"No warning can save people determined to grow suddently rich" - Lord Overstone

  • 48 mins Why Are Governments Creating Their Own Cryptocurrencies?
  • 2 hours How Debt Cycles Impact Gold
  • 3 hours Investors Up the Ante In $1.5B Uber Loan Deal
  • 5 hours Are Gold Miners Poised For A Breakout?
  • 6 hours Is The "Crypto Winter“ Over?
  • 8 hours China Says It Doesn’t Fear Trade War
  • 24 hours Twitter CEO: The World Will Have A Single Currency
  • 1 day Asian Currency Correction Could Signal Looming Crisis
  • 1 day Best Buy Drops Telecom Giant Over National Security Threat
  • 1 day The Pros And Cons Of The Federal Interest Rate Hike
  • 1 day Good News For Gold Bulls Despite Interest Rate Hike
  • 1 day Trump Hits China With $50 Billion In Tariffs
  • 1 day Russian Gold Reserves Hit Record High Amid Rising Tensions With West
  • 1 day Stocks Pull Back Following Interest Rate Hike
  • 2 days Will Regulatory Rollbacks Make Banks 'Too Big To Fail?'
  • 2 days Elon Musk’s $2.6 Billion Tesla Challenge
  • 2 days Tech Giants Could Be First Victims Of U.S. Trade War
  • 2 days Dow Gains Despite Fed’s Rate Hike
  • 2 days The Biggest Threat To Chinese Oil Futures
  • 2 days Spending Bill Could Cause U.S. Debt To Soar To 99% Of GDP
Tesla Tumbles As Investors Lose Patience

Tesla Tumbles As Investors Lose Patience

As Tesla’s Model 3 looks…

Stocks Pull Back Following Interest Rate Hike

Stocks Pull Back Following Interest Rate Hike

Fed's interest rate hike drove…

John Rubino

John Rubino

John Rubino edits DollarCollapse.com and has authored or co-authored five books, including The Money Bubble: What To Do Before It Pops, Clean Money: Picking Winners…

More Info

What Comes After Paper Money, Part 1: Fiat's Obvious Failure

Business Insider just posted a Deutsche Bank chart that illustrates the difference between life under the Classical Gold Standard and today's "modern" forms of money. It's for the UK only but is a pretty good representation of the world in general:

10-Year Rolling Inflation in the UK, 1510-2014

For the first four hundred years depicted here, money was gold and silver -- the quantity of which rose at roughly the same rate as the human population. Price levels during that time fluctuated, but with just a couple of exceptions only slightly by today's standards, and they always reverted to the average of more-or-less zero. In other words, money held its value for not just years but centuries. It was a fixed aspect of the financial environment and was therefore not a tool of economic policy. Governments and individuals had to adapt to unchanging money rather than forcing money to adapt to political circumstances.

A phase change occurs in the 20th century when the US created the Federal Reserve and World Wars I and II placed survival above monetary stability for most of Europe and Asia. Violent swings in the value of money became the norm, and with the subsequent worldwide adoption of fiat currencies -- which governments can create at will -- volatility has soared.

Clearly, something bad has happened -- and just as clearly something really bad is coming. The question is what. Inflation and deflation both have their articulate proponents, many of whom (adding yet another layer of complexity) expect both but disagree on the order in which they'll occur. See here, here, here, and here. This is a fascinating debate, with huge implications for personal financial planning. We all have to choose a side with our investments, and the risks and potential rewards have never been higher.

The follow-on question is also fascinating: What do we use for money once fiat currencies inevitably fail? Will central banks adopt some version of Milton Friedman's computer that increases the supply of base money by a pre-set amount each year, removing the temptation to inflate? Will cyber-currencies like bitcoin turn out to be secure enough to gain worldwide acceptance, eliminating the need for underlying physical reserves? Is a high-tech gold standard possible, in which physical bullion backs an electronic currency that circulates in place of unbacked fiat currencies? Again, this is interesting in its own right but crucially important for everyone with money to invest. Stay tuned.


Back to homepage

Leave a comment

Leave a comment

Sign Up For The Safehaven Newsletter