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Posts Tagged ‘fiat currency’

Gold Bars

On liberty-themed radio shows and sites, one often hears the claim that fiat currencies don’t last long, and in some generous but inaccurate cases, that a fiat currency has never lasted more than a couple hundred years.

The English tally sticks were an example of a fiat currency that lasted more than 500 years. Before you say that it wasn’t a currency because it didn’t circulate widely, how is circulation between the citizens of England and the government not widespread circulation?

The gold double standard is this: pointing to examples of fiat currencies failing, and completely overlooking examples of failed gold standards. The argument is that it was government’s fault for historical instances of gold standards failing. Ah, but isn’t that the same blame foisted upon most fiat currencies as well?

One aspect of the gold double standard is the use of word association of fiat currency with fractional reserve banking. That is, the lending of more fiat currency than the fraction of reserves held. Where did fractional reserve banking originate? From goldsmiths, not fiat currency bankers.

One of the primary arguments against a fiat currency is that it is doomed to fail because governments will progressively issue more currency than is in productive demand, and that a gold standard is necessary to tie the government’s hands in limiting the increase in the money supply. But how did the gold standard prevent the Great Depression starting in 1929?

Some will argue that the gold standard in effect in 1929 only backed the currency by 35-40%, and that its failure resulted from less than 100% backing. However, with 100% backing, where does the money come to pay the compound interest demanded from bankers on their loans of gold?

An insidious consequence of a 100% gold reserve standard with compound interest is that those who own the gold will eventually control all the money supply.

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A "fiat" currency that lasted 500+ years

It is widely believed and often repeated that no “fiat” currency has lasted very long. By “fiat” currency, most are referring to currency issued with a dictated value without gold or silver backing, despite fiat simply meaning “let it be,” and doesn’t require or exclude backing by gold or silver. Most who disparage “fiat” currency fail to draw the distinction between interest-free currency and currency issued at interest by banks.

In his August 14, 2010 interview of Lew Rockwell, Al Korelin of The Korelin Economics Report said:

“No fiat currency has ever lasted more than a couple hundred years.”

The banksters don’t want you discovering historical examples of “fiat” currencies that have lasted more than a few hundred years, because they demonstrate that a middle-man who lends money out at interest is not only unnecessary, but a direct cause of booms and busts. Also, such examples impinge on their cyclical plan of presenting the gold standard as a false solution for a return to “stability” and “honest money,” after their debt-money system has inevitably reached its end in the current cycle.

From the United Kingdom’s National Archives we see the following description of  “thirteenth century tally sticks“:

“According to the Latin writing on them, several of the tallies were issued to Nicholas de Turevill. He was sheriff of the counties of Buckinghamshire and Bedfordshire between 1293 and 1296, during the reign of Edward I. One tally was a payment relating to royal forest in the counties. Another cleared some of his outstanding debts to the king.”

“Exchequer officials continued to use tallies until 1826, with very large tally sticks created to record huge sums of money.”

Here we have an official source describing one such example of a “fiat” currency that lasted more than a few hundred years — in this case, for over 500 years, from 1293 to 1825.

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