fiat currency

description: currency established as money by government regulation or law

133 results

pages: 444 words: 151,136

Endless Money: The Moral Hazards of Socialism
by William Baker and Addison Wiggin
Published 2 Nov 2009

As a consequence, outside a few doomsayers, libertarians, and boldly curious economists or money managers, most observers in our time have little more than a theoretical conception of why a fiat currency system could come under stress, and whether the current crisis might be handled effectively or deepen to the point that the political demand for an alternative form of money 74 ENDLESS MONEY would emerge. U.S. fiscal policy will play a role, for the market’s perception of the credit worthiness of the U.S. government ultimately determines whether its fiat currency is sound. The world might be best served by a fiat currency whose growth is managed such that there is little or no inflation of credit. Milton Friedman suggested that the Fed might be replaced by a computer that would regulate the money supply, holding its growth to a low singledigit rate, originally 3 percent per year, in line with economic expansion.

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Probably most of those who read Rothbard’s musings when they were published well before the credit meltdown began in 2008 doubted that the fiat currency system could ever unravel to the extent that it did. All of us suffer from a recent past bias that makes us disbelieve great financial changes might occur. Chapter 3 recounted the monetary history of the United States, which clearly shows a pendulum-like tendency of swinging between hard money and fiat currency, but transitions can take decades. During times of fiat currency use, anyone who prophesied that a complete collapse would usher in hard money would have been dismissed by the experts of his time.

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However, it was a fulcrum between the old system and the new, one which began with the birth of our modern financial world and its governmental institutions. These may some day come to be regarded as structurally flawed and contributory to the present meltdown. America’s colonial history is imbued with the experience of fiat currency, and this invention has remained a powerful force in the nation and the world economy ever since. The term “fiat currency” applies to any money declared by government to be legal tender, particularly for the payment of taxes, but for this analysis one should exclude gold and silver coins, known as specie. Although technically the dollar only lost its backing with gold in 1971, other more subtle monetary constructs have made this linkage increasingly irrelevant for a century or more.

pages: 108 words: 27,451

Magic Internet Money: A Book About Bitcoin
by Jesse Berger
Published 14 Sep 2020

So, in an economy that is careless in its consideration of future consequences – where currency issuance is inexpensive, rising in spite of its ability to gauge value, and where debts can be incurred without regard to repayment – why should fiat currency be considered valuable? What promise does it hold? Practically and historically speaking, fiat money’s fundamental value proposition is suspect, and its promises are seemingly empty. US MONETARY POLICY: As the world reserve currency, the US dollar settles the majority of global trade, and its monetary policies could be considered a proxy for all fiat currencies. Since the Global Financial Crisis, supply has been increasing at an unpredictable rate, and interest rates have been flatlining.

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Unit of account: Fiat is moderately useful because it is easily divided, counted, and is commonly accepted, but its unstable and unpredictable monetary policies blunt the precision with which it can accurately measure value over time. Store of value: With no sound underlying basis, fiat currency has value due to little else besides the general expectation that it should be valuable. This value is at all times presumed and subject to change based on its unknown future policies. The authorities relied upon to uphold the integrity of fiat currencies and promote economic welfare regularly undermine the confidence markets are asked to place in them. The questionable agendas and outcomes of their policies cast a long shadow of doubt over the fundamental soundness of fiat money.

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In many respects, the economics and social payoffs of fiat leaves much to be desired of a monetary system, especially when compared to Bitcoin. Most fiat currencies in the world today have been around for several decades or, in some select cases, over a century. However, they all have failed ancestors dating back over a millennium. From the Jiaozi of the Chinese Song Dynasty in the 10th century to the Papiermark of the German Weimar Republic in the 20th century, time has never been kind to fiat money. Nonetheless, currencies today continue to be created at will and at no cost, mirroring the events that led to the demise of their predecessors. Today, the world’s fiat currencies are cumulatively valued at approximately $20 trillion USD.

pages: 247 words: 60,543

The Currency Cold War: Cash and Cryptography, Hash Rates and Hegemony
by David G. W. Birch
Published 14 Apr 2020

In the case of M-Pesa, this was the SIM card (which is actually the same thing) that GSMA has propelled into every phone in every pocket. Mondex was decentralized, M-Pesa was centralized; both were managed by a central authority, and in both cases the electronic value in the chips was issued against a 100% reserve in fiat currency held by the banking system.13 Swedish models The country where the transition from physical to digital fiat currency is likely to take hold first is Sweden. So, it is sensible to try to understand what the future of digital currency is, and whether digital currencies might fix any actual problems, by looking at what is happening with money there.

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Early local currency experiments have not gone that well, and the jury is still out on the main supranational fiat currency, the euro. Yet, looking around the world, I can confidently predict that change is in the air: it is no longer just local currency climate change activists or libertarian utopians who are lauding digitalization, but governments, businesses and banks too. The Bank of England’s 2019 review on ‘the future of finance’ said that the bank should monitor developments in the tokenization of fiat currency to make sure the regulatory, legal and infrastructure implications are understood, and monetary and financial stability are safeguarded.

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Currencies (aka currency boards, which we will discuss later), which are similar to asset-backed currencies, but in this case the assets backing the digital currency are fiat currencies only. There are mundane versions of these already: in Bulgaria, for example, the local currency (the Lev) is backed by a 100% reserve of euros. As regards the last category, this is effectively what is currently defined as e-money under the existing EU directives, and therefore it is already regulated. The cryptocoins backed by fiat currency, such as JPM Coin, simply provide a convenient way to transfer value around the internet without having to go through banking networks.

pages: 271 words: 52,814

Blockchain: Blueprint for a New Economy
by Melanie Swan
Published 22 Jan 2014

-M2M/IoT Bitcoin Payment Network to Enable the Machine Economy and consensus models, Blockchain AI: Consensus as the Mechanism to Foster “Friendly” AI-Blockchain Consensus Increases the Information Resolution of the Universe extensibility of, Extensibility of Blockchain Technology Concepts for facilitating big data predictive task automation, Blockchain Layer Could Facilitate Big Data’s Predictive Task Automation future applications, Blockchain AI: Consensus as the Mechanism to Foster “Friendly” AI-Blockchain Consensus Increases the Information Resolution of the Universe limitations of (see limitations) organizational capabilities, Blockchain Technology Is a New and Highly Effective Model for Organizing Activity tracking capabilities, Fundamental Economic Principles: Discovery, Value Attribution, and Exchange-Fundamental Economic Principles: Discovery, Value Attribution, and Exchange blockchain-recorded marriage, Decentralized Governance Services BlockCypher, Blockchain Development Platforms and APIs BOINC, DAOs and DACs bond deposit postings, Technical Challenges Brin, David, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel BTCjam, Financial Services business model challenges, Business Model Challenges Buttercoin, Financial Services Byrne, Patrick, Financial Services C Campus Cryptocurrency Network, Campuscoin Campuscoin, Campuscoin-Campuscoin censorship, Internet (see decentralized DNS system) Chain, Blockchain Development Platforms and APIs challenges (see see limitations) charity donations, Charity Donations and the Blockchain—Sean’s Outpost China, Relation to Fiat Currency ChromaWallet, Wallet Development Projects Chronobit, Virtual Notary, Bitnotar, and Chronobit Circle Internet Financial, eWallet Services and Personal Cryptosecurity Codius, Financial Services coin drops, Coin Drops as a Strategy for Public Adoption coin mixing, eWallet Services and Personal Cryptosecurity coin, defining, Terminology and Concepts, Currency, Token, 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Increases the Information Resolution of the Universe contagious disease relief, Global Public Health: Bitcoin for Contagious Disease Relief contracts, Blockchain 2.0: Contracts-The Blockchain as a Path to Artificial Intelligence (see also smart contracts) crowdfunding, Crowdfunding-Crowdfunding financial services, Financial Services-Financial Services marriage, Decentralized Governance Services prediction markets, Bitcoin Prediction Markets smart property, Smart Property-Smart Property wallet development projects, Wallet Development Projects copyright protection, Monegraph: Online Graphics Protection Counterparty, Blockchain 2.0 Protocol Projects, Counterparty Re-creates Ethereum’s Smart Contract Platform Counterparty currency (XCP), Currency, Token, Tokenizing Counterwallet, Wallet Development Projects crowdfunding, Crowdfunding-Crowdfunding cryptocurrencies benefits of, Currency, Token, Tokenizing cryptosecurity, eWallet Services and Personal Cryptosecurity eWallet services, eWallet Services and Personal Cryptosecurity mechanics of, How a Cryptocurrency Works-Merchant Acceptance of Bitcoin merchant acceptance, Merchant Acceptance of Bitcoin cryptosecurity challenges, eWallet Services and Personal Cryptosecurity cryptowallet, Blockchain Neutrality currency, Technology Stack: Blockchain, Protocol, Currency-Regulatory Status, Currency, Token, Tokenizing-Extensibility of Demurrage Concept and Features Campuscoin, Campuscoin-Campuscoin coin drops, Coin Drops as a Strategy for Public Adoption Communitycoin, Communitycoin: Hayek’s Private Currencies Vie for Attention-Communitycoin: Hayek’s Private Currencies Vie for Attention cryptocurrencies, How a Cryptocurrency Works-Merchant Acceptance of Bitcoin decentralizing, Communitycoin: Hayek’s Private Currencies Vie for Attention defining, Currency, Token, Tokenizing-Currency, Token, Tokenizing, Currency: New Meanings demurrage, Demurrage Currencies: Potentially Incitory and Redistributable-Extensibility of Demurrage Concept and Features double-spend problem, The Double-Spend and Byzantine Generals’ Computing Problems fiat currency, Relation to Fiat Currency-Relation to Fiat Currency monetary and nonmonetary, Currency Multiplicity: Monetary and Nonmonetary Currencies-Currency Multiplicity: Monetary and Nonmonetary Currencies new meanings, Currency: New Meanings technology stack, Technology Stack: Blockchain, Protocol, Currency-Technology Stack: Blockchain, Protocol, Currency currency mulitplicity, Currency Multiplicity: Monetary and Nonmonetary Currencies-Currency Multiplicity: Monetary and Nonmonetary Currencies D DAOs, DAOs and DACs-DAOs and DACs DAOs/DACs, DAOs and DACs-DAOs and DACs, Batched Notary Chains as a Class of Blockchain Infrastructure, Blockchain Government Dapps, Dapps-Dapps, Extensibility of Demurrage Concept and Features Dark Coin, eWallet Services and Personal Cryptosecurity dark pools, Technical Challenges Dark Wallet, eWallet Services and Personal Cryptosecurity DASs, DASs and Self-Bootstrapped Organizations DDP, Crowdfunding decentralization, Smart Contracts, Centralization-Decentralization Tension and Equilibrium decentralized applications (Dapps), Dapps-Dapps decentralized autonomous organization/corporation (DAO) (see DAOs/DACs) decentralized autonomous societies (DASs), DASs and Self-Bootstrapped Organizations decentralized autonomy, eWallet Services and Personal Cryptosecurity decentralized DNS, Namecoin: Decentralized Domain Name System-Decentralized DNS Functionality Beyond Free Speech: Digital Identity challenges of, Challenges and Other Decentralized DNS Services and digital identity, Decentralized DNS Functionality Beyond Free Speech: Digital Identity-Decentralized DNS Functionality Beyond Free Speech: Digital Identity DotP2P, Challenges and Other Decentralized DNS Services decentralized file storage, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation decentralized secure file serving, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation deeds, Decentralized Governance Services demurrage currencies, Demurrage Currencies: Potentially Incitory and Redistributable-Extensibility of Demurrage Concept and Features action-incitory features, Extensibility of Demurrage Concept and Features limitations of, Demurrage Currencies: Potentially Incitory and Redistributable digital art, Digital Art: Blockchain Attestation Services (Notary, Intellectual Property Protection)-Personal Thinking Blockchains (see also blockchain attestation services) hashing and timestamping, Hashing Plus Timestamping-Limitations online graphics protection, Monegraph: Online Graphics Protection digital cryptography, Ethereum: Turing-Complete Virtual Machine, Public/Private-Key Cryptography 101 digital divide, defining, Digital Divide of Bitcoin digital identity verification, Blockchain 2.0: Contracts, Smart Property, Wallet Development Projects, Digital Identity Verification-Digital Divide of Bitcoin, Limitations, Decentralized Governance Services, Liquid Democracy and Random-Sample Elections, Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy, Privacy Challenges for Personal Records dispute resolution, PrecedentCoin: Blockchain Dispute Resolution DIYweathermodeling, Community Supercomputing DNAnexus, Genomecoin, GenomicResearchcoin Dogecoin, Technology Stack: Blockchain, Protocol, Currency, Currency Multiplicity: Monetary and Nonmonetary Currencies, Scandals and Public Perception DotP2P, Challenges and Other Decentralized DNS Services double-spend problem, The Double-Spend and Byzantine Generals’ Computing Problems DriveShare, DAOs and DACs dynamic redistribution of currency (see demurrage currency) E education (see learning and literacy) Electronic Freedom Foundation (EFF), Distributed Censorship-Resistant Organizational Models EMR (electronic medical record) system, EMRs on the Blockchain: Personal Health Record Storage Ethereum, Crowdfunding, Blockchain 2.0 Protocol Projects, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation, Ethereum: Turing-Complete Virtual Machine-Counterparty Re-creates Ethereum’s Smart Contract Platform eWallet services, eWallet Services and Personal Cryptosecurity ExperimentalResultscoin, Blockchain Academic Publishing: Journalcoin F Fairlay, Bitcoin Prediction Markets fiat currency, Relation to Fiat Currency-Relation to Fiat Currency file serving, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation, Ethereum: Turing-Complete Virtual Machine file storage, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation financial services, Regulatory Status, Financial Services-Financial Services, Blockchain Technology Is a New and Highly Effective Model for Organizing Activity, Government Regulation Fitbit, Personal Thinking Blockchains, Blockchain Health Research Commons, Extensibility of Demurrage Concept and Features Florincoin, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel Folding@Home, DAOs and DACs, Blockchain Science: Gridcoin, Foldingcoin, Community Supercomputing franculates, Blockchain Government freedom of speech, Namecoin: Decentralized Domain Name System, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel (see also decentralized DNS system) Freicoin, Demurrage Currencies: Potentially Incitory and Redistributable fundraising (see crowdfunding) futarchy, Futarchy: Two-Step Democracy with Voting + Prediction Markets-Futarchy: Two-Step Democracy with Voting + Prediction Markets G GBIcoin, Demurrage Currencies: Potentially Incitory and Redistributable GBIs (Guaranteed Basic Income initiatives), Demurrage Currencies: Potentially Incitory and Redistributable Gems, Blockchain Development Platforms and APIs, Dapps Genecoin, Blockchain Genomics Genomecoin, Genomecoin, GenomicResearchcoin Genomic Data Commons, Genomecoin, GenomicResearchcoin genomic sequencing, Blockchain Genomics 2.0: Industrialized All-Human-Scale Sequencing Solution-Genomecoin, GenomicResearchcoin GenomicResearchcoin, Genomecoin, GenomicResearchcoin genomics, consumer, Blockchain Genomics-Genomecoin, GenomicResearchcoin Git, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation GitHub, Blockchain Academic Publishing: Journalcoin, Currency Multiplicity: Monetary and Nonmonetary Currencies global public health, Global Public Health: Bitcoin for Contagious Disease Relief GoCoin, Financial Services GoToLunchcoin, Terminology and Concepts governance, Blockchain Government-Societal Maturity Impact of Blockchain Governance decentralized services, Decentralized Governance Services-Decentralized Governance Services dispute resolution, PrecedentCoin: Blockchain Dispute Resolution futarchy, Futarchy: Two-Step Democracy with Voting + Prediction Markets-Futarchy: Two-Step Democracy with Voting + Prediction Markets Liquid Democracy system, Liquid Democracy and Random-Sample Elections-Liquid Democracy and Random-Sample Elections personalized governance services, Blockchain Government random-sample elections, Random-Sample Elections societal maturity impact of blockchain governance, Societal Maturity Impact of Blockchain Governance government regulation, Regulatory Status, Government Regulation-Government Regulation Gridcoin, Blockchain Science: Gridcoin, Foldingcoin-Blockchain Science: Gridcoin, Foldingcoin H hashing, Hashing Plus Timestamping-Limitations, Batched Notary Chains as a Class of Blockchain Infrastructure, Technical Challenges Hayek, Friedrich, Communitycoin: Hayek’s Private Currencies Vie for Attention, Demurrage Currencies: Potentially Incitory and Redistributable, Conclusion, The Blockchain Is an Information Technology health, Blockchain Health-Virus Bank, Seed Vault Backup as demurrage currency, Extensibility of Demurrage Concept and Features doctor vendor RFP services, Doctor Vendor RFP Services and Assurance Contracts health notary services, Blockchain Health Notary health research commons , Blockchain Health Research Commons health spending, Healthcoin healthcare decision making and advocacy, Liquid Democracy and Random-Sample Elections personal health record storage, EMRs on the Blockchain: Personal Health Record Storage virus bank and seed vault backup, Virus Bank, Seed Vault Backup Healthcoin, Healthcoin, Demurrage Currencies: Potentially Incitory and Redistributable I identity authentication, eWallet Services and Personal Cryptosecurity, Blockchain 2.0: Contracts, Smart Property, Smart Property, Wallet Development Projects, Digital Identity Verification-Digital Divide of Bitcoin, Limitations, Decentralized Governance Services, Liquid Democracy and Random-Sample Elections, Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy, Privacy Challenges for Personal Records Indiegogo, Crowdfunding, Dapps industry scandals, Scandals and Public Perception infrastructure needs and issues, Technical Challenges inheritance gifts, Smart Contracts intellectual property, Monegraph: Online Graphics Protection (see also digital art) Internet administration, Distributed Censorship-Resistant Organizational Models Internet Archive, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation, Personal Thinking Blockchains Internet censorship prevention (see Decentralized DNS system) Intuit Quickbooks, Merchant Acceptance of Bitcoin IP protection, Hashing Plus Timestamping IPFS project, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation J Johnston, David, Blockchain Technology Could Be Used in the Administration of All Quanta Journalcoin, Blockchain Academic Publishing: Journalcoin Judobaby, Crowdfunding justice applications for censorship-resistant organizational models, Distributed Censorship-Resistant Organizational Models-Distributed Censorship-Resistant Organizational Models digital art, Digital Art: Blockchain Attestation Services (Notary, Intellectual Property Protection)-Personal Thinking Blockchains (see also digital art, blockchain attestation services) digital identity verification, Blockchain 2.0: Contracts, Smart Property, Wallet Development Projects, Digital Identity Verification-Digital Divide of Bitcoin, Limitations, Decentralized Governance Services, Liquid Democracy and Random-Sample Elections, Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy, Privacy Challenges for Personal Records freedom of speech/anti-censorship, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel governance, Blockchain Government-Societal Maturity Impact of Blockchain Governance (see also governance) Namecoin, Namecoin: Decentralized Domain Name System-Decentralized DNS Functionality Beyond Free Speech: Digital Identity, Monegraph: Online Graphics Protection (see also decentralized DNS) K Kickstarter, Crowdfunding, Community Supercomputing Kipochi, Blockchain Neutrality, Global Public Health: Bitcoin for Contagious Disease Relief, Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy Koinify, Crowdfunding, Dapps Kraken, Financial Services L latency, Blockchain 2.0 Protocol Projects, Technical Challenges, Technical Challenges, Scandals and Public Perception LaZooz, Dapps, Campuscoin, Extensibility of Demurrage Concept and Features Learncoin, Learncoin learning and literacy, Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy-Learning Contract Exchanges learning contract exchanges, Learning Contract Exchanges Ledra Capital, Blockchain 2.0: Contracts, Ledra Capital Mega Master Blockchain List legal implications crowdfunding, Crowdfunding smart contracts, Smart Contracts lending, trustless, Smart Property Lighthouse, Crowdfunding limitations, Limitations-Overall: Decentralization Trends Likely to Persist business model challenges, Business Model Challenges government regulation, Government Regulation-Government Regulation personal records privacy challenges, Privacy Challenges for Personal Records scandals and public perception, Scandals and Public Perception-Scandals and Public Perception technical challenges, Technical Challenges-Technical Challenges Liquid Democracy system, Liquid Democracy and Random-Sample Elections-Liquid Democracy and Random-Sample Elections Litecoin, Technology Stack: Blockchain, Protocol, Currency, Technology Stack: Blockchain, Protocol, Currency, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel, Currency Multiplicity: Monetary and Nonmonetary Currencies, Technical Challenges literacy (see learning and literacy) LTBcoin, Wallet Development Projects, Currency, Token, Tokenizing M M2M/IoT infrastructure, M2M/IoT Bitcoin Payment Network to Enable the Machine Economy, Blockchain Development Platforms and APIs, Blockchain Academic Publishing: Journalcoin-The Blockchain Is Not for Every Situation, The Blockchain Is an Information Technology Maidsafe, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation, Technical Challenges Manna, Crowdfunding marriage, blockchain recorded, Decentralized Governance Services Mastercoin, Blockchain 2.0 Protocol Projects mechanics of cryptocurrencies, How a Cryptocurrency Works Medici, Financial Services mega master blockchain list, Ledra Capital Mega Master Blockchain List-Ledra Capital Mega Master Blockchain List Melotic, Crowdfunding, Wallet Development Projects merchant acceptance, Merchant Acceptance of Bitcoin merchant payment fees, Summary: Blockchain 1.0 in Practical Use messaging, Ethereum: Turing-Complete Virtual Machine, Dapps, Challenges and Other Decentralized DNS Services, Technical Challenges MetaDisk, DAOs and DACs mindfiles, Personal Thinking Blockchains MIT Bitcoin Project, Campuscoin Monegraph, Monegraph: Online Graphics Protection money (see currency) MOOCs (massive open online courses), Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy Moroz, Tatiana, Communitycoin: Hayek’s Private Currencies Vie for Attention multicurrency systems, Demurrage Currencies: Potentially Incitory and Redistributable N Nakamoto, Satoshi, Blockchain 2.0: Contracts, Blockchain 2.0: Contracts Namecoin, Namecoin: Decentralized Domain Name System-Decentralized DNS Functionality Beyond Free Speech: Digital Identity, Monegraph: Online Graphics Protection Nationcoin, Coin Drops as a Strategy for Public Adoption, Demurrage Currencies: Potentially Incitory and Redistributable notary chains, Batched Notary Chains as a Class of Blockchain Infrastructure notary services, Hashing Plus Timestamping, Blockchain Health Notary NSA surveillance, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel NXT, Technology Stack: Blockchain, Protocol, Currency, Blockchain 2.0 Protocol Projects O offline wallets, Technical Challenges OneName, Digital Identity Verification-Digital Identity Verification OneWallet, Wallet Development Projects online graphics protection, Monegraph: Online Graphics Protection-Monegraph: Online Graphics Protection Open Assets, Blockchain 2.0 Protocol Projects Open Transactions, Blockchain 2.0 Protocol Projects OpenBazaar, Dapps, Government Regulation Ostel, Freedom of Speech/Anti-Censorship Applications: Alexandria and Ostel P passports, Decentralized Governance Services PayPal, The Double-Spend and Byzantine Generals’ Computing Problems, Financial Services, Distributed Censorship-Resistant Organizational Models peer-to-peer lending, Financial Services Peercoin, Technology Stack: Blockchain, Protocol, Currency personal cryptosecurity, eWallet Services and Personal Cryptosecurity personal data rights, Blockchain Genomics personal mindfile blockchains, Personal Thinking Blockchains personal thinking chains, Personal Thinking Blockchains-Personal Thinking Blockchains physical asset keys, Blockchain 2.0: Contracts, Smart Property plagiarism detection/avoidance, Blockchain Academic Publishing: Journalcoin Precedent, PrecedentCoin: Blockchain Dispute Resolution, Terminology and Concepts prediction markets, Bitcoin Prediction Markets, DASs and Self-Bootstrapped Organizations, Decentralized Governance Services, Futarchy: Two-Step Democracy with Voting + Prediction Markets-Futarchy: Two-Step Democracy with Voting + Prediction Markets Predictious, Bitcoin Prediction Markets predictive task automation, Blockchain Layer Could Facilitate Big Data’s Predictive Task Automation privacy challenges, Privacy Challenges for Personal Records private key, eWallet Services and Personal Cryptosecurity Proof of Existence, Proof of Existence-Proof of Existence proof of stake, Blockchain 2.0 Protocol Projects, PrecedentCoin: Blockchain Dispute Resolution, Technical Challenges proof of work, PrecedentCoin: Blockchain Dispute Resolution, Technical Challenges-Technical Challenges property ownership, Smart Property property registration, Decentralized Governance Services public documents registries, Decentralized Governance Services public health, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation, Global Public Health: Bitcoin for Contagious Disease Relief public perception, Scandals and Public Perception-Scandals and Public Perception public/private key cryptography, Public/Private-Key Cryptography 101-Public/Private-Key Cryptography 101 publishing, academic, Blockchain Academic Publishing: Journalcoin-Blockchain Academic Publishing: Journalcoin pull technology, eWallet Services and Personal Cryptosecurity push technology, eWallet Services and Personal Cryptosecurity R random-sample elections, Random-Sample Elections Realcoin, Relation to Fiat Currency redistribution of currency (see demurrage currency) regulation, Government Regulation-Government Regulation regulatory status, Regulatory Status reputation vouching, Ethereum: Turing-Complete Virtual Machine Researchcoin, Blockchain Academic Publishing: Journalcoin REST APIs, Technical Challenges Ripple, Technology Stack: Blockchain, Protocol, Currency, Relation to Fiat Currency, Blockchain 2.0 Protocol Projects Ripple Labs, Financial Services Roadcoin, Blockchain Government S Saldo.mx, Blockchain Neutrality scandals, Scandals and Public Perception science, Blockchain Science: Gridcoin, Foldingcoin-Charity Donations and the Blockchain—Sean’s Outpost community supercomputing, Community Supercomputing global public health, Global Public Health: Bitcoin for Contagious Disease Relief Sean's Outpost, Charity Donations and the Blockchain—Sean’s Outpost secret messaging, Ethereum: Turing-Complete Virtual Machine security issues, Technical Challenges self-bootstrapped organizations, DASs and Self-Bootstrapped Organizations self-directing assets, Automatic Markets and Tradenets self-enforced code, Smart Property self-sufficiency, Smart Contracts SETI@home, Blockchain Science: Gridcoin, Foldingcoin, Community Supercomputing size and bandwidth, Technical Challenges smart contracts, Smart Contracts-Smart Contracts, Smart Contract Advocates on Behalf of Digital Intelligence automatic markets and tradenets, Automatic Markets and Tradenets Counterparty, Counterparty Re-creates Ethereum’s Smart Contract Platform DAOs/DACs, DAOs and DACs-DAOs and DACs Dapps, Dapps-Dapps DASs, DASs and Self-Bootstrapped Organizations Ethereum, Ethereum: Turing-Complete Virtual Machine increasingly autonomous, Dapps, DAOs, DACs, and DASs: Increasingly Autonomous Smart Contracts-Automatic Markets and Tradenets smart literacy contracts, Blockchain Learning: Bitcoin MOOCs and Smart Contract Literacy-Learning Contract Exchanges smart property, Smart Property-Smart Property, Monegraph: Online Graphics Protection smartwatch, Extensibility of Demurrage Concept and Features Snowden, Edward, Distributed Censorship-Resistant Organizational Models social contracts, Smart Contracts social network currencies, Currency Multiplicity: Monetary and Nonmonetary Currencies Stellar, Blockchain Development Platforms and APIs stock market, Financial Services Storj, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation, Dapps, Technical Challenges Stripe, Blockchain Development Platforms and APIs supercomputing, Community Supercomputing Svalbard Global Seed Vault, Virus Bank, Seed Vault Backup Swancoin, Smart Property swaps exchange, Financial Services Swarm, Crowdfunding, Dapps Swarm (Ethereum), Ethereum: Turing-Complete Virtual Machine Swarmops, Crowdfunding T Tatianacoin, Communitycoin: Hayek’s Private Currencies Vie for Attention technical challenges, Technical Challenges-Technical Challenges Tendermint, Technical Challenges Tera Exchange, Financial Services terminology, Terminology and Concepts-Terminology and Concepts 37Coins, Global Public Health: Bitcoin for Contagious Disease Relief throughput, Technical Challenges timestamping, Hashing Plus Timestamping-Limitations titling, Decentralized Governance Services tradenets, Automatic Markets and Tradenets transaction fees, Summary: Blockchain 1.0 in Practical Use Tribecoin, Coin Drops as a Strategy for Public Adoption trustless lending, Smart Property Truthcoin, Futarchy: Two-Step Democracy with Voting + Prediction Markets Turing completeness, Ethereum: Turing-Complete Virtual Machine Twister, Dapps Twitter, Monegraph: Online Graphics Protection U Uber, Government Regulation unbanked/underbanked markets, Blockchain Neutrality usability issues, Technical Challenges V value chain composition, How a Cryptocurrency Works versioning issues, Technical Challenges Virtual Notary, Virtual Notary, Bitnotar, and Chronobit voting and prediction, Futarchy: Two-Step Democracy with Voting + Prediction Markets-Futarchy: Two-Step Democracy with Voting + Prediction Markets W wallet APIs, Blockchain Development Platforms and APIs wallet companies, Wallet Development Projects wallet software, How a Cryptocurrency Works wasted resources, Technical Challenges Wayback Machine, Blockchain Ecosystem: Decentralized Storage, Communication, and Computation Wedbush Securities, Financial Services Whatevercoin, Terminology and Concepts WikiLeaks, Distributed Censorship-Resistant Organizational Models Wikinomics, Community Supercomputing World Citizen project, Decentralized Governance Services X Xapo, eWallet Services and Personal Cryptosecurity Z Zennet Supercomputer, Community Supercomputing Zooko's Triangle, Decentralized DNS Functionality Beyond Free Speech: Digital Identity About the Author Melanie Swan is the Founder of the Institute for Blockchain Studies and a Contemporary Philosophy MA candidate at Kingston University London and Université Paris VIII.

