This is essential to understand since today’s worldwide unbacked paper, or “fiat,” money regime is an economically and socially destructive scheme – with far-reaching and seriously harmful consequences. There is an answer, though, and this lies in ending the money production monopoly of states.
The Problem of Fiat Money
The US dollar, the Chinese renminbi, the euro, the Japanese yen, the British pound, and the Swiss franc represent fiat money.
Fiat money has three characteristics:
- Fiat money is money monopolized by the state’s central bank. It is created by central banks and commercial banks licensed by the state.
- Fiat money is mostly produced through bank credit expansion; it is created out of thin air.
- Fiat money is dematerialized money, consisting of colorful paper tickets and bits and bytes on computer hard drives.
Fiat money is by no means “harmless.”
Fiat money is inflationary. Its buying power dwindles over time, and history has shown that this entropy is almost as irreversible as gravity. Fiat money makes a select few rich at the expense of many others. The first to get new money benefit to the detriment of those on the bottom rung.