I now see the logic of fiat paper money

I used to be a big time gold bug but I have now seen the light.

I have to say I have changed my mind after reading this wikipedia article.  I can now see the superiority of fiat money.

http://en.wikipedia.org/wiki/Fiat_money

"Historically, money originated as commodity money, based on physical commodities such as cowrie shells, copper, gold, or silver, but fiat money is based solely on faith in the government issuing the money."

Faith in the government issuing the money has to be the best system, without a doubt.


"The term fiat money has been defined variously as:

• any money declared by a government to be legal tender.^[1]
• state-issued money which is neither legally convertible to any other thing, nor fixed in value in terms of any objective standard.^[2]
• money without intrinsic value.^[3]"

Money that is declared legal by a government, which is non-convertible nor fixed to any objective standard, and which has no intrinsic value, is unquestionably the best system.

Fiat paper money was first tried in China.  it was such a success that "By 1455, in an effort to rein in economic expansion and end hyperinflation, the new Ming Dynasty ended the use of paper money."  How could they screw up such a good system?

"An early form of fiat currency were "bills of credit."

Of course, Article 1, Section 10 of the Constitution said that no state shall "emit bills of credit, or make anything but gold and silver coin a tender in payment or debts." "Such bills of credit are declared to mean promissory notes or bills issued exclusively on the credit of the state, and for the payment of which the faith of the state only is pledged."  http://legal-dictionary.thefreedictionary.com/Bill+of+credit

How silly of the writers of the Constitution.  No bills of credit for creating debt and only using gold and silver?  How antiquarian is THAT idea?  No faith in the state?  Preposterous!

In the 18th and 19th centuries: "The repeated cycle of deflationary hard money, followed by inflationary paper money continued through much of the 18th and 19th centuries."

What system could be better than deflationary cycles followed by inflationary cycles?

"The Bretton Woods system pegged the value of the United States dollar to 1/35th of a troy ounce of gold. Other currencies were pegged to the U.S. dollar at fixed rates. The U.S. promised to redeem dollars in gold to other central banks. Trade imbalances were corrected by gold reserve exchanges or by loans from the International Monetary Fund. This system collapsed when the United States government ended the convertibility of the US dollar for gold in 1971, in what became known as the Nixon Shock."

Backing paper money with gold or silver always results in printing too much paper, causing the "responsible" government to default on their promises to redeem the paper.  This has happened EVERY SINGLE TIME in the history of fiat paper money.  What system could possibly be better than this?  A collapsed system is the best kind of system, unquestionably.  Not fulfilling promises is the main attribute of government, so fiat paper money is a perfect fit.  How foolish to back paper money with something of value!

"In monetary economics, fiat money is an intrinsically useless good used as a means of payment."

An outstanding, logical system that has no flaws.  I am now a believer.  I don't know what took me so long to see the logic of fiat paper money.  Nobody could come up with a more perfect system.  I now see that faith in the government is the most important thing I can possess.  I'm there, dude.