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This claim is more applicable for cryptocurrencies, as we notice that although there is nothing backing Bitcoin like a gold standard, there is also nothing backing fiat currencies. What “backs” currency is the high adoption rate, being accepted by many people, the populace buying into the illusion of the concept of money. If more people were to accept the notion of cryptocurrencies and begin to use and trust them, they too could become as liquid as fiat currencies. Just as the term Bitcoin can be used in a threefold manner to denote the underlying blockchain ledger, the Bitcoin transaction protocol, and the Bitcoin cryptocurrency, the term currency is being employed similarly to mean different things.

pages: 661 words: 185,701

The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance
by Eswar S. Prasad
Published 27 Sep 2021

Tether describes itself as a “blockchain-enabled platform designed to facilitate the use of fiat currencies in a digital manner.… Tether currencies are not money, but are digital tokens formatted to work on blockchains.” Tether is supposedly backed by reserves of US dollars and designed to maintain a stable value at par with the US dollar (or, in its other incarnations, at par with other major currencies). Thus, this cryptocurrency’s price is permanently tethered to the fiat currency. Conceptually, the fiat currency on reserve gets transformed into a token that can be transacted on the platform, called Omni, used by this cryptocurrency.

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Fiat money now serves as a unit of account, a medium of exchange, and a store of value. The advent of various forms of digital currencies, and the technology behind them, has made it possible to parcel out these functions of money and has created direct competition for fiat currencies in some dimensions. Some of these changes could affect the very nature of money—how it is created, what forms it takes, and what roles it plays in the economy. Such challenges to fiat currencies might be more imminent than previously thought, particularly in developing economies. Given the easy access that many developing-country households have to global social media platforms—in some of these countries, Facebook is synonymous with the internet—and the enormous financial and commercial clout that such corporations wield, cryptocurrencies such as Diem could reduce domestic demand for government-backed fiat currencies, both as mediums of exchange and stores of value.

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The absolute cap on the total number of bitcoins has an important implication for enthusiasts who view this cryptocurrency as a viable alternative to fiat currencies such as the dollar. They see the limit as an attractive feature that ensures Bitcoin’s reliability as a store of value that is invulnerable to debasement through an increase in supply. The cap would have some negative implications, however, if Bitcoin enthusiasts’ dreams of its rivaling fiat currencies were to come true. The supply cap means that Bitcoin is intrinsically deflationary. Consider an economy that used only Bitcoin as a currency.

pages: 275 words: 84,980

Before Babylon, Beyond Bitcoin: From Money That We Understand to Money That Understands Us (Perspectives)
by David Birch
Published 14 Jun 2017

Let us imagine for a moment that this tortured analogy holds and that the invention of the shared ledger will, just as the steamship did, trigger one final round of innovation in the ‘legacy’ financial services infrastructure (push payments exchanging fiat currencies between accounts held at regulated financial institutions). Well, if Money 2.0 is going the way of the tea clipper, what will that Money 3.0 steamship look like? Many years ago my colleague Neil McEvoy and I argued in Wired magazine that while the new technologies for the medium of exchange were being deployed in a reactionary fashion to bring improvements to the current money system of national fiat currencies (i.e. the sailing ship effect, although we did not think of it in those terms at the time), they would in future drive such decentralization and be used to create non-fiat currencies (Birch and McEvoy 1996).

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At this point all the world’s national and supranational currencies became ‘pure manifestations of sovereignty conjured by governments’ (Steil 2007b), and the majority of these currencies were unwanted. That is, they are currencies that people may well use in the marketplace but they do not choose to hold them as a store of value. Governments can force their citizens and subjects to hold fiat currency by requiring its use for state transactions (e.g. tax) but they have no such control over foreigners. In a world in which people will only willingly hold a handful of fiat currencies (US dollars, sterling, euros, Swiss francs and so on) in lieu of gold, the mythology tying money to sovereignty is, as Steil says, ‘costly and sometimes dangerous’. He goes on to say: Monetary nationalism is simply incompatible with globalization.

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Part III The Future: Money That Understands Us The economics of the future are somewhat different. You see, money doesn’t exist in the twenty-fourth century. — Patrick Stewart (as Captain Jean-Luc Picard) in Star Trek: First Contact (1996) The future of money started back in 1971, and the mental model of money that we have now is out of date. We are in a world of fiat currencies and those fiat currencies are ‘pure manifestations of sovereignty conjured by governments’ (Steil 2007b) – or, as I said in the introduction, they are just bits. But there’s more going on than this dematerialization. We no longer need governments to create money, we no longer need banks to move money, and we no longer need cash to make money real.

pages: 457 words: 128,838

The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order
by Paul Vigna and Michael J. Casey
Published 27 Jan 2015

Once inside that in-house system, they can also make cheap, transparent, and instantaneous transfers within and across the accounts of other Bitreserve users anywhere in the world. As with Ripple, Bitreserve holdings expressed in these fiat currencies are, in effect, tradable IOUs rather than actual rights to dollars. But unlike Ripple, and like Realcoin, they are backed by reserves of real fiat currencies that are held by the company itself and whose balances are updated and published in real time. The advantage is that with Bitreserve’s server-centralized system backing up all that value, users get a guaranteed store of value denominated in their currency of choice.

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A Vital, If Unseen, Cog One scenario that Silicon Valley visionaries frequently articulate is that cryptocurrencies end up playing a vital role inside the infrastructure of our financial systems but in the background, with fiat currencies continuing as the economies’ main units of account and mediums of exchange. In that case, cryptocurrency protocols and blockchain-based systems for confirming transactions would replace the cumbersome payment system that’s currently run by banks, credit-card companies, payment processors, and foreign-exchange traders. Some of those intermediaries would disappear; others would simply use cryptocurrency technology for their own institution-to-institution transactions. Because of instantaneous conversion into fiat currencies after each transaction, the end-user consumers and businesses would go about their lives quoting prices and handing over money in the same currencies they’ve always used.

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It’s got parallels with the financial crisis, and the new sharing economy, and the California gold rush, and before it’s all over, we may have to endure an epic battle between a new high-tech world and the old low-tech world that could throw millions out of work, while creating an entirely new breed of millionaires. Are you ready to jump down the bitcoin rabbit hole? One FROM BABYLON TO BITCOIN The eye has never seen, nor the hand touched a dollar. —Alfred Mitchell Innes For any currency to be viable, be it a decentralized cryptocurrency issued by a computer program or a traditional “fiat” currency issued by a government, it must win the trust of the community using it. For cryptocurrency advocates, as we’ll learn in the chapters ahead, the whole point is to offer an alternative model for that trust. They tout a system of payments in which the payee no longer has to trust “third-party” institutions such as banks or governments to assure that the payer can deliver the agreed-upon funds.

pages: 416 words: 106,532

Cryptoassets: The Innovative Investor's Guide to Bitcoin and Beyond: The Innovative Investor's Guide to Bitcoin and Beyond
by Chris Burniske and Jack Tatar
Published 19 Oct 2017

Learning from bitcoin’s reliance on too few currencies and exchanges early in its young life, we can now follow the trading pair diversity of other cryptoassets, especially with regard to fiat currency pairs. Fiat currency pairs are particularly important for cryptoassets because they require significant integration with preexisting financial infrastructures. Due to high levels of required compliance, only a small number of cryptoasset exchanges offer the capability to accept fiat currency or connect to investors’ bank accounts. These exchanges, such as Bitstamp, GDAX, itBit, Gemini, Kraken, and a few others, are hesitant to provide access to all cryptoassets, as they do not want to encourage trading in those that are not reputable.

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Ethereum’s ether provides a study on how exchanges adding a cryptoasset can increase the diversity of the trading pairs used to buy the asset. If our hypothesis on the importance of fiat currencies in cryptoasset trading holds, then as an asset grows in maturity and legitimacy, it should have more diversity in its trading pairs, with particularly strong growth in fiat currencies being used to buy the asset. That has certainly been the case with ether. In Figure 9.5 we can see that over the course of 2016 the diversity in trading pairs used to buy it has grown significantly. The dollar has shown particular strength, and overall fiat currencies have increased from less than 10 percent of ether’s trading volume in the spring of 2016 to nearly 50 percent in the spring of 2017.

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Volume aggregators like CoinMarketCap also give insight into which exchanges support which currencies.17 Another good proxy for the increased acceptance of a cryptoasset and its growing offering by highly regulated exchanges is the amount of fiat currency used to purchase it. As also mentioned in Chapter 9, in the early days of a cryptoasset listing, the majority of the volume often goes through bitcoin, meaning that buys and sells are done in bitcoin, not dollars or euros. As cryptoassets grow in diversity, so too do their trading pairs with fiat currencies, as shown with Ethereum’s ether in Figure 13.14. Figure 13.14 Ether’s growing currency pair diversity Data sourced from CryptoCompare In the one-year period from March 2016 to March 2017, ether went from being traded 12 percent of the time with fiat currency to 50 percent of the time.

pages: 296 words: 86,610

The Bitcoin Guidebook: How to Obtain, Invest, and Spend the World's First Decentralized Cryptocurrency
by Ian Demartino
Published 2 Feb 2016

Uphold (previously known as Bitreserve), BitGold, and several other services allow users to invest and hold precious metals or even other fiat currencies. In the case of Uphold, 27 different fiat currencies and precious metals are supported in addition to four digital currencies (Bitcoin, Litecoin, Ether, and Uphold’s own Voxelus). Uphold opens up investment opportunities that would otherwise be unavailable to the average consumer without enough disposable income to make a large initial investment and deal with significant fees. Uphold has recently removed fees for all verified customers—those who prove their identity by uploading personal documents—for fiat currency conversion. The two services described above allow the quick transfer between precious materials or fiat and Bitcoin.

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With enough diversification, BTCJam loans should pay out overall—assuming you aren’t only investing in risky loans. Most loans on BTCJam are pegged either to US dollars or the fiat currency of the borrower. This is to protect the borrower and lender from Bitcoin’s sometimes massive price swings. Although loans are made and paid back using Bitcoin, the amount of Bitcoin required for the loan and the repayment will generally be based on the exchange rate of the fiat currency the borrower chose. This system allows the lender to maintain a somewhat reliable revenue stream—assuming proper research is conducted—and hedge against the fluctuations in Bitcoin price while keeping money “active.”

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It’s not as if there are plenty of people looking to sell hundreds of thousands of dollars worth of Bitcoin for cash. To find a whale like that you would need to go online and going online creates records. Potentially, a Bitcoin-run world would be more difficult for big-time money launderers. If a currency such as Bitcoin ever replaces or significantly supplements traditional fiat currencies, it would only make sense that public companies would keep their public spending on the blockchain public. Given the choice, would you invest in a company that keeps all of its finances public or one that puts its money through a mixing service and hides its transactions from the public and its stockholders?

pages: 87 words: 25,823

The Politics of Bitcoin: Software as Right-Wing Extremism
by David Golumbia
Published 25 Sep 2016

According to these standard usages, Bitcoin could only be fiat money; Schroeder (2015, 1n2) writes that Bitcoin “can be considered a fiat currency in that it also has no underlying asset.” Yet because of the appeal of currencies with intrinsic value to the right wing, one of the most frequent objects of Bitcoin discourse has been either to redefine “fiat” so as to exclude Bitcoin (see, e.g., both Kelly 2015; and Cox 2013 for this sort of ad-hoc redefinition), or to redefine “intrinsic value” so that some aspect of the Bitcoin software system (e.g., the energy put into mining, or the “trust” put into the system by its users) can qualify. The supposed problem with fiat currency, which happens to be a favored talking point of conspiratorial libertarians like Ron Paul and Rand Paul (Shoff 2012), is that it interferes with the store of value function of money.

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Yet even Nakamoto himself, in one of the first announcements that the Bitcoin system was actually running, rested his justification for the creation of the system on the extremist story about inflation and central banks: “The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve” (Nakamoto 2009). Ironically, Nakamoto seems not to have realized that his belief that Bitcoin would be immune to “debasement” was based on a flawed monetarist definition of inflation, or that Bitcoin itself could fuel credit bubbles and fractional reserve banking.

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Bitcoin advocates make repeated reference to the superiority of gold-backed money, despite the fact that governments fixed even the price of gold at many moments in history to tame volatility, and in the face of current stories about gold and silver prices being part of the Libor price-fixing scandal.[3] This preference for gold versus what they somewhat inaccurately call the “fiat currency” of nation-states only shows the ideological nature of their assertions, since gold exists right now, is widely traded and can be untraceable, largely resistant to counterfeiting, and yet is widely used (though not as a currency peg) by the very nation-states and central banks that Bitcoin advocates say they are in the process of dismantling.

pages: 492 words: 118,882

The Blockchain Alternative: Rethinking Macroeconomic Policy and Economic Theory
by Kariappa Bheemaiah
Published 26 Feb 2017

As the century rolled on it was this form of money that evolved into fiat money, which is currently used by modern economies. Fiat currencies came into use in 1971 following the decision of President Nixon to discontinue the use of the gold standard. The end of the gold standard helped sever the ties between world currencies and real commodities and gave rise to the floating exchange rate. A distinguishing feature between commodity-backed currencies and fiat currencies, however, is the fact that it is based on trust and not a tangible value per se. Fiat currency is backed by a central or governmental authority and functions in purpose as a legal tender that it will be accepted by other people in exchange for goods and services.

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But, nevertheless, there are advantages and possibilites that can be achieved which are not possible today, or can only be possible with increased regulation, oversight, and government cost. To ascertain if moving to a cashless sytem is a move that needs to be contemplated and how cashless do we need to be, let us review what could be the consequances of moving to a monetary system based on government-issued fiat currency on a Blockchain. Fiat currency on a Blockchain If central banks were to have complete control of money creation instead of the private sector, they would be in the position of providing individuals and companies with official digital money (as they already offer cash and coins) instead of deposits with commercial banks.

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But currencies such as Ethereum and Bitcoin are not commodity monies. They can be considered as privately issued fiat currencies which are fiduciary in nature, i.e., they are not commodity-backed and cannot be redeemed for any other asset. Although these currencies are effective ways to transfer value on a decentralized network, from an economic perspective, their ability to fulfil all three functions of money14 has been questioned due to their differences in comparison to a regular fiat currency. These include: Volatility : The price swings of currencies like Bitcoin has been a subject of constant debate and had led analysts to comment that the currency will never be a good store of value since it is subject to large price swings.

The Future of Money
by Bernard Lietaer
Published 28 Apr 2013

It is also complementary because most participants use the normal national currency and a complementary currency in parallel. It is often the case that a single transaction includes partial payments in both currencies at the same time. Another useful differentiation is the one between fiat money and mutual credit currencies. A fiat currency, as we saw earlier (Chapter 2), is a currency which is created out of nothing by an authority. For instance, all our national currencies (including the euro) are fiat currencies. In contrast, mutuP1 credit currencies are created by the participants themselves in a transaction as a simultaneous debit and credit. A more detailed description on how such currencies operate will be provided hereafter in the case of LETS or Time Dollars, both mutual credit currencies.

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As of 1997, there were 39 HOURS systems operational in the world. Bottom line: it is a successful model with very low start-up costs, and it works. However, it has one drawback common to all fiat currencies: Ithaca HOURS require someone to decide centrally how much currency to issue. While this is done in a democratic way by the 'Ithaca Reserve Board', all i central bankers will confirm that managing a fiat currency supply remains a tricky decision. The biggest risk is that if more currency is issued than people want to use, there will be inflation and devaluation of the complementary currency. This will not happen as long as Ithaca HOUR managers follow Paul Glover's and his colleagues' lead in remaining wisely conservative in their money supply decisions.

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AU economists would immediately understand why such a process would create employment, but also (erroneously) conclude that complementary currencies would automatically add to inflationary pressures on the economy as a whole. This reasoning would be valid if and only if the complementary currencies were all fiat currencies as are the dollar, the euro or any other national currencies of today. There is indeed one type of complementary currency (the Ithaca HOUR described in Chapter 6) which is such a fiat currency, and which could pose such a risk if its use became widespread. However, it will be shown that other designs, including all mutual credit systems (e.g. LETS, Time Dollars) do not contribute to inflationary pressures.

pages: 434 words: 77,974

Mastering Blockchain: Unlocking the Power of Cryptocurrencies and Smart Contracts
by Lorne Lantz and Daniel Cawrey
Published 8 Dec 2020

However, with a DEX, anyone can use the exchange without sharing any identity information. The only information shared is a cryptocurrency address. The advantage is that anyone with cryptocurrency can use the DEX without asking permission. The disadvantage is that DEXes only allow for the trading of cryptocurrencies, and do not support fiat currencies like USD or EUR. This is because all fiat currencies are tied to the traditional banking system, which uses all central authorities like banks and financial institutions. Scalability A centralized exchange can run its infrastructure on well-established technology that can easily perform millions of operations per second.

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However, this example of exchange slippage shows how small cryptocurrency order books typically are. They operate on a much different scale than mature markets; large platforms like the NYSE and the NASDAQ can easily fill orders of this size. Note Miners must convert their block rewards and transaction fees gained into fiat currency to pay for overhead, so mining impacts market data. This overhead may include mining equipment, energy costs, and data center operations, among other things, creating constant selling pressure. However, most miners use OTC providers to sell cryptocurrency, and OTC has less of an impact on cryptocurrency slippage as there is not a transparent order book.

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Cryptocurrency Market Structure As a whole, the cryptocurrency market lacks the market depth, or the ability to absorb large orders, that is seen in traditional markets. There are several reasons for this. One is the relatively small number of traders compared to other markets. Another is that regulatory issues surrounding cryptocurrency make it difficult to trade against fiat currencies. Arbitrage As mentioned previously, arbitrage is the act of purchasing an asset in one market at one price and selling the same asset in another market at a higher price, thus exploiting the difference in prices between markets. This is a common occurrence in cryptocurrency trading. Arbitrageurs serve an important purpose in the trading community.

pages: 328 words: 96,678

MegaThreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them
by Nouriel Roubini
Published 17 Oct 2022

This looks like a trigger for spiraling liabilities. Central bank mission creep and instrument creep are fueling asset and credit bubbles. Busts and crashes will go together with debasement of fiat currencies as inflation surges ahead. The role of the US dollar as the major global reserve currency faces growing challenges coming from China and Russia. The world’s third major currency, the euro, careens on instability if not collapse in a splintering European Monetary Union. As fiat currencies ebb, the current meteoric rise of crypto alternatives threatens to replace them with speculative Ponzi schemes, with severely unstable systemic effects.

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Meanwhile, political leaders are busy campaigning on nationalist themes: closing borders, imposing tariffs, spurning international affairs in order to put America first, or Russia first, or wherever-they-happen-to-live first. Expect chaos and financial instability as fiat currencies get debased, the EMU may eventually implode, the role of the US dollar as the key global reserve currency is challenged, and no clear alternative appears to fiat currencies and the dollar, as cryptocurrencies are neither currencies nor assets. This is a recipe for monetary system chaos and financial instability. This chapter looked at financial technology threats that cross borders with ease.

