Saturday, February 28, 2009

Fiat Money Rant

I'm used to reading a lot of poor economics writing. I'm more used to it coming from the political left, however, there's a whole bunch of it coming from the far right of late. There's just one thing I want to say:

ALL CURRENCY IS FIAT CURRENCY.

Okay, I'm better now.

Money is a contract. Rather than simply bartering for goods, you sign a standard contract in the form of currency to be paid at a later date. A government then acts as the guarantor of the contract. The only difference between the "gold standard" and a "fiat" currency is that the gold standard specifies the liability precisely by fixing the price of a commodity, whereas the "fiat" currency allows all prices to float.

Without the guarantee of the government, however, there is no gold standard. The gold standard is a fiat currency like any other.

2 Comments:

Blogger Mark Herpel said...

Get rid of the dollar and bring back honest money or at least allow the states to use it. There are still 5 states with pending honest money legislation. We have devoted an entire issue to it this month on DGC Magazine

Mark

9:07 AM  
Blogger Octavo Dia said...

There is no honest money. Aside from barter, I have never read of any analysis of money which is both "honest" and useful as a currency.

9:22 PM  

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