0:06 - The Fate of Fiat Currency
1:50 - Lessons from History
4:11 - The Global Impact of Currency Failure
4:43 - The Cost of Worthlessness
This lecture explores the inherently fragile nature of fiat currencies, delving into the historical context and the implications of monetary systems throughout the ages. It begins with an examination of the average lifespan of fiat currencies, which stands at approximately 27 years, highlighting the cyclical nature of monetary failures every 30 to 40 years as noted by prominent monetary scholar Edwin Vieira. Referencing the pivotal moment in 1971 when President Nixon severed the dollar's link to gold, the discussion weaves through the narrative of how the world adopted the unbacked dollar as its reserve currency primarily due to convenience rather than intrinsic value.
The lecture raises critical questions about the future of the current monetary system, suggesting that its eventual collapse is inevitable. It speculates on potential replacements for the failing fiat system, drawing parallels to historical instances such as Germany's hyperinflation in the 1920s and the introduction of the Rentenmark. The speaker theorizes that the government might develop a new currency that loosely ties itself to a basket of commodities, though notes that practical challenges would prevent a direct conversion of traditional currency to tangible assets.
Throughout the lecture, the notion of volatility and financial instability is a recurring theme. The expectation of uncertainty is emphasized, particularly as the Federal Reserve grapples with the impending crisis of the fiat system. Chris Mack’s research adds depth to this discussion, revealing the unfortunate reality that no fiat currency has successfully maintained its value over time. Statistics cited show alarming rates of failure: hyperinflation, war, and monetary reform contributing to the demise of various currencies, alongside the sobering realization that the British pound, although historically the longest-standing fiat currency, has still lost an overwhelming 99.5% of its original value.
Moreover, the lecture scrutinizes the complacency surrounding the perceived stability of fiat currencies, illustrating through historical examples that no nation, regardless of size or economic stature, is immune to the consequences of currency mismanagement. The speaker recounts the visual narrative provided by BMG Bullion Bars, showcasing numerous currencies that have collapsed, a stark reminder of the tangible outcomes of fiscal irresponsibility. The commentary serves to underline the lack of discrimination in the fate of fiat currencies, emphasizing that the seductive appeal of unbacked money ultimately leads to their downfall.
As the lecture concludes, it reflects on the overarching theme of worthlessness that arises in the context of failing currencies, urging listeners to re-evaluate their understanding of monetary value within a system destined for collapse. The historical patterns outlined serve as both a warning and a call to action for individuals to consider the implications of relying on a monetary system marked by such a consistent trajectory of failure.
[0:00] The average life expectancy for a fiat currency is 27 years.
[0:06] Every 30 to 40 years, the reigning monetary system fails and has to be retooled. From Washington's blog. David Galland notes, Monetary scholar Edwin Vieira pointed out that every 30 to 40 years, the reigning monetary system fails and has to be retooled. The last time around for the U.S. Was in 1971, when Nixon cancelled the convertibility of dollars into gold. Remarkably, the world bought into the unbacked dollar as its reserve currency, but only because that was the path of least resistance. But here we are, 40 years later, and it is clear to anyone paying attention that the monetary system is irretrievably broken and will fail.
[0:48] What will replace it is still unclear, but I suspect that when this stuff really hits the fan and inflation rages, the government will try the approach taken by the Germans to end their hyperinflation back in the 1920s, coming up with the equivalent of the Rentenmark, a dollar that is loosely linked to some basket of commodities and financial instruments. It won't be convertible because it would be impossible for bank tellers to exchange your dollar for a cup of oil and a coupon off of a bond and a chip of gold or whatever makes up the basket, but it might restore some semblance of confidence in the currency. That's one option. Another is that some government decides to make its currency convertible into precious metals. But that will only happen when all other less fiscally restraining systems have been floated and failed. Simply at this point, we can't know what will replace the current monetary system or when. All we can know is that the status quo cannot, and so will not, survive this crisis.
[1:50] Regardless, between now and the point in time where the Fed throws in the towel on today's fiat monetary system, you would have to be naive in the extreme not to expect volatility, uncertainty, and wholesale financial dislocations.
[2:06] Chris Mack writes, According to a study of 775 fiat currencies by DollarDays.org, there is no historical precedence for a fiat currency that has succeeded in holding its value. 20% failed through hyperinflation, 21% were destroyed by war, 12% destroyed by independence, 24% were monetarily reformed, and 23% are still in circulation, approaching one of the other outcomes. The average life expectancy for a fiat currency is 27 years, with the shortest lifespan being one month. Founded in 1694, the British pound sterling is the oldest fiat currency in existence. At a ripe old age of 317 years, it must be considered a highly successful fiat currency. However, success is relative. The British pound was defined as 12 ounces of silver, so it's worth less than 1 200th, or 0.5% of its original value. In other words, But the most successful long-standing currency in existence has lost 99.5% of its value.
[3:22] Given the undeniable track record of currencies, it is clear that on a long enough timeline the survival rate of all fiat currencies drops to zero. And Jeff Clarke points out, History has a message for us – no fiat currency has lasted forever. eventually they all fail. BMG Bullion Bars recently published a poster featuring pictures of numerous currencies that have gone bust. Some got there quickly, while others took a century or more. Regardless of how long it took, though, the seductive temptations allowed under a fiat monetary system eventually caught up with these governments and their currencies went poof. You might suspect that this happened only to third-world countries. You'd be wrong.
[4:11] There was no discrimination as to the size or perceived stability of a nation's economy. If the leaders abused their currency, the country paid the price. As you look at the pictures here, you'll see some long-ago casualties. What's shocking, though, is how many have occurred in our lifetime. time. You might count how many currencies have failed since you've been born. So what's the one word for the thousand pictures you're seeing?
[4:44] Worthless.
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