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Now the Russian invasion of Ukraine has led to a further mission creep of central banks that—with financial sanctions—are expected to support the national security goals of the United States and Western nations: weaponizing the US dollar, freezing most of the foreign reserves of the Russian central bank that are in part kept in central banks and financial institutions of the West, restricting the use of the SWIFT system of international payments. This sort of weaponizing of currencies for the pursuit of national security goals is the latest frontier of the mission creep of central banks, starting with the Fed. This is a deeper problem that the Fed, in particular, faces, and it’s a megathreat. For decades, the US dollar has been the “fiat currency” of the global financial system. It has been the most trusted of all currencies, and thus, the one that most countries wish to hold in foreign exchange reserves. That’s a big advantage to the United States: the demand for dollars coming from its global reserve currency status implies that the United States can borrow for cheaper and longer to finance its ballooning twin fiscal and trade deficits.

pages: 571 words: 106,255

The Bitcoin Standard: The Decentralized Alternative to Central Banking
by Saifedean Ammous
Published 23 Mar 2018

Until this day, all government central banks maintain reserves to back up the value of their national currency. The majority of countries maintain some gold in their reserves, and those countries which do not have gold reserves maintain reserves in the form of other countries' fiat currencies, which are in turn backed by gold reserves. No pure fiat currency exists in circulation without any form of backing. Contrary to the most egregiously erroneous and central tenet of the state theory of money, it was not government that decreed gold as money; rather, it is only by holding gold that governments could get their money to be accepted at all.

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As Mises puts it, “The boom squanders through malinvestment scarce factors of production and reduces the stock available through overconsumption; its alleged blessings are paid for by impoverishment.”10 This exposition helps explain why Austrian school economists are more favorable to the use of gold as money while Keynesian mainstream economists support the government's issuance of elastic money that can be expanded at the government's behest. For Keynesians, the fact that the whole world's central banks run on fiat currencies is testament to the superiority of their ideas. For Austrians, on the other hand, the fact that governments have to resort to coercive measures of banning gold as money and enforcing payment in fiat currencies is at once testament to the inferiority of fiat money and its inability to succeed in a free market. It is also the root cause of all business cycles' booms and busts. While the Keynesian economists have no explanation for why recessions happen other than invoking “animal spirits,” Austrian school economists have developed the only coherent theory that explains the cause of business cycles: the Austrian Theory of the Business Cycle.11 Unsound Money and Perpetual War As discussed in Chapter 4 on the history of money, it was no coincidence that the era of central bank‐controlled money was inaugurated with the first world war in human history.

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On the other hand, the persistence of volatility in bitcoin's value will prevent it from playing the role of a unit of account, at least until it has grown to many multiples of its current value and in the percentage of people worldwide who hold and accept it. Yet, considering that the world's population today has only lived in a world of volatile fiat currencies shifting against each other, bitcoin holders should be far more tolerant of its volatility than generations reared under the certainty of the gold standard. Only the best fiat currencies have been stable in the short‐term, but the devaluation in the long term is evident. Gold, on the other hand, has maintained long‐term stability, but it is relatively unstable in the short term. Bitcoin's lack of stability does not seem like a fatal flaw that would prevent its growth and adoption given that all its alternatives are also relatively unstable.

End the Fed
by Ron Paul
Published 5 Feb 2011

Once you decide that a commodity standard such as the gold standard is, for whatever reasons, not acceptable in a society and you go to a fiat currency, then the question is automatically, unless you have government endeavoring to determine the supply of the currency, it is very difficult to create what effectively the gold standard did. I think you will find, as I have indicated to you before, that most effective central banks in this fiat money period tend to be successful largely because we tend to replicate that which would probably have occurred under a commodity standard in general. I have stated in the past that I have always thought that fiat currencies by their nature are inflationary.

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Now in the middle of possibly the greatest correction of credit creation of all history, Greenspan remains in denial as to his most significant contribution to the crisis. I would say that he never came close to achieving what he claimed—that he could get paper to substitute for gold when managed by wise central bankers. History will prove that goal is unachievable, and any sophistication in managing fiat currency may well delay corrections, but in doing so only allows a greater financial bubble to form. That’s what today’s crisis is all about. Many libertarians had actually advanced the theory that Greenspan was still a true believer and would advance the cause of sound money and freedom when appropriate.

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You have an increase in productivity, and it does help bring prices down, but it doesn’t deal with inflation. And I think what I am talking about here could relate to the concerns of the gentleman from Massachusetts about real wages. There is a lot of concern about real wages versus nominal wages, but I think it is a characteristic of an economy that is based on fiat currency that is just losing its value that it is inevitable that the real labor goes down. As a matter of fact, Keynes advocated it. He realized that in a slump, that real wages had to go down; and he believed that you could get real wages down by inflation, that the nominal wage doesn’t come on and keep the nominal wage up, have the real wage come down and sort of deceive the working man.

pages: 338 words: 104,684

The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy
by Stephanie Kelton
Published 8 Jun 2020

President Nixon’s decision to suspend dollar convertibility increased monetary sovereignty to the United States, forever changing the nature of the relevant constraint on federal spending. Under the Bretton Woods system, the federal budget had to be fairly tightly controlled to protect the nation’s gold reserves. Today, we have a purely fiat currency. That means the government no longer promises to convert dollars into gold, which means it can issue more dollars without worrying that it could run out of the gold that once backed up the dollar. With a fiat currency, it’s impossible for Uncle Sam to run out of money. Yet these senators were talking as if overspending could lead to bankruptcy. They needed to update their monetary lens. Second, the government’s budget isn’t supposed to balance.

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This book uses the lens of Modern Monetary Theory (MMT), of which I have been a leading proponent, to explain this Copernican shift. The main arguments that I present apply to any monetary sovereign—countries like the US, the UK, Japan, Australia, Canada, and others—where the government is the monopoly issuer of a fiat currency.1 MMT changes how we view our politics and economics by showing that in almost all instances federal deficits are good for the economy. They are necessary. And the way we have thought about them and treated them is often incomplete or inaccurate. Rather than chasing after the misguided goal of a balanced budget we should be pursuing the promise of harnessing what MMT calls our public money, or sovereign currency, to balance the economy so that prosperity is broadly shared and not concentrated in fewer and fewer hands.

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It’s also important that they don’t promise to convert their currency into something they could run out of (e.g., gold or some other country’s currency). And they need to refrain from borrowing (i.e., taking on debt) in a currency that isn’t their own.3 When a country issues its own nonconvertible (fiat) currency and only borrows in its own currency, that country has attained monetary sovereignty.4 Countries with monetary sovereignty, then, don’t have to manage their budgets as a household would. They can use their currency-issuing capacity to pursue policies aimed at maintaining a full employment economy.

pages: 179 words: 42,081

DeFi and the Future of Finance
by Campbell R. Harvey , Ashwin Ramachandran , Joey Santoro , Vitalik Buterin and Fred Ehrsam
Published 23 Aug 2021

To solve the matching problem, money was introduced as a medium of exchange and store of value. Initial types of money were not centralized. Agents accepted any number of items such as stones or shells in exchange for goods. Eventually, specie money emerged, a form in which the currency had tangible value. Today, we have non-collateralized (fiat) currency controlled by central banks. The form of money has changed over time, but the basic infrastructure of financial institutions has not. However, the scaffolding is emerging for a historic disruption of our current financial infrastructure. DeFi, or decentralized finance, seeks to build and combine open-source financial building blocks into sophisticated products with minimized friction and maximized value to users utilizing blockchain technology.

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However, given that gold is a volatile asset, its historical hedging ability is realized only at extremely long horizons.10 Many argue that Bitcoin has no “tangible” value and therefore should be worthless. Continuing the gold comparison, approximately two-thirds of gold is used for jewelry, and an additional amount is used in technology hardware. Gold has tangible value. The U.S. dollar, while a fiat currency, has value as “legal tender.” However, there are many examples from history whereby currency emerged without any backing that had value. A relatively recent example is the Iraqi Swiss dinar. This was the currency of Iraq until the first Gulf War in 1990. The printing plates were manufactured in Switzerland (hence the name), and the printing was outsourced to the United Kingdom.

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Not backed by any underlying asset and using algorithmic expansion and supply contraction to shift the price to the peg, they often employ a seigniorage model where the token holders in the platform receive the increase in supply when demand increases. When demand decreases and the price slips below the peg, these platforms issue bonds of some form, which entitle the holder to future expansionary supply before the token holders receive their share. This mechanism works almost identically to the central bank associated with fiat currencies, with the caveat that these platforms have an explicit goal of pegging the price rather than funding government spending or other economic goals. A noteworthy early example of an algorithmic stablecoin is Basis,11 which had to close due to regulatory hurdles. Current examples of algorithmic stablecoins include Ampleforth (AMPL)12 and Empty Set Dollar (ESD).13 The drawback to non-collateralized stablecoins is that they have a lack of inherent underlying value backing the exchange of their token.

pages: 275 words: 77,017

The End of Money: Counterfeiters, Preachers, Techies, Dreamers--And the Coming Cashless Society
by David Wolman
Published 14 Feb 2012

You’d be a fool because the silver content makes that coin worth about $38.13 A return to the gold standard, or a gold and silver standard, is one of those perennial ideas that may sound throwback-ish, until you remember that we’ve only been ticking along with a fiat currency system for about a century, and only forty years with the complete separation from gold. It’s also something of a puzzler that fiat currencies are the way of the world, yet central banks themselves hoard so much gold. Still, even distinguished economists who are gravely concerned about the dollar and the global economy’s dependence on it say that a return to the gold standard is a bad idea.14 For one thing, there just isn’t that much of it, a limitation to reviving the gold standard that could, theoretically, be overcome if we were to transact digitally in ever-smaller fractions of an ounce.

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“My objection,” Birch continued, “is that by helping other people [and himself] to evade tax, the person in question was making me pay more tax: the use of cash facilitates the transfer of wealth from the law-abiding (e.g., me) to the law-breaking (e.g., his builders). This seems immoral to me.”58 It also helps illuminate why Birch defies the easy characterization often assigned to people who complain about fiat currencies. Part of the reason he favors electronic money is precisely because it would help government, insofar as making tax evasion harder. In the United States overt evasion, or for that matter cash-enabled evasion, doesn’t account for all uncollected taxes. Intentional evasion is only one piece of the noncompliance equation.

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By issuing currency, the government provides the people with a convenient medium for conducting exchanges. But when using government money, there’s also a built-in transaction between the individual and the central authority. The money people want for purposes of transacting, says Rushkoff, is “also being used by speculators to extract value from communities.” Fiat currency just isn’t good at both reinforcing the economic power of the government and promoting transactions between individuals. So what, then? Replace the dollar? Not necessarily. The democratization of currency that we’re witnessing is about innovating monetary systems that are more efficient and valuable for use at times when government currency is suboptimal.

pages: 515 words: 126,820

Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World
by Don Tapscott and Alex Tapscott
Published 9 May 2016

He also expects to see bitcoin applications in the Metaverse (a virtual world) where you can convert bitcoin into Kongbucks and hire Hiro Protagonist to hack you some data.20 Or jack yourself into the OASIS (a world of multiple virtual utopias) where you actually do discover the Easter egg, win Halliday’s estate, license OASIS’s virtual positioning rights to Google, and buy a self-driving car to navigate Toronto.21 And, of course, there’s the Internet of Things, where we register our devices, assign them an identity (Intel is already doing this), and coordinate payment among them using bitcoin rather than multiple fiat currencies. “You can define all these new business cases that you want to do, and have it interoperate within the network, and use the network infrastructure without having to bootstrap a new blockchain, just for yourself,” said Hill. 22 Unlike fiat currency, each bitcoin is divisible to eight decimal places. It enables users to combine and split value over time in a single transaction, meaning that an input can have multiple outputs over multiple periods of time, which is far more efficient than a series of transactions.

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Had Greek citizens known about bitcoin during their country’s economic crash in 2015, they still would’ve been hard-pressed to locate a bitcoin exchange or a bitcoin ATM anywhere in Athens. They wouldn’t have been able to transfer their drachmas into bitcoins to hedge against the plummeting fiat currency. Computer scientist Nick Szabo and information security expert Andreas Antonopoulos both argued that robust infrastructure matters and can’t be bootstrapped during catastrophes. Antonopoulos said that Greece’s blockchain infrastructure was lacking at the time of the crisis, and there was insufficient bitcoin liquidity for an entire population to move its troubled fiat currency into it. On the other hand, the bitcoin blockchain isn’t ready for Greece either. That’s the second facet: it falls short on security controls for such a massive bump in usage.

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A decade later in 2008, the global financial industry crashed. Perhaps propitiously, a pseudonymous person or persons named Satoshi Nakamoto outlined a new protocol for a peer-to-peer electronic cash system using a cryptocurrency called bitcoin. Cryptocurrencies (digital currencies) are different from traditional fiat currencies because they are not created or controlled by countries. This protocol established a set of rules—in the form of distributed computations—that ensured the integrity of the data exchanged among these billions of devices without going through a trusted third party. This seemingly subtle act set off a spark that has excited, terrified, or otherwise captured the imagination of the computing world and has spread like wildfire to businesses, governments, privacy advocates, social development activists, media theorists, and journalists, to name a few, everywhere.

pages: 80 words: 21,077

Stake Hodler Capitalism: Blockchain and DeFi
by Amr Hazem Wahba Metwaly
Published 21 Mar 2021

Let's talk about each one of the categories one by one besides MakerDAO that we just mentioned. Stable-coin Stable-coin is a cryptocurrency designed to reduce fixed-priced Bitcoins' volatility compared to "fixed" asset baskets or assets. Stable-coin can be linked to cryptocurrency, fiat currency, or commodities (e.g., precious or industrial metals). Soluble stables in currency, commodities, or fiat currency are known to be hedged, and the stables associated with the algorithm are called seigniorage (non-backed). Stable-coins are cryptocurrencies linked to an asset outside of the cryptocurrency community, for instance, the dollar or euro. The main objective here is to stabilize the price.

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Furthermore, receipts of surgeries can be stored on a blockchain and automatically sent to insurance providers as evidence of delivery. The ledger can also be used for general healthcare management like overseeing drugs, regulating obedience, testing results, and organizing healthcare rations. Benefits of Smart Contracts Smart contracts are a key edge for Ethereum and other cryptocurrency ecosystems over ordinary fiat currencies. Here are some of the things that can be gotten or gained from using smart contracts: Autonomy Since you are the one agreeing, there is no need to depend on a broker, lawyer, or any other middleman for confirmation. Apropos also takes away the dangers of being manipulated by a third party. Since the job is automatically done by the network, instead of by one or more people, probably biased, or individuals that can make a mistake, your interest is secured.

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Fiat-backed inserts can be traded on the stock exchange and redeemed from the issuer. Other key factors in Stable-coins stability are the cost of maintaining reserves and legal compliance, licensing required by regulators, and maintaining the auditors and business infrastructure. Cryptocurrencies supported by fiat currencies are the most common and were the first types of fixed coins to be released on the market. Features of fiat-backed cryptocurrencies: • Its value is fixed in one or more currencies (usually US dollars, euros, and Swiss francs) at a fixed rate. • Communication takes place offline through banks or other regulated financial institutions that act as a repository of currencies used to support Stable-coins

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Bitcoin: The Future of Money?
by Dominic Frisby
Published 1 Nov 2014

Of course, governments create money through such processes as quantitative easing, but, even so, most money is lent into existence. This power to ‘create’ money through lending is what has made the worlds of banking and finance so large, powerful and rich. Modern money could thus be defined as ‘electronic debt-based fiat currency’. Research by UK think tank Positive Money shows that since 1989, money creation has been growing by 11.5% per annum. Compounded over time, the entire money stock doubles every six years and three months. This used to be what we called inflation, but modern measures of inflation now ignore money supply and instead focus on the prices of certain goods.

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But, because money supply growth is no longer considered important, many of the causes of inequality go undetected, while the proposed cures are misdiagnosed. The shortcomings of our money systems are something that Satoshi was attempting to address when he designed Bitcoin: The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible. 13 Discounting trust, Satoshi set out to design a system of money based on ‘proof instead.’14 Cryptographic proof.

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By 1999 – even though gold itself was right at the bottom of a 20-year bear market – it was already so successful that the Financial Times called it ‘the only electronic currency that has achieved critical mass on the web’.17 Jackson believed his payment system, backed by solid gold, would eventually rival fiat currencies. At its zenith in 2008, E-gold was processing over $2 billion worth of transactions a year with some four million accounts open. The problem was many of these accounts were operated by money-launderers and drug-dealers. It fell victim to hacking, fraud and identity theft. E-gold was already under FBI investigation in 2005.

pages: 135 words: 26,407

How to DeFi
by Coingecko , Darren Lau , Sze Jin Teh , Kristian Kho , Erina Azmi , Tm Lee and Bobby Ong
Published 22 Mar 2020

It is useful as it helps buyers and sellers to access an instant market without the need of intermediaries. C Cryptocurrency Exchange (Cryptoexchange) It is a digital exchange that helps users exchange cryptocurrencies. For some exchanges, they also facilitate users to trade fiat currencies to cryptocurrencies. Custodian Custodian refers to the third party to have control over your assets. Fiat-collateralized stablecoin A stablecoin that is backed by fiat-currency. For example, 1 Tether is pegged to $1. Crypto-collateralized stablecoin. A stablecoin that is backed by another cryptocurrency. For example, Dai is backed by Ether at an agreed collateral ratio. Centralized Exchange (CEX) Centralized Exchange (CEX) is an exchange that operates in a centralized manner and requires full custody of users’ funds.

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~ What Assets do Synths Support? At the point of writing, Synths support the following 4 major asset classes (full list): (i) Cryptocurrencies: Ethereum (ETH), Bitcoin (BTC), Binance Coin (BNB), Tezos (XTZ), Maker (MKR), Tron (TRX), Litecoin (LTC), and Chainlink (LINK) (ii) Commodities: Gold (XAU) and Silver (XAG) (iii) Fiat Currencies: USD, AUD, CHF, JPY, EUR, and GBP (iv) Indexes: CEX and DEFI ~ Index Synths One of the interesting Synths available on Synthetix is the Index Synths. At the time of writing, there are 2 different Index Synths, namely sCEX and sDEFI. Index Synths provide traders with exposure to a basket of tokens without the need to purchase all the tokens.

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Retrieved from https://blog.makerdao.com/dai-is-now-live/ DSR. (n.d.). Retrieved February 20, 2020, from https://community-development.makerdao.com/makerdao-mcd-faqs/faqs/dsr John, J. (2019, December 4). Stable Coins In 2019. Retrieved from https://www.decentralised.co/what-is-going-on-with-stable-coins/ Tether: Fiat currencies on the Bitcoin blockchain. (n.d.). Tether Whitepaper. Retrieved from https://tether.to/wp-content/uploads/2016/06/TetherWhitePaper.pdf ~ Chapter 6: Decentralized Borrowing and Lending Leshner, R. (2018, December 6). Compound FAQ. Retrieved from https://medium.com/compound-finance/faq-1a2636713b69 ~ Chapter 7: Decentralized Exchange (DEX) Connect to Uniswap.

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The Truth Machine: The Blockchain and the Future of Everything
by Paul Vigna and Michael J. Casey
Published 27 Feb 2018

Without its existence as an incentive for computer owners to honestly validate exchanges of valuable information, Satoshi’s censorship-resistant distributed ledger simply wouldn’t work. Of course, for this all to tie together, the miners must regard bitcoin currency as having value—they must believe they’ll be able to exchange it for other things of established value, be they goods and services or fiat currencies such as dollars. Fully exploring how they, and millions of others, came to conclude that bitcoins did have value requires a deeper dive into how human communities reach agreements on what constitutes a common medium of exchange, store of value, and unit of account—the three qualities of money.

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And, while it’s hard to see how the acrimony and bitterness was an advantage, the fact that it had proven so difficult to alter the code, to introduce a change to its monetary system, was seen by many as an important test of Bitcoin’s immutability. Solid censorship resistance was, after all, a defining selling point for Bitcoin, the reason why some see the digital currency becoming a world reserve asset to replace the outdated, mutable, fiat-currency systems that still run the world. In fact, it could be argued that this failure to compromise and move forward, seen by outsiders as Bitcoin’s biggest flaw, might actually be its biggest feature. Like the simple, unchanging codebase of TCP/IP, the gridlocked politics of the Bitcoin protocol were imposing secure rigidity on the system and forcing innovation up the stack.

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They might not have envisaged regular Joes sending money from the West to the East Coast without any intermediaries, but they knew there were lots of pointless processes that slowed down the finance system, added costs, and left customers unsatisfied. As Nakamoto wrote in 2009: The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.

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99%: Mass Impoverishment and How We Can End It
by Mark Thomas
Published 7 Aug 2019

ECONOMIC CHOICES In the US and the UK (and almost every other country), we have a mixed economy, which combines capitalism with state-run activities and uses a fiat currency. This is not the only conceivable way to run an economy. If we chose to, we could change our system and step back in time to return to the gold standard – some people do want to turn the clock back in this way – or even to a barter economy. At the futuristic end of the spectrum, we could choose to run a completely planned economy using artificial intelligence to determine what will be produced, in what quantities, and how and where it should be distributed. Even within the context of a mixed economic system with a fiat currency, there are many possibilities (as Chapter 13 explains).

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It also acts as a ‘unit of account’: if we want to say how much value each has exchanged, the fact that all the transactions took place using money enables us to measure the value (in any unit of currency we wish). There is a third function of money – it can act as a ‘store of value’: if I like, I can keep some money in the bank or under my mattress to spend later. The money that we use today is known as a fiat currency, from the Latin word meaning let it be. The fiat money system has been in place since the early 1970s. Before that, the dollar, sterling and most other currencies were backed by gold. This was the ‘gold standard’ according to which a dollar or a pound could be converted into gold on demand. In 1971, Richard Nixon ended dollar convertibility into gold.2 A dollar today has value only because the US government says it has value, because there is a legal duty to pay taxes in dollars and therefore – if for no other reason – people need them, and because society as a whole accepts that it has value.

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But government and Central Bank money-creation is only the first and most obvious way that money can be created out of nothing. There is also a less obvious, but far more important, way: private sector banks create money. As Michael McLeay, Amar Radia and Ryland Thomas of the Bank of England’s Monetary Analysis Directorate explained, in a society like the UK that operates a fiat currency: In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans. Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.11 As their paper makes clear, 97 per cent of the money in circulation is in the form of bank deposits – which are essentially IOUs from commercial banks to households and companies; only 3 per cent are in the form of currency.

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The Curse of Cash
by Kenneth S Rogoff
Published 29 Aug 2016

Alexander’s elegant solution was to simply declare a gold-to-silver value of ten to one, using a mix of stockpiles throughout his empire, and coercion to enforce it.9 Alexander’s approach made Macedonian coinage simple and useful, and a precursor to more modern versions of coinage. Nevertheless, as Sargent and Velde explain in their marvelously titled book The Big Problem of Small Change, it wasn’t really until the nineteenth century, when pure fiat currency became more widespread, that the problem of co-circulation of coins in different metals was truly solved.10 Technology has always played a central role in currency, because of the need to produce monies that are easily seen to be genuine and not counterfeit. Referring once again to William Stanley Jevons’s classic (1875) book on money, it is notable how much attention he gives to making life difficult for counterfeiters, warning that governments need to use sophisticated milling machinery to discourage imitators.

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Palmstruch’s experience is a caricature of the history of private banking and provides the kind of rationale governments always use to eventually usurp private monies; governments can have debt crises, but they are far less vulnerable to runs than are private banks.24 A few decades later, in 1694, the Bank of England also issued notes convertible to specie, though it was not yet a true central bank. It was only with the Bank Act of 1844 that the Bank of England’s notes gained the right of legal tender and could thus be used to settle any debt.25 Bragging rights for the first full-fledged modern fiat currency in the West belongs to the enterprising colonists of the young United States. As poor immigrants, the colonial Americans did not possess a significant quantity of British sterling, nor did the early colonies yield discoveries of the precious metals needed to mint their own coins. In early years, the colonists often relied on wampum, fur, tobacco, and other commodities.

