“What’s ridiculous is the notion that any and all fiat currencies will end up with any value other than totally, flat as a pancake worthless.”
Fiat currency does not have to be worthless if the issuing government is well run and people have confidence that it can live within its means. Remember that a fiat currency has one huge inherent value: you can pay your taxes with it. In the great scheme of things, the invention of pieces of paper that held the power to make gun-toting men from the government go away without stealing your stuff was a huge civilizational advance. As long as government continues to accept tax payments in its own currency and takes steps to match money supply growth to growth in real productivity, a fiat currency can be rock solid stable.
“Remember that a fiat currency has one huge inherent value: you can pay your taxes with it. In the great scheme of things, the invention of pieces of paper that held the power to make gun-toting men from the government go away without stealing your stuff was a huge civilizational advance”
This is so very, very wrong. Fiat currency exists, you must realize, so that the government can print money at will to cover its debts, the people all along being mostly totally unwise. At least in the olden days, when the men with the guns had to do it the hard way, everyone saw what was happening. Oh, yes, they covered it up by outsourcing to tax farmers or stealing from the other guys or clipping coins.
Still, most of their booty had to be taken honestly. That is, openly. Just like some portion of the whole is now taken honestly. But without the hidden part—the part taken through inflation—government would never, ever have grown to its current gargantuosity. Wouldn’t have slipped it by us.
“and takes steps to match money supply growth to growth in real productivity”
What a pathetic expectation. You know, back in the day, when an economy grew prices actually dropped, because the money supply stayed (roughly) the same. Which is possible, you know. The money supply does not have to expand, no matter what some people tell you. Anyway, people’s wages were stagnant, but they could buy more. Which was fun and made everyone happy.
But then the counterfeiters came to town, and they made everyone accept their funny money, and they stole real things from the people, which made prices go up, which made people able to buy less. But their wages went up. Eventually, after the counterfeiters already got their cut of the loot. Which helped. But the counterfeiters never stopped buying stuff with their funny money, which made things so confusing all the time that no one ever bothered to pause, go back, and wonder whatever happened to the time when prices didn’t always go up.
The inclination to manipulate the money supply via the production of fiat is simply too strong. We’re evidencing that now with the dollar having lost over 95% of its value since 1913 with the depreciation accelerating recently.
From roughly our founding to 1913 the dollar appreciated in value by nearly 11% when it was backed by gold and couldn’t be created out of thin air. The founders understood this danger very well and thus resisted the drive to establish a central bank and prohibited the states from issuing bills of credit although they could issue legal tender in the form of gold and silver.
I simply don’t trust anyone to control the supply of money. There needs to be an external restraint tied to the true wealth of the state. A group of guys meeting on a monthly basis doesn’t meet that requirement. They’ve gotten it wrong time and again leading to a series of rolling bubbles as this hot money seeks a home.
This has never happened in the history of the world, but I guess you can fantasize if you want to. The only time in our history that the currency held its value for the long run was when it was-- wait for it--- backed by gold.