Today’s Fiat Dollar Standard is Built on Lies – OpEd – Eurasia Review

By Manuel Tacanho*

We live in an age of rampant inflation (monetary and price), more frequent economic crises, chronic deficit spending, unpayable debt and massive financial bubbles. It is not accidental. It is substantial.

This fact and the many economic, social and even cultural consequences of our fiat money system remain largely unknown to the majority of people. The US dollar became fiat currency by deception and not because of the merit of fiat currency or by free choice.

So much so that the economist Jacques Rueff entitled his book The Monetary Sin of the West (1971) in reference to the Bretton Woods gold exchange standard, which was not even a full-fledged fiat money system.

What is fiat currency? you can ask. It is basically an inconvertible or unsecured currency usually issued by the government/central bank. Fiat currency is a currency of unlimited supply.

Word decree comes from Latin and means “let it be done”, used in the sense of a government order and decree. Another key word here is inconvertible. Note that fiat emerged from paper money which is no longer exchangeable for silver and gold.

The US dollar, Euro and all national currencies are now fiat. So they can be easily and “endlessly” created, printed, if you prefer. On top of that, due to fractional reserve banking, commercial banks also create large amounts of money by lending it into existence – an artificial expansion of credit.

A brief recap

For context, let me briefly describe how the Bretton Woods gold trading system evolved into the global fiat dollar standard.

Bretton Woods is the name the Allied Nations, led by the United States, gave to the monetary system they devised to govern world trade after World War II because the conference was held in Bretton Woods, New Hampshire , in 1944.

Participating countries agreed that the US dollar would be backed by gold at a fixed exchange rate of $35 an ounce and that, in turn, other currencies would be pegged to the dollar. Hence the name “gold exchange standard” as opposed to the classic gold standard.

This is how the US dollar became the world’s reserve currency. On the promise of being the bridge, or link, between gold and all other currencies.

Note, however, that under this arrangement only governments and central banks could redeem (convert) paper money for gold. Neither citizens nor businesses were allowed to do so. Which is a big red flag.

Because governments are not particularly known for their honesty and fiscal discipline, over time and in order to keep funding their ever-increasing spending programs, the main ones being war and the expansion of the welfare state , the United States found itself printing more dollars than it could repay. with gold.

Noting this, a handful of European countries began to rightly doubt the ability of the United States to meet its gold convertibility commitment given the increasing creation of currencies (monetary inflation). This led some countries, France in particular, to start exchanging their paper dollars for gold. Other countries have followed suit.

As the pressure to redeem grew, the Nixon administration on August 15, 1971 unilaterally ended the convertibility of the dollar into gold – giving the dollar stability, reliability, and international acceptance. Nixon announced:

I have directed Secretary Connally to temporarily suspend the convertibility of the dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interests of monetary stability and in the best interests of the United States.

In more blunt terms, the US government defaulted and broke its promise to exchange gold for dollars. This is how we ended up with today’s global fiat currency system – the dollar standard.

Plus endemic monetary, financial and economic instability; tyranny; and the injustice that accompanies a fiat money system.

Vingt-et-un marked the fiftieth anniversary of this “temporary” suspension and therefore of the global system of fiat money. And despite the worsening socio-economic situation, given today’s mainstream economic thinking, it is difficult, if not inconceivable, to imagine that the United States would reestablish some kind of link between the dollar and the gold for the foreseeable future.

It should be noted that the “Crime of 71” was only the deathblow against a moral and sound currency and the last leg of the journey to fiat currency, which, in my opinion, began in 1913, with the creation of the current US central bank, the Federal Reserve System.

Today’s global fiat currency system, the dollar standard, was born out of government trickery and deception by selfish politicians serving special interest groups, who colluded to create a system of full fiat currency. For the benefit of the ruling elites and to the detriment of everyone else.

Now suppose that the American public in 1971 was well informed and aware of the insidiously destructive nature of fiat money. Would they have allowed their government to make the dollar a fiat currency?

The reality is that humanity lives under a fiat currency system. But as a healthy economy shows and as history proves, fiat money is an unreliable and fallible form of money that always ends up having an economically and socially destructive end.

*About the author: Manuel Tacanho is the founder of Afridom, a money-based digital banking startup for Europe and Africa. He is also an advocate for free markets and sound money for Africa’s economic development.

Source: This article was published by the MISES Institute

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