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The government’s total profit from printing money—including both the inflation tax and the monopoly rents accrued by accommodating greater real demand—is sometimes referred to as “seigniorage,” a term that derives from the old French word seigneur. The word’s origins trace to the days when coins were made of gold, silver, and bronze. The word refers to the difference between the face value of coins minted by the government and the cost of inputs, including both materials and production costs. Unbacked paper fiat currency just takes the practice to a higher level. According to the Federal Reserve, it costs 12.3 cents to make a $100 bill and 4.9 cents to make a $1 bill.1 As seigniorage goes, Marco Polo’s description of paper money creation as alchemy was not far off. Between 2006 and 2015, the US government earned 0.40% of GDP per year by printing new notes and spending them.

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Machine, Platform, Crowd: Harnessing Our Digital Future
by Andrew McAfee and Erik Brynjolfsson
Published 26 Jun 2017

Because it relied heavily on many of the same algorithms and mathematics as cryptography (the art and science of making and breaking codes), Bitcoin came to be known as a “cryptocurrency.” American dollars, Japanese yen, Turkish lira, Nigerian naira, and all the other money issued by nations around the world, meanwhile, are called “fiat currencies” because they exist by government fiat, or order; governments simply declare them to be legal tender.§ Existing combinations of “crypto” code and math helped Nakamoto solve the tough problem of identifying who owned Bitcoins as they got used over time and all over the web to pay for things. Participants would use their digital signatures during transactions to sign over the right quantity of Bitcoins from the buyer to the seller.

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If he had kept the Bitcoins that he received in exchange for his food delivery, they would have been worth over $8.3 million by mid-January of 2017. As Bitcoins gained in popularity, numerous marketplaces appeared to facilitate trading them. These exchanges enabled people to create orders to buy or sell Bitcoins for a certain price, usually denominated in fiat currencies like the US dollar or British pound. When the conditions of both the buyer and seller were met, the trade was executed. The largest and most infamous of these exchanges was Mt. Gox, a Tokyo-based firm that accounted for 80% of all Bitcoin trading at its peak. Mt. Gox was plagued with difficulties from the time it was founded, including at least one major hack that resulted in a loss of $8.75 million in 2011.

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Bank of England, “Digital Currencies,” accessed February 8, 2017, http://www.bankofengland.co.uk/banknotes/Pages/digitalcurrencies/default.aspx. § From 1873 to 1971, US dollars were convertible to a fixed quantity of gold. The US “gold standard” ended with a series of economic measures, introduced by President Richard Nixon, that converted dollars to a fiat currency. ¶ The original reward was set at 50 Bitcoins. It fell to 25 in November 2012 and to 12.5 in June 2016. This process, known as “halving,” happens every 210,000 blocks and is built into the Bitcoin software. There will be a maximum of sixty-four halvings, yielding a total 21 million Bitcoins, after which no more will be created (Jacob Donnelly, “What Is the ‘Halving’?

Layered Money: From Gold and Dollars to Bitcoin and Central Bank Digital Currencies
by Nik Bhatia
Published 18 Jan 2021

The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.23 Satoshi Nakamoto revealed his ambitions for BTC to exist as a currency denomination, not singularly a payments network. He mentioned fiat currencies to refer to currencies issued on the second layer of money by central banks, regardless of what exists on the first; the word fiat originally means “by decree” in Latin. Satoshi’s criticism of fiat currencies demonstrated a cognizance of the instabilities within our fractionally reserved, layered-money system.

Rethinking Money: How New Currencies Turn Scarcity Into Prosperity
by Bernard Lietaer and Jacqui Dunne
Published 4 Feb 2013

At the commencement of the process, the government decides what it will accept in payment of taxes. Historically, it has chosen specific commodities, such as wheat or other food products, bronze or copper ingots, beaver pelts, tobacco leaves, or gold or silver bullion. This obligation puts the population to work to find or produce those commodities. Today, with fiat currencies required for the payment of taxes, the population works, trades, and invests in national currencies so they can meet their responsibilities. It’s the same story worldwide. This is true regardless of the country of issuance, the political philosophy (capitalist, communist, socialist, fascist, totalitarian, despotic, or democratic), and the different designations, and despite differences in material composition, shape, or particular motif.

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These currencies are used automatically, as a means of entering into an assumed and unspoken contract. There is, however, a broader context of what money is, as money can be found outside the narrow parameters of legal tender. As shown earlier, contemporary national currencies are all interest-bearing fiat currencies, debt based, created through the fractional banking system. They are designed to facilitate transactions (i.e., as a medium of exchange), used both as units of account and as savings (i.e., as temporary stores of value), and are particularly well adapted for business and industrial applications and settings.

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Consequently, the introduction of a local cooperative currency could lead some economists and monetary theorists to conclude that a parallel money system would automatically add to inflationary pressures on the economy as a whole. The objection would be valid if, and only if, this second currency were a fiat currency, as is the case for the dollar, the euro, the yen, or any other national money. Local currencies, however, are intrinsically different from fiat money and can be designed specifically to avoid contributing to inflation. The most generally accepted economic insight is that inflation results whenever there are not enough goods and ser vices produced for the quantity of money in circulation: too much money pursuing too few commodities.

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The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money
by Steven Drobny
Published 18 Mar 2010

Protectionism causes all risky assets to underperform dramatically. You would want to own the short end of most sovereign bond markets because when you enter into protectionist scenarios, countries will want to ease their monetary conditions and devalue their currency against everyone else. Do fiat currencies inevitably lead to instability? I would not say that instability is inevitable. However, mishandling a fiat currency system like the current one can bring collapse. We did not run our system in a controlled way, but rather allowed the system to get overextended on credit. You could argue that the political logic assumes politicians will bail out the system to save the economy from totally collapsing under their watch, regardless of what the costs are afterwards.

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The U.S. dollar-value of the SDR is posted daily on the IMF’s Web site. SOURCE: International Monetary Fund (www.imf.org). With a long-term investment horizon, if you had to put all your liquid net worth in one trade for 10 years, what would it be? I would be torn between the deferred gold trade and the deferred oil trade. I do believe in the debasement of fiat currency thesis. When I think about the transfer of risk from the private sector to the public sector, the numbers just don’t work. At some point, the debts will have to be paid or restructured. If you look at the assets and liabilities of the U.S. government in the same way that I look at a company, we would all be short shares of the U.S. government even though they can print money.

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The more the price goes up, the more people believe in its worth as a store of value, particularly when it is appreciating relative to the major currencies of the world. There is a common belief that the gold market cannot be squeezed because there is about 50 years of above-ground supply available. However, in that rare scenario where people’s faith in fiat currency is truly shaken, there may be a shortage of gold that will be lent to the market. Since supply growth is actually negative, lending is a clear balancing mechanism, and its absence would have enormous impact on the gold price. That is potentially a truly asymmetric outcome. (See Figure 9.5.) Figure 9.5 Gold, 2004-2009 SOURCE: Bloomberg.

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Digital Bank: Strategies for Launching or Becoming a Digital Bank
by Chris Skinner
Published 27 Aug 2013

Well, if there’s no central issuing authority to issue more or less money for monetary control, then that’s the real issue. So you can’t address the issues in economies with money, but I would argue ordinary fiat currencies are actually less of a benefit to societies and economies if those currencies can be manipulated. We know corruption in all forms at all levels in all countries is rife. If fiat currencies are corruptible, and by definition all are, then they can do more harm than good. Perhaps there needs to be an evolution of currencies, and there will be a natural selection by the people of the strongest.

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Instead of a central bank issuing the currency, Bitcoins are issued by anyone with a computer or smartphone, and are issued using encryption algorithms. In other words, extremely difficult mathematical problems are incorporated into each coin and transactions are cryptographically authenticated. This makes Bitcoins a combination of a commodity and a fiat currency, with the creation of Bitcoin dating back to 2008 when Satoshi Nakamoto published a white paper about a peer-to-peer exchange of value for the internet age. [28] The coins are digital currency designed to be controlled through encryption, rather than a centralised authority, and potentially operate in exactly the same way as cash.

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Although there is a limit of 21 million, the coins are infinitely divisible with each Bitcoin potentially divided to up to eight decimal places giving you a total of 2.1 quadrillion units eventually. By August 2013, of the 21 million coins to be issued, just over 11.5 million have been issued. The aim is to limit the number of coins in existence because, unlike fiat currencies issued by government agencies, there is no centralised issuing authority in Bitcoin, just users. This is another reason why the cap exists and is one of the more contentious points of Bitcoin, as those who own a whole Bitcoin today will become billionaires if it becomes a mainstream currency.

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How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy
by Mehrsa Baradaran
Published 5 Oct 2015

Specie-backed currency restrained the amount of money available because banks could not lend more than the amount of specie they actually held in reserves. The White House suspended specie currency in favor of the newly minted greenbacks.51 The use of paper “fiat” currency, or legal tender, untethered the monetary supply. But it also heightened the need for trust. The fiat currency Lincoln adopted, which we still use today, only works insofar as the public trusts the government’s ability to make good on the claim. At that time and even today, each unit of paper money represents a promise from the government that it will stand behind it—it is a debt from the government to the holder of the paper money.

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When Lincoln accepted the third and final issue of fiat bills, he sent a letter to Congress in which he expressed “sincere regret that it has been found necessary to authorize an additional issue of United States notes.” Wesley C. Mitchell, A History of the Greenbacks (Chicago: University of Chicago Press, 1903), 109. 56. The United States would return to fiat currency from 1914 to 1925 and then again from 1933 to 1945. When the United States returned to specie in 1945, it was essentially fiat currency as far as everyone beyond foreign governments was concerned. 57. Lincoln’s support for national banking started before he became president. When he ran for state legislature in 1832, he said, “My politics are short and sweet, like the old woman’s dance.

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.… A return to specie payments, however, at the earliest period compatible with due regard to all interests concerned should ever be kept in view.”54 Lincoln was a reluctant adopter of paper currency and was eager to return to the safer and more stable specie currency, which Secretary of State Hugh McCulloch eventually did in 1866 after Lincoln’s assassination.55 It would not be until 1971 and President Nixon’s need to fund the Vietnam War that the United States would go back to fiat currency for good and fully abandon specie-backed currency.56 President Lincoln was, however, an advocate of national banking, which provided a more permanent solution to the nation’s funding problems:57 “Is there, then, any other mode in which the necessary provision for the public wants can be made and the great advantages of a safe and uniform currency secured?

Data and the City
by Rob Kitchin,Tracey P. Lauriault,Gavin McArdle
Published 2 Aug 2017

This linear association, connecting one block to the next through the integrity of the encrypted mathematical codes, keeps the chain intact, and, along with the massively distributed, multiple copies of the currency system, helps to prevent fraud. The linear, cumulative nature of this system is of particular interest to the authors, and in particular how this differs from current, centrally controlled, fiat currencies that regulate the release and removal of money in the system (physical and virtual) to attempt to manage the market. In stark comparison to the blockchain, fiat currencies are released as promissory coins, notes, mortgages or loans according to an assessment of how much money there should be within a society according to the values of that particular economic system. Monetary representation has become increasingly abstracted from the goods and services that it can be used to trade in, and this is central to Marx’s concern for how value has become commodified, not in what is needed but what is desired.

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This chapter explores different perspectives upon economic and socio/geographical ledgers and the complexity that they involve as they inevitably collide with concepts of chronological time, representation and actions. Three means of approaching the concept and practice of the ledger are discussed: (1) money, time and the blockchain: an exploration of how the representation of money shifts from material representation within fiat currencies (i.e. those underpinned by governments or precious metals) to the blockchain, the sealed distributed ledger that supports the Bitcoin cryptocurrency; (2) city as ledger: a recovery of the role of time in the production of economic geographies with a focus upon Hägerstrand’s approach to time-geography that accounted for personal and group actions within temporal and spatial frames, and inevitably a recovery of Marx and the obfuscation of histories and geographies; and (3) cognitive and practice-based ledgers: an introduction of the use of filmic storytelling as a cognitive ledger using the Dardennes’ film Two Days and One Night.

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Given the nature of digital systems, perfect copies of money are conceptually even easier to make than the counterfeiting of physical money. The radical invention of the blockchain uses multiple copies of a single ledger distributed across a network to deal with the ‘double spending’ potential of digital money, that is, duplicating currency and spending it twice or more, is a central feature to the Bitcoin platform. In fiat currencies, third parties, for example, banks, balance the books at the close of each trading day. In Bitcoin, ‘double spend’ is prevented by ensuring digital scarcity through the verification of transactions through the mining process and transaction blocks. These differences represent two entirely different models of time for each form of currency.

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Money Mischief: Episodes in Monetary History
by Milton Friedman
Published 1 Jan 1992

Chapter 10 explores the probable consequences of the monetary system that now prevails throughout the world—a system that has no historical precedent. Since the time when President Richard Nixon broke the final tenuous link between the dollar and gold in 1971, no major currency, for the first time in history, has any connection to a commodity. Every currency is now a fiat currency, resting solely on the authorization or sanction of the government. The final chapter is an epilogue that draws a few general lessons from the episodes examined in the preceding chapters. This book provides only small glimpses at the endlessly fascinating monetary gardens that have flourished and decayed in the course of the several millennia since the day when mankind found it useful to separate the act of sale from the act of purchase, when someone decided it was safe to sell a product or service for something—a something that he had no intention of consuming or employing in production but, rather, intended to use as a means to purchase another product or service to be consumed or employed in production.

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Congress did not heed Hamilton's counsel, but left the legal ratio at 15 to 1 until 1834. As a result, silver became the de facto standard until 1834, when Congress altered the legal ratio to 16 to 1, and gold became the de facto standard from then to the Civil War. In 1862, redemption of currency in specie was suspended, and a pure fiat currency, popularly known as greenbacks, was issued to help finance the war. The 1873 coinage act ended the free coinage of silver and limited its legal-tender status, so that when resumption (the convertibility of legal tender into specie) was achieved in 1879, it was on the basis of gold. That in turn unleashed the free-silver movement of the 1880s and 1890s, which culminated in William Jennings Bryan's 1896 presidential campaign under the flag of 16 to 1.

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However, the decline in inflation was a worldwide phenomenon that was by no means limited to members of the EMS. In my view, the explanation for the worldwide decline in inflation is linked to the end of Bretton Woods. That led to the adoption of a world monetary system that has no historical precedent. For the first time in the history of the world, so far as I know, all major currencies are pure fiat currencies—not as a temporary response to a crisis, as often occurred in the past in individual countries, but as a permanent system expected to last. The countries of the world have been sailing uncharted seas. It is understandable that in the first decade of that voyage all sorts of things might happen, and, in particular, a worldwide outburst of inflation did occur.

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Bitcoin for the Befuddled
by Conrad Barski
Published 13 Nov 2014

Any remaining difference in price between exchanges reflects the costs, due to trading fees and transfer fees (and other factors beyond the scope of this book), of moving money from one exchange to another. If one Bitcoin exchange rate is substantially different from all the others, it may indicate an underlying problem and probably should be avoided. Additionally, it is important to remember that a currency exchange is not a bank. You should not leave significant amounts of money, whether fiat currency or bitcoins, sitting your exchange account. After purchasing bitcoins, transfer them to your personal Bitcoin wallet for safekeeping. Buying Bitcoins from a Currency Exchange Currently, no clear front-runner exists among the Bitcoin currency exchanges. Therefore, the following are general steps that you should apply to any Bitcoin exchange.

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If you and the seller agree to use the service, your face-to-face transaction should go as follows: 1. The Bitcoin seller sends the bitcoins to the escrow service. 2. As the buyer, you verify that the bitcoins are in the escrow account as promised. 3. You hand the seller your envelope of dollars (or other fiat currency). 4. The seller signs off on the escrow, and you get your bitcoins. As a result, at no time can the seller abscond with your dollars without sending bitcoins. Satoshi Square If meeting with strangers one-on-one makes you uncomfortable, you may be interested in going to a Satoshi Square event.

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If none of the options discussed in this chapter meet your needs for acquiring bitcoins, you have another alternative to acquire bitcoins that is probably better than any other: Sell something to bitcoiners for bitcoins! Die-hard bitcoiners dream that someday they’ll be able to relinquish all fiat currencies. Someday, we can imagine, you won’t need to buy bitcoins with other money, because bitcoins will be the money. As you can see, Satoshi was able to sign a message with his own private key and thus prove to Crowley that he (Satoshi) owned a certain Bitcoin address. To understand how this is possible, you need to learn about a weird asymmetry that mathematicians discovered a long time ago: 1.

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Fed Up!: Success, Excess and Crisis Through the Eyes of a Hedge Fund Macro Trader
by Colin Lancaster
Published 3 May 2021

“Nixon killed the gold standard, the Bretton Woods system, in 1971, back when impeachment was still a novelty. It was when inflation was choking our economy. This was replaced by freely floating fiat currencies.” “This was great for macro investors,” I say. “Just imagine all of these new freely floating instruments, like kids in a candy store.” The Rabbi chimes in again. “Now we live in a world of fiat currency. Fiat is a nice way of saying wampum, bullshit, no value, worth only the paper it’s printed on, like playing Monopoly. And let me tell you,” the Rabbi goes on, “this is the scary part. We are turning it into a self-fulfilling loop of more and more.

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After unsuccessfully trying to solve a debt crisis with more debt, policymakers will need to do something else. He thinks we could be headed to something called modern monetary theory (MMT), but this would bring serious inflationary implications. The central idea of MMT is that governments with a fiat currency system can and should print as much money as they need to spend. It all sounds enticing but seems to fly in the face of stuff like working hard, living modestly, and building a nest egg. The Fed has already pushed things to new extremes by buying assets it has never bought before. For almost one hundred years, the Fed purchased only government bonds.

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“Yeah, they’re pretty remarkable in showing how much new currency is coming into the world. In theory, it should signal how quickly inflation will grow. Now, remember,” I tell her, “this is way more complicated than the old days, due to our digitized world and the fact that most governments have fiat currencies.” “What do you mean?” “It’s much harder to measure its impact on inflation. In fact, that’s probably the biggest conundrum in all of economics right now, and the central banks have been wrong on this for a long time. Let me get back to where I was going on this,” I say. “The Fed’s dual mandate is to balance unemployment and inflation.

pages: 454 words: 134,482

Money Free and Unfree
by George A. Selgin
Published 14 Jun 2017

Inflation thus usually has to become quite severe before “dollarization” of domestic transactions occurs. Because currency substitution and the elasticity of demand for domestic base money are reduced under fiat currency, the fiscal hypothesis predicts higher inflation rates under fiat standards than under metallic standards (which allow inflationary finance via debasement). This prediction is borne out historically in a comparison of commodity-money and fiat-money episodes after 1600 (Rolnick and Weber 1994). FIAT-MONEY MONOPOLY Why does a revenue-seeking government itself issue fiat currency monopolistically, instead of taxing private issuers? The reasons for thinking that a seigniorage-seeking government would prefer a mint monopoly to taxation of private mints apply again.

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Under a silver standard, alternative coins can always be evaluated (even if not legally) by weight, making the substitution of foreign for domestic money a relatively simple matter of measuring both in terms of silver content (measured in a fixed reference weight unit, a so-called “ghost money” unit). If domestic money is being frequently debased, traders quoting prices in weight units would naturally favor more stable foreign coins—less frequently requiring weighing and assaying—as their medium of exchange. By contrast, traders who consider switching from a domestic to an alternative fiat currency as a medium of exchange find that there is no simple common metric. A network effect associated with using the common unit of account protects the incumbent currency by imposing high transactions costs on those who would switch first (Selgin 2003). Acceptance of an alternative currency in transactions presupposes familiarity with its exchange value, but until its acceptance is widespread, or at least until the domestic unit has become thoroughly unreliable as a unit of account (as in a high inflation), there is scant individual incentive to track the exchange rate between the incumbent and alternative currencies.

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The reasons for thinking that a seigniorage-seeking government would prefer a mint monopoly to taxation of private mints apply again. In the case of fiat money, a more fundamental reason exists as well: open competition in the production of fiat currency is, to date, a purely hypothetical possibility, and one that might not be sustainable in practice. If “competitive supply” of fiat money meant free entry into the production of fiat dollar notes—the equivalent of legalized counterfeiting—each counterfeiter would produce notes until even the highest denomination note was worth no more than the paper and ink it contained. If there were no upper bound on denominations, profits from producing dollars would persist until the dollar became worthless (Friedman 1960).

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The Great Fragmentation: And Why the Future of All Business Is Small
by Steve Sammartino
Published 25 Jun 2014

A curious fact about gold is that it’s had much the same purchasing power when converted into currency for more than 2000 years. It’s been able to buy a handmade robe or a decent suit in perpetuity. The ratio is still on the money, even today, which is something we can’t claim for state-backed or fiat currency because none of the fiat currencies in the world are backed by the gold standard any more. A new globally networked commercial economy needs a currency to match. Step forward crypto currencies such as bitcoin, which are the next evolution in how we trade. Bitcoin Bitcoin was the first fully implemented and distributed crypto currency.

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Since we progressed beyond the bartering system, new forms of currency have arrived, while others have faded and been replaced. Most often though, we tend to have a number of types and brands of currency in operation at any one time. We’ve used everything from grain receipts, to shark’s teeth, shells, the precious metals, minted coins and convertible notes to government-backed paper currency (or ‘fiat currency’, as it’s known). digital currency: a form of virtual currency or medium of exchange that’s electronically created and stored. Some digital currencies, such as bitcoin, are crypto currencies (Wikipedia) For a long period indeed, currency provided by governments in power would guarantee the amount of currency in circulation by anchoring it to the gold standard, the idea being that a currency is more trustworthy as it’s the representation of a commodity with a known market and intrinsic value.

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And while it seems foreign to us at the moment, the reality is that crypto currencies are more suited to the way we transact today. While it’s difficult to predict the final and ultimate globally dominant currency, it’s easy to see that these forms of currency are here to stay. And just like all other technology stacks it doesn’t mean that the layer underneath — in this case fiat currency — will disappear overnight. The entire idea of technology stacking is that we need the previous layer to help prop up the new method; it just becomes less visible. There’s a high probability we’ll still need our ‘home market currency’ to convert back to. Just as we’ve seen in the past we’ll have a number of forms of currency that still have value in exchange and widely adopted usage.

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The Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze
by Laura Shin
Published 22 Feb 2022

And then, although it generated no news at the time, on October 31, a person or group named Satoshi Nakamoto published a white paper that described how people could bypass banks and use the internet to send each other money.4 Over the next nine years, during which a seven-year stretch of 0 to 0.25 percent interest rates managed to produce only the slowest economic recovery in history, this strange new network attracted a peculiar pastiche of supporters.5 Geeks were seduced by its magical fusion of cryptography, game theory, and the age-old ledger. Drug users loved it because, instead of having to meet strangers on street corners, they could have their postal carrier deliver illicit substances with a few mouse clicks. Libertarians adored its potential for enabling people to transact outside the thousand-year-old system of government fiat currencies. Silicon Valley entrepreneurs dreamed it could form the foundation of a faster, cheaper financial system. And the 1 percent, investing either on their own or through hedge funds and family offices, grew a taste for returns of not just 10 percent but 100,000 percent from this futuristic asset: bitcoin.

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Although he didn’t have particular goals around Bitcoin, it combined his interests in social and political theory, math and science, open-source software and programming. Plus, his father had been listening to Doug Casey, an anarcho-capitalist who subscribed to Austrian economics and had a theory that government-issued fiat currencies would collapse, causing a massive depression. Vitalik thought if that happened, he’d have to work hard to survive. Bitcoin seemed like a good hedge against disaster because of its monetary policy. It had a fixed supply of twenty-one million bitcoins, and new ones would be minted by the software, on average, every ten minutes until the cap was reached, making it deflationary.

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(This was a common mind-set of Bitcoiners known as HODL, which was a typo from the BitcoinTalk forum, in which a drunken poster had meant to exhort people to HOLD.10) However Joe never directly refused to sell the bitcoins. He would come up with reasons to put off selling until their next meeting—he needed to do more research first, to figure out which fiat currency to convert to, and so forth. Gavin felt that because Joe knew Vitalik always sought consensus, suggesting they look at more options would delay action. Jeff thought Joe’s actions amounted to gambling with other people’s money. They had told him plenty of times, “Sell the fucking bitcoin.” But Joe had held onto it to see if the price would go up, and instead it had fallen.

pages: 355 words: 92,571

Capitalism: Money, Morals and Markets
by John Plender
Published 27 Jul 2015

While the cost of producing gold is very high, the marginal cost of producing more paper money is very low. And the outstanding stock of physical gold of around 160,000 tonnes is huge relative to the amount of new gold that can be mined and refined in a given year. So while fiat currency and gold both suffer from the disadvantage that they are always potentially worthless, fiat currencies are invariably more likely to become worthless than gold because central bankers can churn out fiat paper at the turn of a tap, while the supply of gold is heavily restricted. It follows that when countries are fiscally profligate and their governments rack up Godzilla-like quantities of public sector debt, the risk that politicians and central bankers resort to inflation via the printing press increases dramatically.

