Chapter 15: The Gradual Implosion of The Unbacked Fiat System

“Most of what people think is money is really credit, and credit appears out of thin air during good times and then disappears during bad times.”

-Ray Dalio

"Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.”

-Alan Greenspan

“A government that robs Peter to pay Paul can always count on the support of Paul.”

-William Gladstone

“The farther back you can look, the farther forward you can see.”

-Winston Churchill

The fiat system is the lifeblood of the modern economy. Almost every mode of exchange today occurs in currencies whose value ties directly to nation-states and their central bank policies. Fiat currencies interact with each other as vessels for the broader economies that they are part of, both inside and outside the borders of the nations who are responsible for issuing them.  

In this chapter, we will cover significant arguments for why the long-term health of economies using unbacked fiat currency are questionable, and how decentralized cryptocurrencies offer a means of retaining value in a future deleveraging cycle. In doing so, we will draw strictly from major economic thinkers, academic economists, and policymakers, all of whom are deeply experienced in and intertwined with the operation of the world’s current monetary system. 

This chapter goes far beyond covering broad philosophical issues like the Keynes/Hayek debate, which is an intellectual exchange over what governments should do. Instead, we’ll focus on the rational models put forward by actual banking and investment practitioners alongside thorough historical accounts that define what governments can do and will do. We do this to contribute to descriptive and predictive analysis, not just a normative debate over how things should be in an idealized world...

Buy book to read more.