Armstrong Economics Blog/Foreign Exchange Re-Posted Apr 2, 2023 by Martin Armstrong
QUESTION: Governments create their own sovereign fiat currency, to facilitate trade, among other reasons. So counterfeit is punishable, in some countries, by death, & at minimum, incarceration. Currency is supposed to be sacrosanct, created under the most exacting conditions. So what to do when your own gov’t engages in what is essentially officially endorsed counterfeit? I mean, the “money” has become almost meaningless, unless you’re on the receiving end. For non-insiders like me…buy PM.
HS
ANSWER: I have trouble with this misinformation always about the only money is gold and paper dollars are worthless fiats, which have rebuilt the world many times over since 1861 and the introduction of the paper dollar.
The propaganda of the goldbugs which has led so many to lose so much has been this nonsense that gold is the hedge against inflation. When the gold coin was money during the 19th century, it rose and fell in purchasing power no different than any paper currency. These people sell fiction like a used car salesman just to sell their product. It honestly does not matter what money is. It always is just a derivative of barter. I give you this for that. You will accept paper money because you know that others will accept it from you. A woman tried to spend a $20 gold coin at Walmart and they refused to accept it because they did not know what it was. She then took them to the back and exchanged them for $20 bills.
Try going to Starbucks and spending a $20 gold coin and asking for change. Unless the salesperson knows what it is, they will refuse.MONEY has always been nothing more than a belief system. That’s all!
FIAT simply means by arbitrary decree. Just because a currency is gold or even silver, does NOT make its value intrinsic. Governments have debased their coinage and reduced the weight declaring its value shall be whatever they say. I have written about how Japan did that and eventually, the people refused to accept Japanese coins and they stopped minting them for 600 years.
The Romans reduced the weight of their silver coinage from 6.5 grams to 4 grams and only because they defeated the Greeks, the Roman monetary system became standard.
During the American Revolution, people accepted the Continental Currency. Money has always simply been predicated upon what people will accept.
Gold has no value whatsoever unless the other person also believes it has value. Gold or silver has no value intrinsically any more than a paper dollar or a bag of rice unless there is an unspoken agreement among people that it is a valuable medium of exchange.
This is the truth. All else is propaganda. Money has been many things throughout thousands of years from seashells to cattle and even slave girls.
Saint Patrick in the 5th Century AD upon his arrival in Ireland, found that MONEY was expressed in human slave girls. He wrote in his Confession, “I think that I have given away to them no less than the price of fifteen humans.” This passage shows something very important. First, MONEY is not defined as the Medium of Exchange exclusively. It also serves the purpose of a Unit of Account. This becomes the true function of MONEY even more so than what it is. MONEY is a language of value.
FIAT is when the government dictates what something is and that will be Digital Central Bank Currency. But if everyone accepts it, then it becomes the medium of exchange.
Centinel2012 