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It feels like the continuation of alchemy by other means, with paper turning into valid money in the same way that alchemists aimed to turn lead into gold. Yet in due course the emperor cannot resist the temptation to flood the country with too much paper. In theory, the currency is backed by all the empire’s gold that has yet to be mined. But the gold is illusory. The reality is that the emperor presides over a fiat currency – that is, one not backed by precious metal. So an excess of paper currency leads to inflation, financial chaos and social strife, as Mephistopheles explains: The Empire sliding into anarchy the while, Strife among great and small on every side, Much brotherly expulsion and homicide, Burgh against burgh, city against city, Guilds feuding with the nobility, The bishop with his chapter and his see, Eyes never meeting but in enmity, Murder in the churches, and on the road No mercy shown to travellers or trade.

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S. 1, 2 Elizabeth II 1 Engels, Friedrich 1, 2, 3, 4, 5 Enlightenment 1, 2, 3, 4, 5 Enron 1 entrepreneurs 1 environmental damage 1 Epistle to Allen Lord Bathurst (Alexander Pope) 1 Esterházy, Prince Nikolaus 1 European Monetary Union 1 European Union 1, 2, 3, 4 eurozone 1, 2, 3, 4, 5 Faber, Marc 1 Fable of the Bees, The (Bernard Mandeville) 1, 2, 3, 4, 5, 6 Facebook 1 Faerie Queene, The (Spenser) 1 Fama, Eugene 1, 2, 3, 4, 5 Farmers’ State Alliance (US) 1 fatal embrace 1, 2 Faust (Goethe) 1, 2, 3, 4 Federal Reserve (Fed) 1, 2, 3, 4 Federal Reserve Act (US 1913) 1 Ferguson, Niall 1 feudalism 1, 2, 3 fiat currencies 1 Fidelity Magellan fund 1 financial crisis (2007–08) 1, 2, 3, 4, 5, 6, 7, 8 financial intermediation 1 financial services 1 financial weapons of mass destruction 1 Finley, Moses 1 Fitzgerald, F. Scott 1 Ford, Henry 1, 2 Fors Clavigera (John Ruskin) 1 fractional reserve banking 1 France 1, 2, 3 art market 1 taxation 1, 2, 3, 4 François I of France 1, 2, 3 Frankel, Jeff 1, 2 Franklin, Benjamin 1 Frederick the Great of Prussia 1, 2 Freeland, Chrystia 1 French Revolution 1, 2 Frick, Henry Clay 1, 2 Friedman, Milton 1, 2 Fukushima nuclear spill 1 Fuld, Dick 1 fund managers 1, 2, 3 Fürstenberg, Carl 1 Galbraith, J.

pages: 302 words: 95,965

How to Be the Startup Hero: A Guide and Textbook for Entrepreneurs and Aspiring Entrepreneurs
by Tim Draper
Published 18 Dec 2017

Then I got excited. People would pay for virtual products! This revelation was an epiphany for me. It got me thinking that there was an amazing business in virtual currency coming. There were many efforts. FarmVille was a fun game that allowed people to buy and trade with virtual gold. People paid real fiat currency to buy more virtual gold. There evolved a market outside of the game for virtual gold. Some people would earn lots of it in the game and others would buy it from them to advance in the game. Something potentially important was beginning. My search for universal virtual currency was afoot. But it wasn’t until 2011 when I discovered Bitcoin.

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I realized that the demand for this new digital currency was so strong that even a huge theft would not keep Bitcoin from creating a new way for us to transact, store and move money. Society needed Bitcoin so much that it was willing to tolerate major failures and frauds as long as they could have this frictionless, global currency. After all, since the financial crisis, people were losing their confidence in government controlled fiat currencies. They needed something to trade that was not tied to any government. This was clearly a big sea change, and as an agent for societal improvement and change, I intended to help support and drive it forward. I became well aware of how important Bitcoin would be as a new and potentially transformative currency and asset.

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The blockchain, being a perfect ledger, may change the accountant’s role to one of advisor, and smart contracts may change what it means to be a corporate lawyer. People will not need to hoard gold or hard currency since Bitcoin is a far more convenient source for stored value. Governments may recognize that their fiat currencies are inferior to virtual currencies and will have to allow more financial freedom to their citizens or risk losing those citizens. Taxing authorities and welfare service providers may be replaced by blockchain tax redistribution engines and welfare insurance wallets. The potential of Bitcoin is only limited by the imaginations of the entrepreneurs who work to drive this new virtual economy.

The Great Economists Ten Economists whose thinking changed the way we live-FT Publishing International (2014)
by Phil Thornton
Published 7 May 2014

He famously summarised this by saying: ‘Substantial inflation is always and everywhere a monetary phenomenon.’ While Friedman rejected the idea that the government could have a role in controlling the economy through spending and taxation, he did believe it had a major role to play in controlling the money supply. The government should be the monopoly provider of what economists call a ‘fiat’ currency. Based on the Latin for ‘let it be’, fiat money is created by the government and neither has any intrinsic value nor is tied to gold. Friedman was certainly no anarchist! Clearly governments that can print money can stoke inflation and Friedman therefore set out hard and fast rules for central banks to follow.

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Index A Theory of Moral Sentiments (Smith, 1759) 2, 5–6 Adelman, Irma 110 American Economic Association 170 An Inquiry into the Nature and Causes of the Wealth of Nations see The Wealth of Nations anarchism 156 apartheid system in South Africa 199 Ariely, Dan 234 Arrow, Kenneth 191, 213 AT&T 22 austerity versus stimulus debate 43–4, 140–1 Austrian School of Economics 121–2 autarky concept 184 bank bailouts in the financial crisis 162 Bank of England 161 Barro, Robert 43 Barro-Ricardo equivalence 43–4 Becker, Gary (1930– ) 193–216 approach to human behaviour 212–15 building human capital 200–2, 210 early life and influences 195–7 economic perspective on discrimination 196–7, 198–9 Economics of Discrimination (1957) 196–7, 198–9 economics of the family 213–15 family decision making 203–6 key economic theories and writings 197–212 long-term impact 212–15 new home economics 203–6 Nobel Prize (1992) 194, 195–6 on crime and punishment 207–10 on drug addiction 210–12, 215 rational choice model 197, 212– 15, 216 verdict 215–16 Becker–Posner Blog 215 behavioural economics 218–19, 233–6 Bentham, Jeremy 31, 181 Bergmann, Barbara 206 Bergson, Abram 182 Bergson–Samuelson social welfare function 182–3 Bernanke, Ben 77, 159, 162 Bernoulli, Daniel 229 bias in decision making 222–5 in financial decision making 225–32 Bitcoin currency 138 Black, Fischer 187 Blinder, Alan 215 Bloomsbury Group 94 Blunt, Anthony 94 boom and bust cycles see business cycles Bretton Woods agreement 95, 108–9 Brown, Gordon 3, 42 Burgess, Guy 94 Burns, Arthur F. 147 Bush, George H.W. 139 business cycles 57, 65 Hayek’s explanation 123–6 Samuelson’s oscillator model 174–5 Butler, Eamonn 162 Cambridge School of economics 74, 86 Cambridge spy ring 94 capital flow controls 113 capital-intensive goods, effects of increase in wages 33 capitalism exploitation of the working class (Marx) 56–8, 62–3 Index239 ‘fictitious capital’ concept (Marx) 62 seeds of its own downfall (Marx) 56–8, 61–3 capitalist production process (Marx) 54–6 Carlyle, Thomas 33 cartels evil of 10–11 regulation to prevent 21–2 central banks control of economic activity 161 over-expansion of credit 123–4 central state planning, Hayek’s opposition to 134–6, 140 certainty effect 229, 230 ceteris paribus approach to economic analysis 79–80 Chapman, Bruce 19 Chicago School of economic thought 146, 160, 194 China savings and investment imbalance with the US 113 trade imbalance with the US 45 choice architecture 234 Churchill, Winston 98 classical economics 40, 54 Coase, Ronald 73 cognitive biases (Kahneman) 222–5 communism 19, 50 Communist Manifesto (Marx and Engels) 52, 58–61 company bailouts in the financial crisis 162 comparative advantage 35–8, 183–4 complex adaptive systems, science of 138 complex financial products 61–2, 187 computer-games-based money 138 confirmation bias 227 consumer demand marginal rate of substitution 180 revealed preference theory 180–1 consumption smoothing concept 149, 163 Corn Laws, attack by Ricardo 33–5 costs of production, relationship to value 75–7 credit expansion, as a driver of boom and bust cycles 123–4 crime and punishment, views of Becker 207–10 Darling, Alistair 112 Das Kapital (Marx) 52, 53–4, 59–61, 62, 67–8 decision making biases and errors in financial decisions 225–32 heuristics and bias in 222–5 Prospect Theory (Kahneman) 228–32, 234 under risk 228–32 demand side economics 127 depression Keynesian interventionist view 92–3, 94, 105–6 see also Great Depression (1930s) dialectic style of analysis 52, 54 Diamond, Peter 179 diminishing marginal utility 82 discrimination economic perspective of Becker 196–7, 198–9 views of Friedman 157 distribution of economic value (Marx) 54–6 division of labour and productivity 11–14 car production 20–1 in daily life 20–1 divorce rates 205 drug addiction, views of Becker 210–12, 215 Dubner, Stephen 234 Eastern Europe, influence of Hayek 140 Ebenstein, Larry 158 Economics: An Introductory Analysis (Samuelson, 1948) 168, 171–3, 188–9 Economics of Discrimination (Becker, 1957) 196–7, 198–9 Efficient Market theory 111, 112, 187 240Index elasticity of demand 82–4 Elizabeth II, Queen 158 emerging markets, offshoring of jobs to 41 endogenous growth 202 endowment effect 232, 234 Engels, Friedrich 52, 58–61 ethical judgements in economics 182–3 European Central Bank 161 exchange rates, impact of trade on 185–6 expected utility theory (EUT) 228, 229–30, 232 externalities 85 factor price equalisation theorem 186–7 Fama, Eugene 160, 187 family decision making economic perspective 183, 203–6, 213–15 welfare decision making 183 fiat currency 152 ‘fictitious capital’ concept (Marx) 62 financial decision making, biases and errors in 225–32 financial economics, work of Samuelson 187 First World War 95 Folbre, Nancy 206 Ford Model-T car, assembly-line production system 21 Foundations of Economic Analysis (Samuelson, 1947) 168, 169–70 Fox, Charles James 23 Freakonomics (Levitt and Dubner) 234 free-market mechanism of supply and demand 8–9 free market system view of Adam Smith 13–14, 16–18 view of Hayek 131–3 view of Friedman 155–7 free rider problem in public goods 177–8 Free to Choose (Friedman and Friedman, 1980) 158 free trade, influence of Adam Smith 22–3 Freeman, Richard 201 frictional unemployment 155 Friedman, David 156 Friedman, Milton (1912–2006) 94, 110, 145–64, 190–1, 196 advocate of the free market 155–7 belief in individualism 155–7 criticism of Keynesianism 149–50 early life and influences 147–8 economics in action 160–3 fiat currency 152 Free to Choose (1980 ) 158 influence of the Great Depression (1930s) 148 influence on modern economic theory 158–60 limited role of government in the economy 152, 155–7 long-term legacy 157–63 monetarism 151–2 monetarist rule 152 monetary policy 151–2 ‘natural’ rate of unemployment 153–5 new explanation for the Great Depression 150–1 Nobel Prize in economics (1976) 146, 147–8, 154, 161 non-accelerating inflation of unemployment (NAIRU) 153–5 permanent income hypothesis 148–50 role of money supply in the economy 151–2 verdict 163–4 Friedman, Rose (formerly Rose Director) 147, 148, 157, 158, 160 FTSE-listed plcs 86 Funk, Walter 108 Funk Plan 108 Galbraith, J.K. 159 gambler’s fallacy (misconception of chance) 224 General Agreement on Tariffs and Trade (GATT) 40 Index241 general equilibrium theory 8 genetically modified foods 42 geographical effects in economics 84–6 Giffen goods 84 global financial crisis (2007–8) 92, 174 and Keynesianism 111–13 global stimulus package 113 Marxist view 61–3 global free trade influence of Adam Smith 22–3 influence of Ricardo 40–2 global public goods 177–8 global recession (2009) see Great Recession (2009) gold standard, criticism by Keynes 95, 98, 107 government debt and the Great Recession (2009) 43 taxpayer view of (Ricardo) 38–9 government role in the economy anti-central planning view of Hayek 134–6, 140 Keynesian view 92–3, 94, 105–6 view of Adam Smith 9, 10, 16–18 view of Friedman 152, 155–7 Great Crash (1929) 98, 99 Great Depression (1930s) 19, 22–3, 85, 92 explanation of Friedman and Schwartz 150–1 influence on Friedman 148 influence on Keynes 99–100 role of the Federal Reserve 159 Great Recession (2009) 23 and government debt 43 arguments against protectionism 42 austerity versus stimulus debate 43–4, 140–1 Greece, sovereign debt crisis 113–14 Greenspan, Alan 111–12, 235 Grossman, Michael 212 Hansen, Lars Peter 160 Hayek, Friedrich (1899–1992) 110, 111, 119–42 business cycle theory 123–6 clash with Keynes 120, 126–31 collapse of the Soviet Union 140 early life and influences 120 emphasis on individual freedom 134–6, 140 explanation for boom and bust cycles 123–6 First World War 121 focus on supply side economics 127 influence in Eastern Europe 140 influence on George H.W.

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Sacred Economics: Money, Gift, and Society in the Age of Transition
by Charles Eisenstein
Published 11 Jul 2011

We call these dollarized economies because they have effectively surrendered any monetary independence. Proxy currencies like BerkShares are useful as a consciousness-raising tool to introduce people to the idea of complementary currencies, but by themselves they are ineffectual in promoting vibrant local economies. Complementary Fiat Currencies More promising are fiat currencies, such as Ithaca Hours, that actually increase the local money supply. Many Depression-era scrips also fall into this category. Essentially, someone simply prints up the money and declares it to have value (e.g., an Ithaca Hour is declared equal to ten U.S. dollars). For it to be money, there must be a community agreement that it has value.

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During the Depression, scrip was often issued by a mainstay local business that could redeem it for merchandise, coal, or some other commodity. In other cases, a city government issued its own currency, backed by acceptability for payment of local taxes and fees. The effect of fiat currencies is much more potent than that of proxy currencies because fiat currencies have the potential of putting money in the hands of those who would otherwise not have it. It is only inflationary if those accessing the money offer no goods or services in return.8 In extreme economic times, it is often the case that there are plenty of people willing to work and plenty of needs to met; only the money to mediate these transactions is missing.

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While they are usually denominated in dollar (or euro, pound, etc.) units, there is no currency board that keeps reserves of dollars to maintain the exchange rate. They are thus similar to a standard sovereign currency with a floating exchange rate. In the absence of local government support, because complementary fiat currencies are not easily convertible into dollars, businesses are generally much less willing to accept them than they are proxy currencies. That is because in the current economic system, there is little infrastructure to source goods locally. Locally owned businesses are plugged into the same global supply chains as everyone else.

pages: 491 words: 141,690

The Controlled Demolition of the American Empire
by Jeff Berwick and Charlie Robinson
Published 14 Apr 2020

The people in charge are going to bring this beast down on purpose to destroy the citizens that they have no respect for, to reset their fraudulent central banking system that has come to the end of its functional lifespan, and to hide their numerous and horrendous crimes against humanity… and then offer their solution. A one-world government, a one-world central bank, and a one-world digital, trackable fiat currency. But where does it all start, and how long has demolition been the end goal? “Begin at the beginning,” the King said, very gravely, “and go on till you come to the end.” – Lewis Caroll, Through the Looking Glass A ROTTING FOUNDATION America, Land of Opportunity Built On Lies Most people have heard the story of the founding of America by those looking to escape the overbearing nature and criminal behavior of the British Empire.

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Where are they going to get the extra $6 that they need to pay for the interest if there is only a total of $100 in the system? They will not be able to find the extra money because it does not exist. The only solution is to borrow the $6 from the bank, but what happens at the end of the next year? They have to borrow the $.36 of interest for the additional $6 that they borrowed the year before. This is known as the fiat currency system, and it is designed to force the central bank to constantly create more and more money in order for it to work. As more money is created and injected into the system, the value of the money shrinks a little bit each time because the supply is increased. This is how citizens lose 96.1% of the value of the United States dollar over a century.

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Someone offers their chickens for sale, another person comes to the market to buy a few chickens, they agree on a price and the deal is done. The real problems surface when one of the parties is trying to manipulate or rig the market in their favor, which inevitably happens due to human nature. The current financial system is a rigged game. From the fiat currency that is printed out of thin air, to front-running market order trades, to arbitrarily setting market rates, employing a “plunge protection team” to prop up the stock market when it dips below a predetermined level, to flooding the market with paper ETC contracts to drive down the physical price of gold, to insider trading before the release of important news.

pages: 337 words: 96,666

Practical Doomsday: A User's Guide to the End of the World
by Michal Zalewski
Published 11 Jan 2022

In the early 20th century, the world kept running into that very problem, experiencing a series of bank runs and economic contractions that forced governments to act. At that stage, outlawing fractional-reserve banking was no longer politically or economically tenable. A simpler alternative was to let go of gold and move to fiat money—an abstract currency that eschewed any pretense, however flimsy, of being tied to any physical commodity. In the era of fiat currency, a new breed of economists saw the role of the monetary authorities not in trying to peg the value of money to any known good, but in freely manipulating its supply and flow to smooth out economic hiccups or stimulate growth. For example, a failing bank could be propped up with newly conjured money, perhaps under the guise of the government purchasing obligations from the insolvent financial institution at a price that nobody else would willingly pay.

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People went on about their lives and paid the usual for eggs or milk, and by the time the freeze ended, they were accustomed to the idea that the “new,” free-floating dollar was worth about the same as the old, quasi-gold-backed one. A robust economy and favorable geopolitics did the rest, and so far, the American adventure with fiat currency has been rather uneventful—perhaps except for the fact that the price of gold itself skyrocketed from $35 per troy ounce in 1971 to $850 in 1980 (or, from $210 to $2,500 in today’s dollars). Well, one thing did change. Now better positioned to freely tamper with monetary policy, the regulators adopted a policy of intentionally increasing the money supply at a rate that slightly outstripped the organic growth in economic activity.

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To Rothbard, a free-market absolutist, all of our ills begin and end with the government’s insatiable urge to live above its means and to control every aspect of our lives; the banking system is complicit only to the extent that it conspires with and profits from this excess. But people of all ideological persuasions seem to agree on one thing: that the system, for whatever good it might have done, is rotten to the core. For decades, individuals who worried about the purported imminent collapse of fiat currencies flocked to the world of sleazy bullion peddlers who stoked the flames on late-night TV infomercials and on fringe radio shows. The buyers of silver and gold coin quickly became the butt of jokes for financial advisors who likened such behavior to betting against civilization and against human progress itself.

pages: 430 words: 68,225

Blockchain Basics: A Non-Technical Introduction in 25 Steps
by Daniel Drescher
Published 16 Mar 2017

• Not be controlled by one single central organization or state; otherwise it causes a serious conflict to the distributed nature of the blockchain. This list of properties reads like a wish list for the perfect world currency. Hence, it is no surprise that none of the existing fiat currencies fulfills these desired properties. A Detour to the Emergence of Cryptographic Currencies The previous section listed desired properties of an instrument of payment for compensating peers of a blockchain. The finding that none of the exist- ing fiat currencies fulfills these properties is a bit sobering because they are Blockchain Basics 187 desirable in their own right. A currency or an instrument of payment that has these properties would also be useful in many occasions other than compen- sating peers of a distributed system.

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As a result, it is impossible to provide a complete overview of all blockchain applications. For Blockchain Basics 227 that reason, this section presents a small selection of concrete blockchain application areas in which the blockchain is already used or may be used soon1: • Payments: Managing ownership and transfer of digital fiat currencies. • Cryptocurrencies: Managing ownership and creation of digital instruments of payment that exist independently from any government, central bank, or other central institution. • Micropayments: Transfer of small amounts of money that would be too costly by using traditional means of transfer

pages: 199 words: 64,272

Money: The True Story of a Made-Up Thing
by Jacob Goldstein
Published 14 Aug 2020

But the cypherpunks’ dream was to embed scarcity in digital money itself so that buyers and sellers wouldn’t need to trust any central institution. Back’s proposal was an elegant solution. Anyone who wanted hashcash had to put in some computational work to get it. The cost of the electricity to power that computation, tiny as it might seem, created scarcity. Chaum’s digital money was like fiat currency, controlled by a central bank. Back’s was more like gold, at least in one respect: just as anyone with the resources and the will could mine gold, anyone with the resources and the will could create hashcash. But there was also an essential way in which hashcash was not like gold—a way in which it wouldn’t work as the digital money the coders needed to make their cypherpunk dreams come true.

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But bitcoin also benefited from arriving on the scene in the middle of the financial crisis, a moment when hundreds of millions of people who had never paid much attention to the meaning of money suddenly found themselves much less trustful of trusted intermediaries. “The root problem with conventional currency is all the trust that’s required to make it work,” Satoshi wrote to a message board in February 2009. “The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts.” At a moment when trust was at a low point, bitcoin seemed to solve the problem of trusting other people to make money work.

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So he’d gotten a meeting with the finance minister to ensure that wouldn’t happen. Mosler had recently come to believe that most people fundamentally misunderstood how money worked. They were still stuck in a gold-standard mentality decades after the gold standard had disappeared. He pointed out that, unlike in the gold-standard world, a country that prints its own fiat currency, and borrows in that currency, never needs to default. It can always print more money to pay its debts. Printing more money can sometimes lead to inflation, Mosler knew. But it doesn’t always lead to inflation. He thought the essential thing for understanding an economy was not how much money the government was printing, but what was going on in the real world.

pages: 364 words: 99,897

The Industries of the Future
by Alec Ross
Published 2 Feb 2016

Bitcoin has encapsulated many of the contradictions and possibilities of digital currencies in a world still largely defined by national economies and governments. Its origin comes from ideological communities deeply skeptical of governments, traditional financial institutions, and “fiat currency” (money that draws its value from government law). Bitcoin has developed a new community around an online currency trying to circumvent these established institutions. A fiat currency fundamentally depends on trust. People must have a shared belief that the currency is ultimately worth something. The word fiat means “it shall be”: a pronouncement from on high that the currency has value.

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It called for the creation of the world’s “first decentralized digital currency.” Satoshi Nakamoto condemned state-based currencies: The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. Bitcoin represented a different effort to rebuild trust in the financial system. In the old model, established institutions functioned as an agent of trust, protecting parties from fraud.

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See also eBay Dorsey, Jack, 78, 170, 172, 217, 245 Down syndrome, 56 Dshell, 145–46 DuPont, 9, 163–64, 192 eBay: Bitcoin and, 98–99 coded markets and, 82, 90, 93 digital banking and, 77 evolution of, 96 trust and, 90, 92, 119 see also Donahoe, John Eli Lilly, 54 Enable Talk, 34, 213 Estonia, 5, 140–41, 191, 205–12, 214, 222, 233, 246, 248. See also Ilves, Toomas European Union (EU), 4, 19, 66, 104, 207, 210 extinct animals, 63–64, 240 ExxonMobil, 122 F-Secure, 134 Fatah, 81 Fazio Mechanical, 133 FBI, 109, 131, 173, 193 Federal Election Committee, 114 Federal Reserve, 111 fiat currency, 98–99. See also Bitcoin Fintech, 167 FireEye, 139 Fleming, John Ambrose, 124–25 FLT3, 46 Founder’s Fund, 119 four Ds, 30 Foxconn, 36–37, 41–42 fraud, 6, 99, 101, 103, 105–6, 117, 119, 161, 173–74 gambiarra, 233 Gates, Robert, 53, 127 Genentech, 59 General Motors (GM), 28 genetic testing, 56–58.

