Fiat Currencies

From Athens to Venezuela

Over 2,000 years ago the Athenians used gold and silver coins, with a common weight, as currency. This practice proved to be a major monetary advance, and its wide scale adoption helped propel Athens to all-star status in the ancient world.  The Athenians achieved many great milestones including, for example, the development of democracy, free markets and numerous architectural accomplishments.

Following 22 years of war with Sparta, Athens ran into financial difficulties ultimately causing its treasury to run dry.  In order to continue funding the war, the Athenians’ began debasing their currency by melting down gold and silver coins received via taxes, and recasting them with 50% copper.  For every 100 coins collected in tax, the government created 200 new coins to finance the war.  By 407 B.C., the value of the coins collapsed, along with Athens and the Athenian culture.

Similar stories replayed throughout history in places such as Rome, China, Germany, Italy, Greece and the United States (Continentals & Greenbacks).  According to the Hanke-Krus hyperinflation table, 56 countries experienced hyperinflation since 1918.  The six most extreme episodes resulted in DAILY inflation rates exceeding 15%.  Hungary claimed the number one spot with daily inflation rates of 207% in 1945. 

In present day Venezuela, inflation is expected to surpass 1.29 million percent in 2019.  Only hunger is increasing faster than inflation in Venezuela, as the productive capacity of the economy evaporated following one failed socialist policy after the next.  The Venezuelans have lost hope, as 91% of the population now live below the poverty line; ironically, in a country with substantial energy resources!

According to a study of 775 fiat currencies conducted by DollarDaze.org, the average life of a fiat currency, such as the dollar or Euro, is 27 years.  The British pound enjoys the longest-run as a viable fiat currency having been in use since 1694. Over the British pound’s life, however, it lost 99.5% of its value relative to silver. 

Following the rise and fall of thousands of fiat currencies, the data is in and the results are clear.  Centralized management of currencies inevitably produces disastrous results – for a country and its people.  Such historical data should serve as a warning sign for those fiat currencies currently in use. Indeed, national currencies overwhelmingly exhibit high rates of currency creation and are likely to join their predecessors in what will be a painful and difficult demise.

Many people across the globe have lost faith in government currencies and seek to reestablish individual sovereignty over their wealth, through scarce money alternatives, such as: Bitcoin (crypto), commodity backed tokens (DGX), Gold, Silver and other hard assets.  If successful, the roles of the individual and markets as the driving forces in society just might be restored.

Next article in the series – Financial Superpowers

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DISCLAIMER:

The information provided herein and any accompanying materials is for informational purposes only.  The information is of a general nature and does not address the circumstances of any particular individual or entity. You should not construe any such information or other material as legal, tax, investment, financial or other advice.  I am not a financial advisor and you should consult with an attorney or other professional to determine what may be best for your individual needs. 

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