The FIAT system
Most modern-day societies use a fiat system. It is this system which cryptocurrency pundits adamantly are speaking out against. The majority of us never heard or can’t remember the phrase “as good as gold”. But, there was a time when money was made from gold and silver. Once governments began printing paper money, these notes were considered to be as good as gold. But that was before governments transferred to a fiat system.
Printing money causes inflation
Since the Romans first debased their currency, every fiat currency struggled with devaluation and a great number of them eventually collapsed. Let’s speed up to Post World War 1 Weimar Germany. The war came with a huge price tag for Germany as financial punishment (Treaty of Versailles) for the war. Repayment had become an enormous burden for Germany. Eventually, all Germany could do to make its payments was by running the printing press, which led to a period of hyperinflation. Imagine that in December 1923, 4.2 trillion Marks would have bought you one US dollar.
Government’s debt – US
Does this sound familiar – unpayable debt and the burden of financing wars. The U.S. has borrowed, over $3 trillion for its wars in Afghanistan, Iraq, and Syria and that’s not including interest cost on the American Express Card, no pun intended, used to finance these wars.
You would think that current governments would learn from the mistakes of previous governments. That doesn’t seem to be the case, especially with the U.S. government. The idiom, as it has been said, “history repeats itself” has stood the test of time. Especially, when it comes to politicians making the same mistakes again.
Consequently, the United States national debt is now more than one full year of the entire nation’s collective economic output.
The United States national debt from 2010 to 2020 (in billion U.S. dollars)
Doesn’t sound alarming. Well, these figures do not take into account state and local debt, estimated at $3 trillion. Also, missing from the equation are unfunded obligations, such as Social Security, Medicare, and Medicaid. Who can blame them for not wanting to highlight these unfunded obligations! The 75-year future present value of these estimated liabilities stands today at $47.9 trillion dollars, largely exceeding the future net present value of incoming tax revenue to pay for these obligations.
Author Paul Hamilton
By no means is the loss of purchasing power limited to the U.S. dollar or massive debts a phenomenon of the U.S. government. There is further analysis including EU and Japan available in my book:
“Top Misconceptions of Cryptocurrency as a Payment System”
Which can be read on Amazon Kindle Unlimited for Free You can find more interesting articles by visiting us on one of the following platforms: AML Knowledge Centre (LinkedIn) or Anti-Bribery and Compliance at the Front-Lines (LinkedIn)