Mastering Blockchain, Second Edition
by Imran Bashir
Published 28 Mar 2018

Businesses can use the following logo to advertise that they accept bitcoins as payment from customers. bitcoin accepted here logo Various payment solutions, such as XBTerminal and 34 Bytes bitcoin Point of Sale (POS) terminal are available commercially. Generally, these solutions work by following these steps: The sales person enters the amount of money to be charged in Fiat currency, for example, US Dollars Once the value is entered in the system the terminal prints a receipt with QR code on it and other relevant information such as amount The customer can then scan this QR code using their mobile Bitcoin wallet to send the payment to the Bitcoin address of the seller embedded within the QR code Once the payment is received on the designated Bitcoin address, a receipt is printed out as a physical evidence of sale A Bitcoin POS device from 34 Bytes is shown here: 34 Bytes POS solution The bitcoin payment processor, offered by many online service providers, allows integration with e-commerce websites.

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Experts are recommending Howey Test as some criteria for any ICO to be considered a security. Another difference is that ICOs by design usually require investors to invest using cryptocurrencies and payouts are paid using cryptocurrencies, most commonly this is the new token (a new cryptocurrency) introduced by the ICO. This can also be Fiat currency, but most commonly cryptocurrency is used. For example, in the Ethereum crowdfunding campaign a new token, Ether was introduced. The name token sale for crowdfunding is also quite popular and both terms are used interchangeably. ICO are also called crowd sales. When a new blockchain based application or organization is launched, a new token can be launched with it as a token to access and use the application and also to gain incentives that are paid in the very same token that has been introduced by the ICO.

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When a new blockchain based application or organization is launched, a new token can be launched with it as a token to access and use the application and also to gain incentives that are paid in the very same token that has been introduced by the ICO. This token is released to the public in exchange of some already established cryptocurrency (for example, Bitcoin or Ethereum) or Fiat currency. The advantage is that when the usage of the application or product launched increases the value of the new token also increases with it. This way the investors who invested initially gain a good incentive. In the year 2017, ICOs have become a leading tool for raising capital for new start-ups.

pages: 542 words: 145,022

In Pursuit of the Perfect Portfolio: The Stories, Voices, and Key Insights of the Pioneers Who Shaped the Way We Invest
by Andrew W. Lo and Stephen R. Foerster
Published 16 Aug 2021

The coins were ring-shaped with a square hole in the middle, allowing them to be strung together, and continued to be minted until the end of the empire under Emperor Puyi in 1912. These coins (historically called “cash” in English) are important, because as with present-day money they were fiat currency, not backed by any precious metals such as gold but only having value because of decree and convention. Once coins became accepted as fiat currency and the weight and type of metal of the coin were no longer important, it was only a matter of time until paper currency became accepted. Banknotes, the most common form of currency today, originated in China during the Tang dynasty (618–907 CE).

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After King Louis XIV died in 1715 and France was in a state of bankruptcy, Law was appointed controller general of finances by young King Louis XV’s regent, the Duke d’Orleans. Law, as a friend of the French regent, was able to establish a bank authorized to issue fiat money, or paper notes, as legal tender, the first such full-scale use of fiat currency in Europe. Law also established the Mississippi Company to develop French territory along the Mississippi River in North America. Later he was granted a twenty-five-year monopoly on colonial trade as well as on the beaver fur trade in Canada and the ability to collect French taxes in return for taking over France’s public debt, as part of a system or, as some later argued, a scheme.

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(Shiller), 232–33 dragon risk, 221 drawdown, Scholes on, 168 Drexel Burnham Lambert, 236–37 Duffie, Darrell, 190 duration targeting, 214–15 Dutch East India Company, 8–9 Econometrica, 37, 71 “The Economic Role of the Investment Company” (Bogle), 116 Economics: An Introductory Analysis (Samuelson), 114, 126, 228 economics: finance vs., 34–35; financial, as emerging field, 144 Eendragt Maakt Magt, 14 efficient market hypothesis (EMH), 93–99; adaptive markets hypothesis and, 320; advocates of, 82; cost matters hypothesis compared with, 130–31; critics of, 82; debate over, 97–98; expansion of concept, 98–99; Fama on market efficiency and crashes and, 245–46; Jensen on, 81; joint hypothesis problem and, 96–97; LeRoy and Porter on, 234–35; random walks and, 82–83; rationality and, 83–84; Shiller on, 82, 97, 232–36; versions of, 94–96, 97 efficient portfolios, 32 Einstein, Albert, 83, 227 The Elements of Investing (Ellis and Malkiel), 276 Ellis, Charles (Charley), 255–80, 323; on active management, 267, 276; on avoiding making mistakes, 265–66, 278; connections to other pioneers, xiv; on diversification, 277; on domestic bonds, 277; at Donaldson, Lufkin & Jenrette, 260–62; early life of, 255–56; education of, 256–57, 259–60; on financial advisers, 280; on goal setting, 267; Greenwich Associates and, 262–64; on index funds, 266, 274–76, 277, 279, 318; Perfect Portfolio of, 276–80, 318; on performance investing, 261–62, 273–74; publications of, 255, 260, 261–62, 264, 266–67, 272–73, 274–75; relationship with Swensen, 270–71; at Rockefeller Brothers, 258–59; on savings, 276, 278–79; on taxes, 279; “ten commandments” for individual investors and, 268–69; truths about investing and, 267–68; on underperformance, 272–73; Yale University endowment fund and, 269–71 Ellis, Harold, 260 endowment funds, 5 endowment model, 220–21 Endowment Model of Investing: Return, Risk, and Diversification (Leibowitz, Bova, and Hammond), 220 Enterprise Fund, 117 equity premium, Siegel on, 288–91 Ernst, Harry, 85 exchange-traded funds (ETFs): Markowitz on, 310; Sharpe on, 311; Siegel on, 304–5; traditional index funds vs., 136–37 expected utility theory, 20 Explorer Fund, 135 Extraordinary Popular Delusions and the Madness of Crowds (Mackay), 9 Extraordinary Tennis for the Ordinary Tennis Player (Ramo), 264–65 Fama, Eugene (Gene), 81–112, 189, 305; academic career of, 87–88; on active management, 112; agency problem and, 108–9; asset predictability and, 105–7; association with Dimensional Fund Advisors, 110; beta and, 101–3; breadth and depth of contributions to finance profession, 107–11; on bubbles, 243–46; on capital asset pricing model versions, 70–71; connections to other pioneers, xiv; database use by, 109; dissertation of, 87, 88; dividends research of, 109; early life of, 84; education of, 84, 85–87; former students of, 109–10; key influences on, 86–88; as Nobel Prize winner, 243, 244; Perfect Portfolio of, 111–12, 312; publications of, 88, 93–94, 108; relationship with Thaler, 245; sports interest of, 84–85; stock split research of, 90–93; on students at Chicago, 143; three-factor model of, 102–5 Fannie Mae, 249 fat-tail events, 89–90 Faulstich, Ginny, 231 Fear Index. See Volatility Index (VIX) Federal Reserve, Greenspan as chairman of, 236–39 fees: Ellis on, 274; Sharpe on, 79–80 fiat currency: Chinese bronze coins as, 6; first full-scale use in Europe, 11 finance: behavioral (see behavioral finance); economics vs., 34–35; mathematical, Merton’s work in, 180 financial advisers: Ellis on, 280; Sharpe on, 78; Shiller on, 253 Financial Analysts Journal, papers to celebrate sixtieth anniversary of, 218 financial crises: Minsky’s model of, 240–41; of 2007–2009, derivatives’ role in, 166 financial district, earliest known, 3 financial economics, as emerging field, 144 Financial Engines, 75 financial goals: achieving, investments and, 332; levers to help in achieving, 331–33; setting, Ellis on, 267; size of, 332 financial innovations, Shiller on, 253–54 financial science, Merton and, 186–87 First Index Investment Trust, 113, 123, 124 Fischer, Stanley, 178 Fiserv, 248 Fisher, Irving: on stock market in 1929, 15–16; The Theory of Interest, as Determined by Impatience to Spend Income and Opportunity to Invest It, 15 Fisher, Lawrence, 90, 147, 158 Foo, Justin, 16 Ford, Henry, 227 forward exchange rate, Siegel on, 284–85 Foundations of Economic Analysis (Samuelson), 178 Foundations of Finance (Fama), 108 Freddie Mac, 249–50 Freeman, Harold, 178 French, Ken, 97, 291; beta and, 101–3; three-factor model of, 102–5 Friedman, Lawrence, 201 Friedman, Milton, 20; on index funds, 347n46; influence on Siegel, 283–84; Markowitz’s thesis defense and, 34–35; as Nobel Prize winner, 22; publications of, 20, 284; relationship with Siegel, 285 Friedman, Rose, 285 Fryer, Sarah, 202, 215–16 The Future for Investors: Why the Tried and the True Triumphs over the Bold and the New (Siegel), 298–300, 305 futures contracts.

pages: 183 words: 17,571

Broken Markets: A User's Guide to the Post-Finance Economy
by Kevin Mellyn
Published 18 Jun 2012

Countries could not 79 80 Chapter 4 | Life After Finance effectively debase their currencies or generate inﬂation without having to pony up real money: gold.The only way out was either default or a negotiated restructuring with the bondholders, both wrenchingly embarrassing for any country. With a regime of pure ﬁat currencies—that is, money that is only worth something because the government says it is worth something and the market has to go along—governments can get away with a lot more. Above all, two global wars in which the government exerted a degree of economic control previously unimaginable has made the publics of all advanced economies amenable to accepting a level of regulation and intervention in ﬁnancial markets that makes ﬁnancial repression seem normal.

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This gave us 40 years of global economic expansion punctuated by credit bubbles and ﬁnancial crises as nation states abused their ability to create money out of thin air to ﬁnance growth. The timing is now perfect for an epic global debt crisis. In Coggan’s view, which somewhat mirrors Chapter 1 of this book, the selfindulgent “welfare states” of the European Union have arrived at this precipice ﬁrst and most desperately through the folly of creating a ﬁat currency without a state or a lender of last resort, in the hope that the pooling of currencies would eventually force a pooling of sovereignty. They may well get the worst of both worlds: more unaccountable power in Brussels and growth-killing austerity in the unlikely event the euro is saved. The situation in the United States is less dire, but only slightly.The United States is trying to catch up with Europe in creating unaffordable social entitlements funded by debt even as the consequences of this for Europe become clearer by the day.

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The limits of this export-driven model was clearly recognized in the latest ﬁve-year plan, which seeks to rebalance the export-driven growth model that has driven progress up to now, but at an increasing cost to social harmony.The time necessary for the envisioned transition is very limited given the impact of the crisis on Western demand and the shaky position of the Western credit system and ﬁat currencies, not Broken Markets to mention political support for globalization. Nobody has a bigger stake in the global ﬁnancial system. But will it take up the role of its hegemon? It is in fact likely that China, despite being the world’s largest exporter and creditor, will for some time at least contrive to avoid the role of hegemon, especially the burden of reserve currency issuer and lender of last resort.

pages: 269 words: 79,285

Silk Road
by Eileen Ormsby
Published 1 Nov 2014

Bitcoin exchanges (much like stock exchanges) allow users to buy and trade bitcoin online, but those who want to remain anonymous will use cash over the counter at a local bank or exchange cash for bitcoin credit person-to-person. Pages of financial tomes have been dedicated to whether bitcoin should be categorised as a currency or a commodity, how it is created and traded, and its implications for fiat currencies, all of which are well beyond the scope of this book. The important feature of bitcoin is that it is both completely transparent and, if users know what they are doing, completely anonymous. It is transparent in that anyone can view any transaction that has occurred in any account (or ‘wallet’) at any time they want.

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But this first post gave some insight into his motivation and politics, and especially his thoughts about banks’ roles in the global financial crisis of 2008: The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.

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But some of these internet detectives had a lot of time on their hands, and after thirty-four pages of posts on the forum, the community found compelling – if not completely conclusive – evidence that the wallet was indeed owned by Silk Road, or by somebody who had a very close connection to it. It was fascinating, and people speculated that all anyone needed to do was to keep an eye on any attempts to move bitcoin from that wallet to an exchange where it would be cashed out for fiat currency and they would find Dread Pirate Roberts. At its height, the wallet contained 5 per cent of all bitcoin. But in August, the 500,000 bitcoins – worth by this time closer to US$5 million thanks to an increase in the bitcoin price – disappeared from the wallet. The trail ran cold on the Bitcointalk forum until it was picked up again by a group of researchers at the University of California, who later published a paper called ‘A fistful of bitcoins’.

Where Does Money Come From?: A Guide to the UK Monetary & Banking System
by Josh Ryan-Collins , Tony Greenham , Richard Werner and Andrew Jackson
Published 14 Apr 2012

Regional or local money systems Finally, there are a range of historical and existing non-state based ‘local’ or ‘community’ currencies. These are exchange and payment systems whereby money is issued by non-state and non-bank actors. Such currencies have been described as ‘common tender’41 to distinguish them from fiat currencies or legal tenders and are also known generically as ‘complementary currencies’ to denote that they work in tandem with national fiat currencies rather than aiming to entirely replace them. They often specifically focus on fulfilling the ‘medium of exchange’ function of money and have provisions to prevent people hoarding the currency as a store of value. The best known examples are from the Great Depression era where in both the United States and Europe, ‘stamp scrip’ currencies were issued to support businesses and local production as national currencies became scarce because of deflation.42 One of the survivors of this period is the Swiss WIR credit-clearing circle created in 1934.

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In this section we briefly review these different models and their relation to monetary policy. When countries adhered to the gold standard, their exchange rate was determined by an agreement to exchange notes for a fixed quantity of gold. However, it is also possible to have a fixed exchange rate regime with a fiat currency, as was the case before in Europe just before the introduction of the euro. When exchange rates are not freely set by markets, the most common arrangement is that of a pegged regime. Here the central bank sets the price of the domestic currency in terms of a foreign currency. To maintain this peg, sufficient foreign exchange reserves are required, and sufficient access to the securities in which the foreign exchange reserves are held.

pages: 387 words: 112,868

Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money
by Nathaniel Popper
Published 18 May 2015

In a February posting on the website of the P2P Foundation, a group dedicated to decentralized, peer-to-peer technology, Satoshi led off by talking about problems with traditional, or fiat, currencies, a term for money generated by government decree, or fiat. “The root problem with conventional currency is all the trust that’s required to make it work,” Satoshi wrote. “The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” Currency debasement was not an issue the Cypherpunks had discussed much, but Satoshi made it clear with this posting, and not for the last time, that he had been thinking about more than just the concerns of the Cypherpunks when designing the Bitcoin software.

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The Argentinian hoteliers might not have been libertarians, but they would have easily understood Satoshi’s early writing about Bitcoin, which explained that “the root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” Mismanagement of currencies was a part of daily life in Argentina. The conference in Argentina attracted many of the more ideologically minded Bitcoin followers from around the world. The old team from BitInstant gathered for a reunion of sorts and the team members were all given prominent speaking spots.

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At the time she went to her academic colleagues and found that “none of them could wrap their head around it.” That provoked her to look more deeply, and as she did, she slowly came to understand the potentially enormous implications of the technology: “We all hear the store of value. Here’s a way to move money and to buy things outside the law. Maybe it’s a competitor to fiat currency. Is it a disrupter to the traditional banking sector; an enabler of e-commerce and remittances; a superior internal ledger system for multinationals? That’s not what all the reporters are asking about but that’s another possibility that we see. “By the time I felt like I really understood it I was really excited to share that knowledge, and discuss it with a wider audience,” she said.

pages: 466 words: 127,728

The Death of Money: The Coming Collapse of the International Monetary System
by James Rickards
Published 7 Apr 2014

The world of $9,000-per-ounce gold is also the world of $600-per-barrel oil, $120-per-ounce silver, and million-dollar starter homes in mid-America. This new gold standard would not cause inflation, but it would be a candid recognition of the inflation that has already occurred in paper money since 1971. This one-time price jump would be society’s reckoning with the distortions caused by the abuse of fiat currencies in the past forty years. Participating nations would need legislation to nominally adjust fixed-income payments to the neediest in forms such as pensions, annuities, social welfare, and savings accounts up to the insured level. Nominal values of debt would be left unchanged, instantaneously solving the global-sovereign-debt-and-deleveraging conundrum.

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The value of each bitcoin fluctuates based on supply and demand, but it had exceeded $700 per bitcoin in November 2013. Bitcoin’s long-term viability as a virtual currency remains to be seen, but its rapid and widespread adoption can already be taken as a sign that communities around the world are seeking alternatives to the dollar and traditional fiat currencies. Beyond the world of alternative currencies lies the world of transactions without currencies at all: the electronic barter market. Barter is one of the most misunderstood of economic concepts. A large economic literature is devoted to the inefficiencies of barter, which requires the simultaneous coincidence of wants between the two bartering parties.

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The causes of declining confidence in the dollar are the dual specter of inflation and deflation, the perception on the part of many that the dollar is no longer a store of value but a lottery ticket, potentially worth far more, or far less, than face value for reasons beyond the holder’s control. Panic gold buying, and the emergency issuance of SDRs to restore liquidity when it comes, will signal the stage of a rapid loss of confidence. Volcker was right in his assertion that confidence is indispensable to the stability of any fiat currency system. Unfortunately, the academics who are now responsible for monetary policy focus exclusively on equilibrium models and take confidence too much for granted. ■ Failure of Imagination Following the 9/11 attacks in New York and Washington, D.C., the U.S. intelligence community was reproached for its failure to detect and prevent the hijacking plots.

pages: 263 words: 92,618

Going Infinite: The Rise and Fall of a New Tycoon
by Michael Lewis
Published 2 Oct 2023

It turned out to be thrilling, with Brady leading yet another last-minute game-winning touchdown drive. Only Gabe and Ryan Salame watched it, however, as by then Sam was back in the Bahamas, to play the end of another game. The run on FTX was in its own way spectacular. There had been $15 billion in customer deposits on the exchange. Or there was meant to be that amount, held in either fiat currency or bitcoin and ether. On a normal day, $50 million or so either came into or left the exchange. Each day between November 1 and November 5, $200 million fled. By late Sunday night, the sixth, $100 million was leaving every hour. FTX customers withdrew $2 billion that day, and then tried to withdraw another $4 billion on Monday.

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Ordinary trading loans made by FTX to Alameda constituted a small fraction of the losses to customers; on their own, they wouldn’t have posed a problem. The bulk of the customers’ money inside of Alameda that should have been inside FTX—$8.8 billion of it, to be exact—resided in an account that Alameda had labeled fiat@. The fiat@ account had been set up in 2019 to receive the dollars and other fiat currencies sent by FTX’s new customers. Alameda Research had created the account only after FTX had been unable to get its own bank accounts. Back in 2019, no real bank in the United States had been willing to offer its services to a new international crypto exchange. The crypto entities that they did bank, like Alameda Research, usually disguised their association with crypto.

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So far as Ray could see, which was not very far, no money was moving. “There was no sheet of paper with bank account information on it,” he said. Inside scores of small banks and far-flung crypto exchanges, FTX or Alameda or one of the more than one hundred other corporate entities they controlled held many dollars and other fiat currencies. There were also, on some Amazon server, passcodes that gave you access to virtual wallets with crypto inside. “The wallets were in the cloud,” said Ray. “You lose the passcodes, you lose the money.” If the money was hard to find, it was in part because there was no person inside of FTX—at least no person Ray was willing to speak with—in charge of knowing where it all was.

pages: 209 words: 53,236

The Scandal of Money
by George Gilder
Published 23 Feb 2016

Szabo’s basic point is the same one I contested with Friedman in China. In economics, velocity rules. In moral terms, velocity equals our freedom. We rule, as we learn. Chapter 8 Where “Hayeks” Go Wrong From Italy’s financial community arises a different critique of prevailing moneys, one that applies not only to fiat currencies like the dollar and the euro, but also to gold and its digital imitators. Let us take this critique seriously and see what we learn about it using our new information theory of money. Ferdinando Ametrano has seen currencies come and go. He can look the dollar in the face and detect Botox in its apparently smooth Ben Franklin jowls.

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Sounding like Steve Forbes, Ametrano stresses, “When the value of money changes . . . it is not just the value of one good that is changing, but the unit against which every other good is measured.” He warns, “If high inflation is money’s heart attack, persistent deflation is money’s cancer.”2 Both gold and bitcoin, he declared, show a fatal deflationary bias. “In the last twenty years,” Ametrano points out, “it has become more and more clear that the banking system built around fiat currencies is not adequate to the new digital realm defined by mobile communication, Internet, and social networks. . . . As everybody gets used to carrying around in their mobile phones powerful computers, hours of video and audio entertainment, and immediate access to an immense amount of information, the expectation has arisen to be able to pocket a whole efficient and fair monetary, financial, and banking system along with it.”3 Yet, in his view, gold and digital gold cannot play this role because of their deflationary bias.

pages: 180 words: 55,805

The Price of Tomorrow: Why Deflation Is the Key to an Abundant Future
by Jeff Booth
Published 14 Jan 2020

You could expect that if you made a big bet and were wrong, you would be wiped out—but if you were right, your hard work, ingenuity, or risk taking would be rewarded. In game theory, we could call this a dominant cooperative strategy, and it dominated for the better part of the twentieth century. The rise of fiat currencies that could be manipulated domestically and the bailout in 2008 changed that strategy to one where the players whose bad bets caused the crisis, instead of being wiped out, were rewarded handsomely. Capitalism’s long-dominant cooperative strategy was replaced by a non-dominant strategy, crony capitalism, where the cheaters won.

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Again, as game theory predicts, the agreement showed that when countries work together with a clear understanding of the rules, prosperity was enhanced for all. But in 1971, the United States unilaterally terminated a critical aspect of the system—the conversion of the US dollar to gold—and with that change created a system where the US dollar, a fiat currency subject to domestic agenda, was the backbone of the world’s economic order. From here, Bretton Woods effectively ended. Since the US dollar became the primary currency of the world without a peg to gold, it gave the US tremendous influence in global affairs. It also enabled a single country to change the rules by printing more currency, and therefore set the stage to return to where we are now, where each country manipulates its currency for political gain while worsening a framework for fair trade.

pages: 524 words: 143,993

The Shifts and the Shocks: What We've Learned--And Have Still to Learn--From the Financial Crisis
by Martin Wolf
Published 24 Nov 2015

What to do about it is the theme of the Conclusion. The Eurozone is a large multinational economy – the second biggest economy in the world, after the US. In 2012, for example, Eurozone GDP, at market prices, was a little short of 80 per cent of that of the US. The Eurozone also has a floating fiat currency that no other important country targets (unlike the US dollar). It is reasonable therefore to assume that the external balance is market determined. Moreover, as it happens, since the creation of the Eurozone the external current-account surplus has been a small share of GDP: internal imbalances have been far more significant than external ones, at least until after the crisis (see Figure 34).

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One possibility would be to continue to purchase assets from the non-bank private sector, thereby raising the latter’s holdings of cash and increasing the reserves of banks. In order to prevent this from leading to the shrinkage of bank holdings of other assets, the regulator would need to specify that the holding of central-bank reserves does not count against a bank’s capital. This obviously makes sense, since default by the issuer of a fiat currency is inconceivable. Sixth, it is objected that the combination of bail-inable debt (debt that is contractually available for conversion into equity if required) with effective resolution regimes is an adequate substitute for higher capital requirements, while allowing banks to continue to benefit from the tax deductibility of interest.

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On the contrary, the evidence from the recent crisis is that the consequences for financial stability in the US are highly adverse. It seems likely that the Chinese government will have that view of a comparable role for the renminbi. It surely should do so. Maybe, the possibility of a transition to the kind of monetary regime Keynes envisaged may now emerge. It is at least clear that the world of floating fiat currencies, one of which is a reserve currency, is highly unstable. The experience already forced a drastic shift in the policies of emerging and developing countries after 1997, as this book has noted (see Chapter Five). Now the owner of the monetary and financial dog has been bitten too. The system needs to be changed.

pages: 585 words: 151,239

Capitalism in America: A History
by Adrian Wooldridge and Alan Greenspan
Published 15 Oct 2018

Called “Erlanger Bonds” after the French firm that underwrote the issues, these bonds continued to sustain their value long after it became clear that the South was losing the war in large part because the option to buy cotton gave investors a hedge against war risk.34 In general, though, it made a mess of both fiscal and monetary policy. Efforts to raise money through taxation were feeble at best: only 6 percent of the $2.3 billion in revenues came from a combination of export and import duties together with a “war tax” on commodities. Both the North and the South printed fiat currency in order to pay soldiers and buy supplies. But the North was much more restrained than the South. The North’s “greenbacks” (so called because of their color) still retained about 70 percent of their face value by the end of the war. The Confederacy’s currency lost value much more quickly, reducing the army’s ability to buy military matériel and unleashing hyper-inflation of up to 9,000 percent (see chart below).

