Fiat currencies have been around for hundreds of years, leaving societies in chaos and destroying endless amounts of users’ wealth through inflation. Truly, it’s hard to imagine any money that has cumulatively had a more negative impact on humanity than fiat has.
It’s also hard to imagine that fiat currencies would have lasted so long if not for the efforts of governments and their cronies to force us to use them. After all, who would choose to use a money that allows others to literally steal from them if they didn’t have to? I know I wouldn’t, and I can imagine that many of you would agree.
I sincerely believe that fiat currencies are one of the worst types of money in history, so much so that today I’d like to share with you why I don’t believe fiat even qualifies to be considered money in the first place:
Fiat - A Misfit Among Monies
Money was created thousands of years ago to satisfy humanity's need for a better medium with which to transfer value across time and space. Barter systems, in which producers of goods and services simply traded their products directly with one another, were too inefficient and expensive to bring economies and societies into the future. Money has evolved quite a bit over the millennia, culminating with the creation of the world’s best money to date, Bitcoin.
Money serves a lot of roles in different markets. However, there are three primary functions that determine how well a particular money will perform and how desirable it will become:
Store of Value
Unit of Account
Medium of Exchange
Fiat fills each of those roles so poorly that it’s not hard to understand why fiat currencies would have been left in the trash heap of history if not for the zealous protection of their governments:
Store of Value
High quality money is able to maintain its value over time, which means users can hold onto that value until a later date when it is more needed than at present. Individuals and societies are thus able to wait to invest their money in resources and technologies that have a better chance of improving their standard of living.
Fiat currencies are provably terrible stores of value. It doesn’t take much research to learn that all fiat currencies through history imploded, losing every bit of their previously held value before being abandoned completely. The fiat currencies of today are well on their way to worthlessness:
Unit of Account
High quality money allows goods and services to easily be compared against one another, meaning that producers, purchasers, and observers are able track value across the entire economy.
Think about it — when you stand in an aisle full of eggs, price is one of the first things you assess in order to determine which eggs are of higher or lower quality. In other words, money gives us one of the most powerful ways to identify value, quality, and so much more.
As we just discussed, fiat currencies are terrible stores of value, with purchasing power that is perpetually on the decline. Fiat currencies can’t adequately communicate value through time and, as we’ll see in the next section, there are hundreds of fiat currencies competing with one another across societies. Both factors contribute to making fiat currencies terrible units of account.
Medium of Exchange
High quality money is something that appeals to large numbers of people, locally and around the world. If our money is widely accepted as a medium of exchange, then we can be highly confident in our ability to acquire the goods and services we need without much trouble.
Governments force their citizens to accept the local fiat currency through legal tender laws. But such enforcement only assures fiat’s acceptance as a medium of exchange locally. No surefire method exists for one government to force other governments and their citizens to accept the former’s fiat currency directly. It’s for that reason that fiat currencies have proliferated, currently numbering nearly two hundred.
Can fiat currencies really be considered good mediums of exchange when a forex transaction, and all its associated fees, is required every time you leave your country’s border? I think not.
Bitcoin, Not Fiat
Fiat currencies simply do a poor job at fulfilling the functions of money. With governments in charge of fiat, that reality is almost assuredly not going to change.
Is it any wonder then that people are abandoning fiat currencies for Bitcoin in droves?
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