fulfill their obligations. This scenario prompts a search for a trustworthy replacement, and given the historical use of gold and silver as exchange mediums, these precious metals emerge as ideal substitutes for fiat currency. Additionally, gold and silver offer vast potential for monetary use. By converting fiat money into reliable gold-backed alternatives, the purchasing power of these precious metals becomes a decisive factor in determining their arbitrage. The available supply of gold readily satisfies the quantity required, ensuring stability in the monetary system. Unlike fiat currency, which often experiences fluctuations, the prices of gold and silver tend to remain relatively stable over the long term. This stability amplifies the purchasing power of gold and silver based money, instilling confidence in holders and promising an improved standard of living compared to the limitations of fiat currency.
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As the current landscape suggests an impending collapse of fiat money, gold and silver emerge as prime candidates to assume the role of future currency. Their rich history, wide acceptance, and stable prices position them as viable alternatives that can potentially reshape the monetary landscape and restore trust in the financial system.
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