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But even if printing money worked in the short term, it invariably produced inflation and retrenchment in the longer term: George Washington’s continentals allowed him to keep his troops paid and provisioned for several years after being issued in 1775, but eventually became worthless. The Civil War was an extreme example of this pattern. It took years of painstaking work to restore the value of America’s currency after both the North and the South introduced fiat currency during the war. The South’s experience proved particularly disastrous: printing half a billion dollars’ worth of “graybacks,” which were not convertible into gold, produced such a severe bout of inflation that money was quickly rendered worthless. Southerners couldn’t trade with people in the rest of the country, let alone across the world.

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Grover Cleveland halted the run on the Treasury’s gold supplies by pressing Congress to repeal the Sherman Act in 1893. Conservatives championed gold as a bulwark not just against economic chaos but against civilizational collapse. The Chicago Tribune, a leading Republican newspaper, compared the advocates of fiat currency to the revolutionaries of the Paris Commune. The Illinois State Register, a leading Democratic paper, described them not just as “inflationists” but as “lunatics.”8 The more that old certainties dissolved, the more desperately liberals clung to the gold standard. The gold standard thus became self-vindicating: pleas that the gold standard was harming the economy were treated as proof that it was “working.”9 Critics of the gold standard have likened this worship of the yellow metal to a primitive fetish.

pages: 700 words: 201,953

The Social Life of Money
by Nigel Dodd
Published 14 May 2014

Peter Praet, a member of the European Central Bank’s executive board, gave a speech in October 2012 that included an illustration of the evolution of money in the form of a “linear parable, which leads from a barter economy to a system with commodities as a medium of exchange; and from there to a fiat currency regime”; see http://www.ecb.int/press/key/date/2012/html/sp121010.en.html. There are exceptions, such as the Oesterreichische Nationalbank, whose website includes a page (see http://archive-at.com/page/2043297/2013–05–08/http://www.oenb.at/en/ueber_die_oenb/geldmuseum/allg_geldgeschichte/ursprung/the_origin_of_money.jsp) on the origins of money that references not only Menger but competing theories by Keynes, Knapp, and Laum.

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Her core thesis about earmarking suggests that all forms of money are differentiated according to use and fungibility in ways that, according to Polanyi, were characteristic of special-purpose monies alone. By contrast, Zelizer argues that all forms of money—primitive and modern, local as well as state fiat currencies, and cash alongside virtual money—are shaped from the inside by the social practices and cultural values of their users. Polanyi represents what she calls the moral critique of the “boundless market” (Steiner 2008: 99). She rejects this critique because in offering no alternative model of the market, it simply reproduces the idea that markets are powerful and autonomous forces that we can only obstruct, not reconfigure.

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According to Nakamoto, however, the trust-based model for electronic transactions suffers from inherent weaknesses associated with increased transaction costs, e.g., small, casual transactions are discouraged: The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.23 Nakamoto’s proposals sought to get rid of this central authority by using a block chain (shared by all computers or nodes within the network) through which the transaction history of each coin could be publicly known.24 Privacy would be maintained, meanwhile, by encrypting the public keys, ensuring that the history of every “coin” is anonymized.

pages: 710 words: 164,527

The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order
by Benn Steil
Published 14 May 2013

Such surrenders,” he said, were “utterly inconceivable today in favor of a mere nineteenth century laissez faire, unconcerned with national levels of employment and economic activity.”17 The political stage was now set for a reform to Bretton Woods that could mean all things to all governments, but nothing to the markets. This was the IMF’s Special Drawing Right, or SDR, approved by the fund’s board of governors in 1968.18 For supporters of Keynes’s bancor vision, the SDR was a first small step on the road to a truly international fiat currency. For France and opponents of the dollar-based Bretton Woods system, the new gold-linked instrument was a step toward dethroning the dollar and restoring gold as the primary international reserve. And it was for the United States a means of buying time to halt the drain on American gold reserves—an expedient to supplement the new policy of limiting gold transactions to monetary authorities, which could ostensibly be bullied into not converting dollars for gold.

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The dollar still accounts for 60 percent of global foreign exchange reserves (down from 70 percent a decade ago), and even 75 percent of global imports from countries other than the United States.39 During the 2008 financial crisis, the Fed was able to take extraordinary actions to support the domestic credit markets; in contrast, central banks from Sweden to Australia were obliged to sell foreign assets for dollars to do the same.40 At present, the United States has no need to accommodate calls for it to sacrifice its exorbitant privilege to some vague vision of the global good. It will only waver when the market initiates a clear shift toward alternatives. But credible alternatives are in short supply at present. The euro is in the midst of an existential crisis that has fueled grave doubts as to whether supranational fiat currencies of any sort are viable. As for SDRs, they currently represent less than 3 percent of global reserves, and there is no private trade invoicing, borrowing, or lending taking place in them.41 Until that changes, there is little incentive for central banks to hold much more of them. Paradoxically, although it was Keynes who argued for, and White who fiercely resisted, a supranational reserve currency in the run-up to Bretton Woods, such a currency would have far greater viability in a world dominated by state trading—of the sort practiced by the former Soviet Union, and toward which White privately believed the world was moving.

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There is, finally, it is worth noting, a small but passionate constituency, curiously based mainly in the United States, for a return to some form of global gold standard. Though there is precious little evidence that any government would, or could, today live by its strictures, which require acceptance of deflation as a natural, and indeed necessary, periodic occurrence, a generalized loss of confidence in fiat currencies could provoke changes in public and private practice. Central banks around the world, in both rich and poor countries, have been reaccumulating gold reserves, reversing the trend of the 1990s, and governments could at some point seek to settle trade balances with it. Gold is used as collateral in derivatives transactions.

pages: 231 words: 64,734

Safe Haven: Investing for Financial Storms
by Mark Spitznagel
Published 9 Aug 2021

The box is the thing that's so cool and impressive, and worthy of our respect. It will change the world. But the stuff inside those boxes, just by virtue of the secure, convenient, cool boxes, is now presumed to have value—by decree or, dare I say, by fiat. (The economist Robert Murphy has even argued that in Mises's framework, we have no choice but to call crypto fiat currencies.) Moreover, bitcoin isn't even ultimately anonymous; the technical term is that it's pseudonymous, meaning that the owner of each bitcoin is public knowledge at any moment, although it's not obvious which human is tied to each address. But it's quite traceable, nonetheless. Worst of all, as a highly speculative vehicle, it is a symptom of (and, I would argue, even inseparable from) the liquidity‐fueled environment that created it.

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See also Hypothesis(—es) conditions of, 169 null hypotheses in, 162–163 payoff profiles for, 129–136 Explicit costs, 135, 153, 156–157 Exposition of a New Theory on the Measurement of Risk (Daniel Bernoulli), 31–32 F Fair value: of any wager, 34–35 of Petersburg wager, 42–43 Fallacies: affirming the consequent, 21, 163 denying the antecedent, 21 errors of omission and commission, 154, 170 false equivalence, 147–148 ludic, 25 in narrow framing, 153–155 prospective, 113–114 retrospective, 113–114 safe haven, 194 type I and type II errors, 169–170 False equivalence fallacy, 147–148 False negatives, 170 False positives, 170 Falsification, 164, 167–170 Falsification principle, 19 Fate, 196–197, 199–201 “Fat the Butch,” 23 Fermat, Pierre de, 23 Feynman, Richard: on being wrong, 189 on consequences of guesses, 129 on looking for new laws, 26 on modus tollens, 18 on philosophy of science, 165 on physics and sex, 17 on scientific method, 165 Fiat currencies, 182 First principles in investing, 13–17 Fleming, Ian, 36 Forecasting, 12–13 Fortune's Formula (Poundstone), 81 Fractional Kelly bet size, 83 Framing, 151–158 Frequentist perspective, 23–24 Frost, Robert, 63 Fuller, Buckminster, 157–159, 197 Functional essentialism, 102, 105 G Galileo, 23 Gambling devices, 22–25.

pages: 52 words: 13,257

Bitcoin Internals: A Technical Guide to Bitcoin
by Chris Clark
Published 16 Jun 2013

Bitcoin Stack Exchange, May 8, 2012. http://bitcoin.stackexchange.com/questions/3600/why-are-bitcoin-addresses-hashes-of-public-keys [24] Raulo, "Optimal pool abuse strategy," February 4, 2011. http://bitcoin.atspace.com/poolcheating.pdf Notes 1Monetary inflation is a sustained increase in the supply of money, which typically results in price inflation. It is a serious risk factor for fiat currencies because governments often produce money excessively, causing perpetual price inflation. 2The creator of Bitcoin defines a bitcoin as a "chain of digital signatures" in the public ledger known as the block chain.[1] 3The Bitcoin source code can be found at https://github.com/bitcoin/bitcoin 4According to the Bitcoin Wiki, the second biggest bitcoin based company is the underground drug website known as the Silk Road.[3] The sales figures were estimated by Carnegie Mellon computer security professor Nicolas Christin.[4] Six of the other businesses in the top 20 largest are gambling related.[3] 5The chart is from bitcoincharts.com 6See https://en.bitcoin.it/wiki/Tor 7These are foreign exchange fees, not Bitcoin transaction fees (which are much smaller). 8There is a 1 in 4.29 billion chance that a mistyped address passes the checksum test.

pages: 236 words: 77,735

Rigged Money: Beating Wall Street at Its Own Game
by Lee Munson
Published 6 Dec 2011

Is this just marketing something so Wall Street has a product to pitch to gold bugs and everyone else who wants to dabble in the craze? As contempt for the government and Wall Street continues to grow with every new fiscal bailout or debt crisis, gold will continue to have appeal to those who distrust traditional securities like stocks and bonds or those who just want to protect themselves against fiat currency. Let’s go on a journey, starting with the historical use of gold. Historical Use of Gold There is a fundamental reason gold has been in circulation for so long. It’s a store of wealth that is universal and can’t easily be destroyed. It doesn’t tarnish. You can melt it down to create different quantities.

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This made it easier to go off of the standard 15 years later. Once the gold was out of citizen’s pockets, central banks can devalue and control the currency with the wave of a pen. The Gold Reserve Act of 1934 did just this. It changed the price of gold from $20.67 just 34 years earlier to $35 in one day! It takes a fiat currency months, if not years, to lower interest rates, print tons of money, and over-borrow to lose 40 percent of its value. Only a year earlier, Executive Order 6102 had been signed by the Roosevelt White House, forcing citizens to turn in their gold for $20.67 per ounce. The 1934 act, while reiterating the illegality of ownership of gold, changed the price per ounce to a level where it would stay in effect until 1968.

pages: 254 words: 76,064

Whiplash: How to Survive Our Faster Future
by Joi Ito and Jeff Howe
Published 6 Dec 2016

Bitcoin’s decentralized design, which relies on CPUs and cryptographic algorithms rather than central banks and government authority, was apparently inspired by Satoshi’s distrust of traditional financial transactions. In an essay describing the system, he wrote, “The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.” He may have embedded another comment on his motivation for creating the cryptocurrency into the genesis block, in a parameter that reads, “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”22 Just days after the creation of the genesis block, which produced fifty bitcoins, Satoshi released the first version of the open-source Bitcoin software platform.

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New Liberty Standard established an exchange rate in October 2009 (1,309.03 bitcoins to the dollar, based on the cost of the electricity needed to mine bitcoins at the time).13 In February 2010, the Bitcoin Market became the first Bitcoin currency exchange—a place where bitcoins could be purchased with fiat currencies, or converted into more traditional forms of money. May 2010 saw the first real-world Bitcoin transaction, when Laszlo Hanyecz of Jacksonville, Florida, offered 10,000 BTC for two pizzas. Though the price seemed reasonable at the time, amounting to about $25, the same 10,000 bitcoins would have been worth more than $2 million in early 2015.14 That pizza purchase came the same year as the rise of the most famous, or infamous, Bitcoin exchange—Mt.

pages: 464 words: 139,088

The End of Alchemy: Money, Banking and the Future of the Global Economy
by Mervyn King
Published 3 Mar 2016

Later banknotes from the Ming dynasty in China were made from the bark of mulberry trees – the paper is still soft to the touch today.11 The penalty for counterfeiting was death – as advertised on the notes themselves.12 If not backed by gold or some other commodity, paper money is what is known as a pure ‘fiat currency’ – it has no intrinsic value and, crucially, cannot be exchanged for gold or any other valuable commodity at the central bank. It is useful only insofar as other people accept it at face value in exchange for goods and services, and its value depends upon the trust people have in it. The earliest western experiment with paper money was conducted in the United States – not the new post-revolutionary nation, but the pre-revolutionary colonies on the eastern seaboard.

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Students at Harvard College met their bills by paying in ‘produce, livestock and pickled meat’.14 There was a strong incentive to find a way to create a new form of money. In 1690, Massachusetts started to issue paper money and other colonial governments followed. In part the paper money thereby created was backed by explicit promises to redeem the notes in gold or silver at specified future dates, but partly it was a pure fiat currency.15 This was a monetary experiment on a grand scale. As that great man Benjamin Franklin wrote in 1767: Where the Sums so emitted were moderate and did not exceed the Proportion requisite for the Trade of the Colony, such Bills retain’d a fixed Value when compar’d with Silver without Depreciation for many Years … The too great Quantity has, in some Colonies, occasioned a real depreciation of these Bills, tho made a Legal Tender … This Injustice is avoided by keeping the Quantity of Paper Currency within due Bounds.16 The issuing of such colonial paper money did not, on the whole, prove inflationary.17 By and large, the colonists understood Franklin’s admonitions and created sufficient paper money to meet the needs of commerce but not so much as to generate high inflation.

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For ten years, therefore, until the invasion in 2003 by the United States and its coalition partners, Iraq had two currencies. In the south the Saddam dinar was issued by the official government of Iraq. In the north the Swiss dinar circulated, even though backed by no formal government or central bank, nor any law of legal tender. For a fiat currency this was an unusual situation. Whatever gave the Swiss dinar its value did not derive from the official Iraqi government, nor indeed from any other government.34 Although there was little or no trade between northern and southern Iraq, both the Swiss and Saddam dinars were traded against the US dollar.

pages: 601 words: 135,202

Limitless: The Federal Reserve Takes on a New Age of Crisis
by Jeanna Smialek
Published 27 Feb 2023

Looking to fund the expensive conflict, President Lincoln’s government borrowed heavily and issued paper notes not immediately backed by gold—so-called greenbacks—between 1862 and 1865.[27] Because the government could not guarantee their convertibility to existing gold reserves, the notes were at least closer to being a fiat currency, one that depended on the faith and credit of the government instead of deriving its value from precious metal. Their existence made America’s money supply less rigid. Driven by necessity, standardization also began to sweep America’s money supply during the Civil War. Legislation passed starting in 1863 created the basis for a national banking system, one in which banks could apply for federal charters and in turn were required to keep government bonds on deposit at the newly created Office of the Comptroller of the Currency.[28] The setup was a good money-raising device for the government, creating a natural source of demand for its debt.

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The Swedish Sveriges Riksbank had pushed especially far in researching its e-krona, and the Bahamian central bank had developed and newly launched a digital “Sand Dollar.” The euro area seemed likely to issue a digital euro, which its citizens would probably be able to hold in limited denominations in digital wallets. Digital central bank money was different from crypto in that it was backed by the full faith and credit of a national government—it was fiat currency. While many transactions already occurred in digital format, either in online commerce or when a shopper swiped a credit card, that digital money was backed by the banking system. Digital currency would be instead backed by the central bank, the electronic version of physical cash. When it came to researching and considering developing such a technology, the Fed was lagging its peers.

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See employment/labor market Lamont, Thomas, 53n Laubach, Thomas, 115, 128 Lehman Brothers, 90, 93, 94 Lehnert, Andreas: “cover the waterfront” strategy for pandemic response, 163–4, 167–8; financial stability division and disaster planning role of, 163–4, 163n, 212; housing market presentation by, 91; pandemic rescue program planning by, 136–7, 151–2, 158–9, 162, 212 Leonard, Elissa, 15–16, 17–18, 18n, 141n Libra, 152–3, 153n, 274 Lincoln, Abraham, 48, 287 Linton, Louise, 140–1, 141n, 193 lobby, coining of phrase, 118 Logan, Lorie, 32–3, 34, 143, 149, 334n4, 334n6 Lombard Street (Bagehot), 50–1, 336n37 M macroeconomic management, 61–2, 82, 86, 130, 230, 341n9 Main Street program, 204n, 212–14, 238, 245–9, 294, 301, 349n3 Marcus, David, 152–4 Martin, William McChesney, Jr., 74, 76–8, 81, 108 masks and face coverings, 219, 222–3 McAdoo, William, 59–60 McCabe, Thomas, 72–4 McConnell, Mitch, 138, 178, 179, 191, 192, 251–2, 267 McFadden Act, 62 meme stocks, 274, 291–2 Mester, Loretta, 154n Metropolitan Club, 11, 333n1 Mexico, 139, 145, 197, 266, 334n11 Missouri, 59 Mnuchin, Steven: allocation of money for programs, 192, 199, 208, 211, 213, 247–8, 251–2, 253–62, 347n10; background, education, and expertise of, 140–1, 170, 192–4; character and personal style of, 140, 141, 192–5; confirmation hearing of, 193–4; deregulation under, 104, 169; economic ideology of, 256–7, 294; Group of Seven call by, 142, 143; January 6 riots and loyalty to Trump, 281n; junk bond–buying discussion with Powell, 210; pandemic rescue program role of, 161–2, 165, 175–81, 183–4, 188–9, 191–5, 199, 205, 206–7, 208, 212, 214, 251–2, 345n25; planning response to pandemic with Powell, 139–40, 141; post-government career of, 298–9; Powell firing threat from, 107; relationship with Powell, 139–40, 141; role in selection of Powell, 20–1; Treasury secretary role of, 104, 192–5; 2020 presidential election and continuation of pandemic relief efforts, 253–62, 263; wealth of, 140, 298–9 monetary policy: economic slowdown and, 108–10, 111–16, 341n9; Fed Listens outreach events on, 22–3, 27–8; financial crisis of 2008 and, 4–5, 24–6, 90–8; full employment and, 22, 77–8, 80, 96–7, 97n, 101, 233–4, 239–44, 250; inscrutability of, 23, 23n; interest rates, economic trends, and, 111–16; modern monetary theory and inflation, 351n1; pandemic and, 4–5, 29–35, 38–41, 238–43; Powell role in as Fed governor, 17–18, 129; review of under Powell, 21–2; Taylor rule, 341n22; voting on by Fed governors and regional bank presidents, 13, 13n, 130 money/currency: Bretton Woods system and linking dollars to gold, 75–6; cash supply and flow management by Fed, 3, 12–13; cash supply and withdrawals at start of pandemic, 39–40, 335n10; concept and history of, 44–6, 335nn11–12; control over by Fed and political goals, 8–9; creation by Fed, 5; creation of during pandemic, 4, 176, 185–6; Federal Reserve note, 57; fiat currency, 48–50, 272; global financial system with dollar at core of, 75–6, 82, 196–8; greenback currency, 48–50; impact of pandemic on currency markets, 141; money supply as driver of economic outcomes, 79–80; national bank notes, 48, 53; pandemic and role of the dollar in global finance, 196–8; specie, 49, 335n11.

pages: 287 words: 81,970

The Dollar Meltdown: Surviving the Coming Currency Crisis With Gold, Oil, and Other Unconventional Investments
by Charles Goyette
Published 29 Oct 2009

Rates changed constantly during the decade—twenty-two times in 1973 alone, twenty-three times in 1978. It was like shaken-business syndrome. The changes were so frequent and violent it is no wonder many small and new businesses couldn’t survive. The volatility can be attributed to a desire to micromanage economic conditions and control the exchange rates of a fiat currency. It almost makes current Fed policy look stable—for now—averaging a mere half-dozen or so rate changes a year. We have already seen evidence of the flailing about by officialdom that will characterize the period ahead. By the time they collect information from the far-flung corners of the real economy, it is obsolete.

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ANSWER: The growing mountains of gold in exchange-traded funds may indeed be an attractive target for government plunder, even though the $35 billion in market capitalization early in 2009 of the two gold ETFs is not enough to make a dent in the government’s financial predicament. But the real motivation for controlling people’s economic behavior is often actually for purposes of social engineering, and not financial at all. Issuers of fiat currencies are always hostile to gold and must suppress it at the first hint of a challenge. If a wholesale abandonment of paper dollars begins to build, it is to be expected that private gold stockpiles would become a target. There is usually plenty of warning before command economies begin wholesale confiscation.

pages: 308 words: 85,850

Cloudmoney: Cash, Cards, Crypto, and the War for Our Wallets
by Brett Scott
Published 4 Jul 2022

But in the final analysis a central bank is granted its power by governments and occupies a crucial position between the government and the banking sector: it is the ‘government’s bank’, but also the ‘bank for banks’ (where commercial banks gather), and therefore functions like a membership club, mediating between the state and the banking sector. The central bank acts as an agent of the state, and jointly they issue fiat currency. To issue ‘by fiat’ means to issue by decree. They write money into existence, as it were. Some of it they write on paper and metal, but much of it they write on computers. Many money users feel a degree of moral horror – or at least confusion – at the notion that money could simply be conjured into being.

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After a decade of imprisonment he was released, and set about building a black rebel movement, which ended up pitted against people like my father in a brutal bush war. When the rebels won power in 1980, Mugabe rebranded the Rhodesian dollar as the Zimbabwe dollar, which imploded in the 2000s as Mugabe lapsed into dictatorial paranoia. Zimbabwe’s failed currency is now frequently held up as a cautionary tale about the fate of fiat currencies, but such tales ignore the geopolitical inequalities between states. Post-colonial Zimbabwe was a country relying on commodity exports, with a large population of poor black farmworkers alongside a small population of wealthy white farmers. It is not surprising that internal tensions emerged from this, and that the situation was exploited by opportunistic leaders, resulting in the country’s agricultural sector collapsing amid an unstable political environment.

pages: 488 words: 144,145

Inflated: How Money and Debt Built the American Dream
by R. Christopher Whalen
Published 7 Dec 2010

When the overheated economy and related financial crisis first started to boil over in the late-1830s, many European banks refused to lend further to the U.S. government or the various states, putting intense pressure on the small nation’s liquidity and political unity. This stress was relieved by the issuance of various types of fiat currency and debt securities. In states such as Michigan and Indiana, the number of banks dwindled as first private institutions and eventually the state-chartered banks were wound up and closed. Regarding the financial situation in the Midwest, Willis Dunbar and George May noted in their book, Michigan: A History of the Wolverine State: The speculation in Michigan land values of the early thirties, for example, was fantastic.

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It also expanded the type of loans that the Fed could make, particularly in time of emergency. But in a larger sense, the Banking Act of 1935 completed the transition of the Fed from an institution that at least nominally paid homage to the gold standard and an asset currency, to one that was entirely devoted to a fiat currency that was not convertible into anything. “Currently, the American monetary system is composed of a series of procedures based on statutes and statutes based on procedures, which reflect no integral concept of money but, rather, a series of residual concepts,” wrote Jane D’Arista in The Evolution of U.S.

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But as the growth potential of the U.S. economy wanes and the baby boomers reach retirement age, all the while refusing to rein in their insatiable desire for consumption, the ability of the American economy to fulfill the dreams of workers around the world is in doubt. How we deal with the uniquely American problem of a global fiat currency will define the destiny of America and the world in the next century and beyond. One of the issues raised by the subprime housing crisis of 2007–2009 that is not often discussed in the media or economic circles is how the increasingly hollow U.S. economy will look without the positive effect of a constantly buoyant housing market.

pages: 366 words: 94,209

Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity
by Douglas Rushkoff
Published 1 Mar 2016

A gold standard is optimized to address fear that one’s savings are not safe if they’re measured in government-backed dollars. But gold-backed currency would be no better at promoting a peer-to-peer marketplace than gold coins were back in the Middle Ages. It’s biased toward scarcity. Bernard Lietaer, one of the economists who helped design the euro, has been proposing since 1991 that fiat currencies—money declared legal by the government but not backed by a physical commodity—be replaced or at least augmented with currencies that represent a “basket” of commodities.24 His current suggestion is to create a currency that is backed by one third gold, one third forests, and one third highways.

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They may be missing the nature of this opportunity as well. Bitcoin money is only a utility—not the thing of value in itself. It’s a label. If bitcoins become too precious and scarce, there are always plenty of alternative blockchain currencies to use instead. Unlike the issuers of national fiat currencies, no one—not even the tax authority—is forcing anyone to use bitcoins. So they don’t have the same role as the sort of money that was invented for early Renaissance monarchs to shut down the peer-to-peer marketplace. Amazingly, it’s money people who have the hardest time understanding this part, which is why they are so destined to be burned on their bitcoin investments, however they play this one.

pages: 285 words: 86,853

What Algorithms Want: Imagination in the Age of Computing
by Ed Finn
Published 10 Mar 2017

If that ledger gets usurped by the blockchain, we are not simply introducing a new currency into those markets: we are creating a new ledger, a new way of valuing goods, services, and activities. Many people perceive Bitcoin’s disruptive force to derive merely from decentralization. It does, indeed, replace the fiat currency of the state with a new fiat currency, one backed by no gold standard, no guaranteed redemption policy or intrinsic utility (burning Bitcoins won’t keep you warm, though mining them does tend to generate a lot of heat from the processors involved).27 This is by no means novel: mercantile cultures have used mutually accepted measures of value (arrowheads, seashells) for millennia without centralized authorities, often using markers or objects that are effectively valueless on their own—and replacing one such system for another when necessary.

pages: 332 words: 93,672

Life After Google: The Fall of Big Data and the Rise of the Blockchain Economy
by George Gilder
Published 16 Jul 2018

The supply of gold has grown by an average of 2 percent per year for centuries, giving it a less remorseless deflationary bias—an advantage over bitcoin, the supply of which is capped at twenty-one million units in 2140, 80 percent of which had already been “mined” by 2018. As a unit of account and store of value, two of the key facets of money, gold is the ultimate standard. If Wright is correct about its scalability, bitcoin could establish itself as a global alternative to fiat currencies during a historical period when these moneys are vulnerable to the depredations of the world’s governments, now indebted to the unsustainable level of $280 trillion. With the value crunch for bitcoin still decades away, moderate deflation seems attractive compared to runaway devaluations. This bitcoin path is portentous.

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The empire may think that Satoshi and his followers are on shaky ground, but the emperors and their courtiers should look to their $280 trillion tower of debt, which is beginning to teeter. Their own fortunes may go down with it. Governments and investors everywhere should welcome the explosion of creativity in crypto, preparing a new financial system of the world for the moment when the fiat currency piñata bursts at last. CHAPTER 22 The Bitcoin Flaw Mike Kendall, nearly six feet, five inches tall, had to slouch at his physical to make it under the Air Force’s six-foot-four maximum height for pilots. Lean, sandy-haired, gimlet-eyed, he now flies Airbus 321s for American Airlines, and for the last twenty years his avocation has been studying money from an altitude of thirty-five thousand feet or so.

pages: 403 words: 110,492

Nomad Capitalist: How to Reclaim Your Freedom With Offshore Bank Accounts, Dual Citizenship, Foreign Companies, and Overseas Investments
by Andrew Henderson
Published 8 Apr 2018

How about doubling your money, just in a bank, in five or six years? Going offshore is not about numbered and anonymous bank accounts, it is about diversifying and increasing your options. Currency diversification through foreign bank accounts is an excellent way to protect your asset base from the destruction of one single fiat currency. It is also a great way to obtain higher interest rates on your money. Many overseas banks offer interest rates that are five, ten, or even 100 times better than what you can get at home. If you are used to relying on interest income, this can be a game changer for you. New Zealand bank accounts currently pay up to ten times the interest that American banks do.

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My assistant from Montenegro, Marija, shared a similar experience when, at an early age, her father would come home from work with a bag full of paper money, greeted with cries of “Daddy, you’re rich!” Then her father would just toss the money at her and her brother and encourage them to play with his now worthless hours-old paycheck. I prefer to be optimistic and hope that none of us will have to deal with the vulnerabilities of fiat currency like hyperinflation, but that does not keep me from insuring myself against such a possibility. Just as you would insure your home against disasters that you hope never hit, your wealth needs insurance from financial disasters that could wipe out what you have worked so hard to build up. Gold is that insurance.

pages: 446 words: 117,660

Arguing With Zombies: Economics, Politics, and the Fight for a Better Future
by Paul Krugman
Published 28 Jan 2020

In normal life, people don’t worry about where the value of green pieces of paper bearing portraits of dead presidents comes from: we accept dollar notes because other people will accept dollar notes. Yet the value of a dollar doesn’t come entirely from self-fulfilling expectations: ultimately, it’s backstopped by the fact that the U.S. government will accept dollars as payment of tax liabilities—liabilities it’s able to enforce because it’s a government. If you like, fiat currencies have underlying value because men with guns say they do. And this means that their value isn’t a bubble that can collapse if people lose faith. And the value of those $100 bills sitting in drug lords’ lairs or whatever is in turn tethered to the value of smaller denominations back in America.

…

L., 147 mercantilism, 250 Merkel, Angela, 98 microeconomics, 407, 408 middle class: cutting benefits for, 30, 196, 309 and financial managers, 92–94 and income distribution, 266, 273 and income mobility, 277, 278 raising taxes on, 199 Mildenberger, Matto, 305, 306 Minskyism, 409 Mississippi, income inequality in, 291–92 Mnuchin, Steven, 322 moderation, instability of, 407–10 financial instability, 409–10 intellectual instability, 407–8 political instability, 408–9 Modern Monetary Theory (MMT), 125, 152, 154, 203 monetarism, 133, 409 monetary economics, 176 monetary policy, 128–29, 140, 143, 144, 153 money: conventional (currency), 412–14 cryptocurrency, 411–14 dollar cash holdings, 413 dollar notes, 413–14 fiat currencies, 414 speculative, 413 as store of value, 112 “Money and Morals” (Krugman), 260, 285–87 money managers, 92–94 money supply, central banks’ control of, 110, 112, 124, 133 “Monopolistic Competition and Optimum Product Diversity” (Dixit and Stiglitz), 396–98 monopoly power, 228, 236 monopsony power, 316–17 Moore, John, 147 Moore, Michael, 44, 45 Moore, Roy, 309 Moretti, Enrico, The New Geography of Jobs, 292 mortgage rates, 87 mortgages, subprime, 90–91, 136 “Most Important Thing, The” (Krugman), 327–28 motives, talk about, 8 Moulton, Seth, 76 movement conservatism, 297–98, 302–4, 307 definition of, 302 keeping zombie ideas alive via, 8 and Republican Party, 297, 299–301, 302, 368 and Tea Party, 303 white resentment as basis of, 343 “Movement Conservativism” (Krugman), 297–98 Moynihan, Daniel Patrick, 5 Mueller, Robert, 307 Mueller investigation, 360 Mulford, David, 405 Mulligan, Casey, 144 Mulvaney, Mick, 207, 225 Murdoch, Rupert, 297, 375 Murphy, Kevin, 279 Murray, Charles, Coming Apart: The State of White America, 1960–2010, 285–86 Mussolini, Benito, 346 “Myths of Austerity” (Krugman), 158, 160–62, 165 NAFTA, 372 NAIRU (non-accelerating-inflation rate of unemployment), 114 NASA, 163 National Association of Realtors, 84 National Climate Assessment, 332, 336 National Commission on Fiscal Responsibility and Reform, 198–200 nationalism, 343 National Older Women’s League, 198 National Review, The, 301 national security: and elections, 306 and tariffs, 251, 253, 255 NATO, 244 neoclassical economics, 132, 133, 139–40, 147 neoliberal ideology, 315 Netherlands, economy of, 184 New Deal, 107, 293, 308 New Geography of Jobs, The (Moretti), 292 New Hampshire, economic freedom in, 317, 317 New Jersey, health care in, 76, 78 New Keynesian views, 129, 139–40, 143, 145, 147 New York: health care in, 74, 318 infant mortality in, 317, 317 Medicaid expanded in, 318 New York Times, The, 348, 349 Nicaragua, and Iran-Contra, 300 Nimbyism, 291 Nixon administration, and media, 300 Nordhaus, William, 396 Norman, Victor, 398 “normative” economics, 1 Northam, Ralph, 308, 309 North Carolina: health care in, 77 Republican Party in, 359 Norway, economy of, 323 Obama, Barack: conservatives vs., 150, 208, 302, 320, 362 on health care, 53–55, 66, 339, 361 and international trade, 252 and taxes, 216, 219, 229 Obama administration: on debt and unemployment, 208 “hijacked” commission of, 198–200 and revenue growth, 225 stimulus plan of, 104, 107–8, 113–14, 115–17, 118–20, 131, 193, 206, 362 Obamacare, see Affordable Care Act O’Brien, Michael, 126 Ocasio-Cortez, Alexandria (AOC), 234, 236, 237, 320–21 Occupy Wall Street, 285 O’Connor, Reed, 367, 369 oil shocks, 126 Oklahoma, tax cuts in, 293 Okun’s Law, 113 oligarchy, 283, 349, 350 Olson, Mancur, The Logic of Collective Action, 354–55 Operation Coffee Cup (1961), 322 optimum currency areas, 177 Palin, Sarah, 54 Panama Papers, 349 Pangloss, Doctor (fict.), 135, 140 “paperclip maximizers,” 357 “Paranoid Style in American Politics, The” (Hofstadter), 346 parasites, 354–57 Paulson, Henry, 91 PBS Newshour, 169–71 Pelosi, Nancy: achievements of, 361–63 and Affordable Care Act, 35–36, 55, 361, 367 and financial reform, 362 as House Speaker, 76, 344, 362, 363 on “monstrous endgame,” 367, 369 on Social Security, 15, 35, 306, 361 and stimulus plan, 362 and trade agreement, 372 on the wall as “manhood thing,” 370 Pence, Mike, 73 pensions: defined benefit, 14 defined contribution, 14–15 401(k)-type plans, 31–32 private, decline of, 31–32 Perlstein, Rick, 302, 354, 355 Perot, H.

pages: 161 words: 44,488

The Business Blockchain: Promise, Practice, and Application of the Next Internet Technology
by William Mougayar
Published 25 Apr 2016

Outside of the blockchain’s operations proper, cryptocurrency is just like any other currency. It can be traded on exchanges, and it can be used to buy or sell goods and services. Cryptocurrency is very efficient inside blockchain networks, but there is friction every time it crosses into the real world of traditional currency (also called “fiat currency”). 2. Decentralized Computing Infrastructure The blockchain can also be seen as a software design approach that binds a number of computers together that commonly obey the same “consensus” process for releasing or recording what information they hold, and where all related interactions are verified by cryptography.

pages: 589 words: 128,484

America's Bank: The Epic Struggle to Create the Federal Reserve
by Roger Lowenstein
Published 19 Oct 2015

It is also possible that Bryan sensed that once paper currency—even in a superficial sense—was proclaimed to be an obligation of the United States, people would begin to think of money differently. The long march of the twentieth century would be toward government dollars (such as circulate today) unfettered by any link to either bank assets or to specie. Wilson’s compromise was a step in that direction: a step, that is, toward fiat currency. On June 20, the text of the bill (with the changes ordered by Wilson) was finally released and published in newspapers across the country. Editorial reaction was harsh. To conservative publishers, the notion of the federal government’s controlling a large, private industry was new and profoundly shocking.

…

That same evening, in the House of Representatives, Glass presented the conference report—the compromise bill. He elaborated on the conference changes and opened the floor to debate. The chairman found it necessary to refute a claim by Frank Vanderlip that the new notes would lack security and be a kind of fiat currency. Glass was pleased to note that Paul Warburg, “perhaps the greatest international banker in America,” not only disagreed with Vanderlip but had been in Washington protesting that the security behind the notes was actually too exacting. The House discussed such matters for a couple of hours. Then it voted, adopting the conference report by an overwhelming margin.

pages: 515 words: 142,354

The Euro: How a Common Currency Threatens the Future of Europe
by Joseph E. Stiglitz and Alex Hyde-White
Published 24 Oct 2016

Africa, 10, 95, 381 globalization and, 51 aggregate demand, 98, 107, 111, 118–19, 189, 367 deflation and, 290 lowered by inequality, 212 surpluses and, 187, 253 tech bubble slump in, 250 as weakened by imports, 111 aggregate supply, 99, 104, 189 agricultural subsidies, 45, 197 agriculture, 89, 224, 346 airlines, 259 Akerlof, George, 132 American Express, 287 Apple, 81, 376 Argentina, 18, 100, 110, 117, 371 bailout of, 113 debt restructuring by, 205–6, 266, 267 Arrow-Debreu competitive equilibrium theory, 303 Asia, globalization and, 51 asset price bubbles, 172 Athens airport, 191, 367–68 austerity, xvi–xvii, 9, 18–19, 20, 21, 28–29, 54, 69–70, 95, 96, 98, 97, 103, 106, 140, 150, 178, 185–88, 206, 211, 235, 316–17 academics for, 208–13 debt restructuring and, 203–6 design of programs of, 188–90 Germany’s push for, 186, 232 government investment curtailed by, 217 opposition to, 59–62, 69–70, 207–8, 315, 332, 392 private, 126–27, 241–42 reform of, 263–65 Austria, 331, 343 automatic destabilizers, see built-in destabilizers automatic stabilizers, 142, 244, 247–48, 357 flexible exchange rate as, 248 bail-ins, 113 bailouts, 91–92, 111, 112–13, 201–3, 354, 362–63, 370 of banks, 127–28, 196, 279, 362–63 of East Asia, 202 of Latin America, 202 of Mexico, 202 of Portugal, 178–79 of Spanish banks, 179, 199–200, 206 see also programs balanced-budget multiplier, 188–90, 265 Balkans, 320 bank capital, 284–85 banking system, in US, 91 banking union, 129–30, 241–42, 248, 263 and common regulations, 241 and deposit insurance, 241, 242, 246 Bank of England, 359 inflation target of, 157 Bank of Italy, 158 bankruptcies, 77, 94, 102, 104, 346, 390 super–chapter 11 for, 259–60 banks, 198–201 bailouts of, 127–28, 196, 279, 362–63 capital requirements of, 152, 249 closing of, 378 credit creation by, 280–82 development, 137–38 evolution of, 386–87 forbearance of regulations on, 130–31 Greek, 200–201, 228–29, 231, 270, 276, 367, 368 lending contracted by, 126–27, 246, 282–84 money supply increased by, 277 restructuring of, 113 small, 171 in Spain, 23, 186, 199, 200, 242, 270, 354 too-big-to-fail, 360 bank transfers, 49 Barclays, 131 behavioral economics, 335 Belgium, 6, 331, 343 belief systems, 53 Berlin Wall, 6 Bernanke, Ben, 251, 351, 363, 381 bilateral investment agreement, 369 Bill of Rights, 319 bimetallic standard, 275, 277 Blanchard, Olivier, 211 bonds, 4, 114, 150, 363 confidence in, 127, 145 Draghi’s promise to support, 127, 200, 201 GDP-indexed, 267 inflation and, 161 long-term, 94 restructuring of, 159 bonds, corporate, ECB’s purchase of, 141 borrowing, excessive, 243 Brazil, 138, 370 bailout of, 113 bread, 218, 230 Bretton Woods monetary system, 32, 325 Brunnermeier, Markus K., 361 Bryan, William Jennings, xii bubbles, 249, 381 credit, 122–123 real estate, see real estate bubble stability threatened by, 264 stock market, 200–201 tech, 250 tools for controlling, 250 budget, capital, 245 Buffett, Warren, 287, 290 built-in destabilizers, 96, 142, 188, 244, 248, 357–58 common regulatory framework as, 241 Bulgaria, 46, 331 Bundesbank, 42 Bush, George W., 266 Camdessus, Michel, 314 campaign contributions, 195, 355 Canada, 96 early 1990s expansion of, 209 in NAFTA, xiv railroad privatization in, 55 tax system in, 191 US’s free trade with, 45–46, 47 capital, 76–77 bank, 284–85 human, 78, 137 return to, 388 societal vs. physical, 77–78 tax on, 356 unemployment increased by, 264 capital adequacy standards, 152 capital budget, 245 capital controls, 389–90 capital flight, 126–34, 217, 354, 359 austerity and, 140 and labor flows, 135 capital flows, 14, 15, 25, 26, 27–28, 40, 116, 125, 128, 131, 351 economic volatility exacerbated by, 28, 274 and foreign ownership, 195 and technology, 139 capital inflows, 110–11 capitalism: crises in, xviii, 148–49 inclusive, 317 capital requirements, 152, 249, 378 Caprio, Gerry, 387 capture, 158–60 carbon price, 230, 260, 265, 368 cash, 39 cash flow, 194 Catalonia, xi CDU party, 314 central banks, 59, 354, 387–88 balance sheets of, 386 capture of, 158–59 credit auctions by, 282–84 credit creation by, 277–78 expertise of, 363 independence of, 157–63 inequality created by, 154 inflation and, 153, 166–67 as lender of last resort, 85, 362 as political institutions, 160–62 regulations and, 153 stability and, 8 unemployment and, 8, 94, 97, 106, 147, 153 CEO compensation, 383 Chapter 11, 259–60, 291 childhood poverty, 72 Chile, 55, 152–53 China, 81, 98, 164, 319, 352 exchange-rate policy of, 251, 254, 350–51 global integration of, 49–50 low prices of, 251 rise of, 75 savings in, 257 trade surplus of, 118, 121, 350–52 wages controlled in, 254 as world’s largest economy, 318, 327 chits, 287–88, 290, 299–300, 387, 388–389 Citigroup, 355 climate change, 229–30, 251, 282, 319 Clinton, Bill, xiv, xv, 187 closing hours, 220 cloves, 230 cognitive capture, 159 Cohesion Fund, 243 Cold War, 6 collateral, 364 collective action, 41–44, 51–52 and inequality, 338 and stabilization, 246 collective bargaining, 221 collective goods, 40 Common Agricultural Policy, 338 common regulatory framework, 241 communism, 10 Community Reinvestment Act (CRA), 360, 382 comparative advantage, 12, 171 competition, 12 competitive devaluation, 104–6, 254 compromise, 22–23 confidence, 95, 200–201, 384 in banks, 127 in bonds, 145 and structural reforms, 232 and 2008 crisis, 280 confirmation bias, 309, 335 Congress, US, 319, 355 connected lending, 280 connectedness, 68–69 Connecticut, GDP of, 92 Constitutional Court, Greek, 198 consumption, 94, 278 consumption tax, 193–94 contract enforcement, 24 convergence, 13, 92–93, 124, 125, 139, 254, 300–301 convergence criteria, 15, 87, 89, 96–97, 99, 123, 244 copper mines, 55 corporate income tax, 189–90, 227 corporate taxes, 189–90, 227, 251 corporations, 323 regulations opposed by, xvi and shutdown of Greek banks, 229 corruption, 74, 112 privatization and, 194–95 Costa, António, 332 Council of Economic Advisers, 358 Council of State, Greek, 198 countercyclical fiscal policy, 244 counterfactuals, 80 Countrywide Financial, 91 credit, 276–85 “divorce”’s effect on, 278–79 excessive, 250, 274 credit auctions, 282–84 credit bubbles, 122–123 credit cards, 39, 49, 153 credit creation, 248–50, 277–78, 386 by banks, 280–82 domestic control over, 279–82 regulation of, 277–78 credit default swaps (CDSs), 159–60 crisis policy reforms, 262–67 austerity to growth, 263–65 debt restructuring and, 265–67 Croatia, 46, 331, 338 currency crises, 349 currency pegs, xii current account, 333–34 current account deficits, 19, 88, 108, 110, 120–121, 221, 294 and exit from euro, 273, 285–89 see also trade deficit Cyprus, 16, 30, 140, 177, 331, 386 capital controls in, 390 debt-to-GDP ratio of, 231 “haircut” of, 350, 367 Czech Republic, 46, 331 debit cards, 39, 49 debtors’ prison, 204 debt restructuring, 201, 203–6, 265–67, 290–92, 372, 390 of private debt, 291 debts, xx, 15, 93, 96, 183 corporate, 93–94 crisis in, 110–18 in deflation, xii and exit from eurozone, 273 with foreign currency, 115–18 household, 93–94 increase in, 18 inherited, 134 limits of, 42, 87, 122, 141, 346, 367 monetization of, 42 mutualization of, 242–43, 263 place-based, 134, 242 reprofiling of, 32 restructuring of, 259 debt-to-GDP ratio, 202, 210–11, 231, 266, 324 Declaration of Independence, 319 defaults, 102, 241, 338, 348 and debt mutualization, 243 deficit fetishism, 96 deficits, fiscal, xx, 15, 20, 93, 96, 106, 107–8, 122, 182, 384 and balanced-budget multiplier, 188–90, 265 constitutional amendment on, 339 and exit from euro, 273, 289–90 in Greece, 16, 186, 215, 233, 285–86, 289 limit of, 42, 87, 94–95, 122, 138, 141, 186, 243, 244, 265, 346, 367 primary, 188 problems financing, 110–12 structural, 245 deficits, trade, see trade deficits deflation, xii, 147, 148, 151, 166, 169, 277, 290 Delors, Jacques, 7, 332 democracy, lack of faith in, 312–14 Democracy in America (Tocqueville), xiii democratic deficit, 26–27, 35, 57–62, 145 democratic participation, xix Denmark, 45, 307, 313, 331 euro referendum of, 58 deposit insurance, 31, 44, 129, 199, 301, 354–55, 386–87 common in eurozone, 241, 242, 246, 248 derivatives, 131, 355 Deutsche Bank, 283, 355 devaluation, 98, 104–6, 254, 344 see also internal devaluation developing countries, and Washington Consensus, xvi discretion, 262–63 discriminatory lending practices, 283 disintermediation, 258 divergence, 15, 123, 124–44, 255–56, 300, 321 in absence of crisis, 128–31 capital flight and, 126–34 crisis policies’ exacerbation of, 140–43 free mobility of labor and, 134–36, 142–44, 242 in public investment, 136–38 reforms to prevent, 243 single-market principle and, 125–26 in technology, 138–39 in wealth, 139–40 see also capital flows; labor movement diversification, of production, 47 Dodd-Frank Wall Street Reform and Consumer Protection Act, 355 dollar peg, 50 downsizing, 133 Draghi, Mario, 127, 145, 156, 158, 165, 269, 363 bond market supported by, 127, 200, 201 Drago, Luis María, 371 drug prices, 219 Duisenberg, Willem Frederik “Wim,” 251 Dynamic Stochastic Equilibrium model, 331 East Asia, 18, 25, 95, 102–3, 112, 123, 202, 364, 381 convergence in, 138 Eastern Europe, 10 Economic Adjustment Programme, 178 economic distortions, 191 economic growth, xii, 34 confidence and, 232 in Europe, 63–64, 69, 73–74, 74, 75, 163 lowered by inequality, 212–13 reform of, 263–65 and structural reforms, 232–35 economic integration, xiv–xx, 23, 39–50 euro and, 46–47 political integration vs., 51–57 single currency and, 45–46 economic rents, 226, 280 economics, politics and, 308–18 economic security, 68 economies of scale, 12, 39, 55, 138 economists, poor forecasting by, 307 education, 20, 76, 344 investment in, 40, 69, 137, 186, 211, 217, 251, 255, 300 electricity, 217 electronic currency, 298–99, 389 electronics payment mechanism, 274–76, 283–84 emigration, 4, 68–69 see also migration employment: central banks and, 8, 94, 97 structural reforms and, 257–60 see also unemployment Employment Act (1946), 148 energy subsidies, 197 Enlightenment, 3, 318–19 environment, 41, 257, 260, 323 equality, 225–26 equilibrium, xviii–xix Erasmus program, 45 Estonia, 90, 331, 346 euro, xiv, 325 adjustments impeded by, 13–14 case for, 35–39 creation of, xii, 5–6, 7, 10, 333 creation of institutions required by, 10–11 divergence and, see divergence divorce of, 272–95, 307 economic integration and, 46–47, 268 as entailing fixed exchange rate, 8, 42–43, 46–47, 86–87, 92, 93, 94, 102, 105, 143, 193, 215–16, 240, 244, 249, 252, 254, 286, 297 as entailing single interest rate, 8, 85–88, 92, 93, 94, 105, 129, 152, 240, 244, 249 and European identification, 38–39 financial instability caused by, 131–32 growth promised by, 235 growth slowed by, 73 hopes for, 34 inequality increased by, xviii interest rates lowered by, 235 internal devaluation of, see internal devaluation literature on, 327–28 as means to end, xix peace and, 38 proponents of, 13 referenda on, 58, 339–40 reforms needed for, xii–xiii, 28–31 risk of, 49–50 weakness of, 224 see also flexible euro Eurobond, 356 euro crisis, xiii, 3, 4, 9 catastrophic consequences of, 11–12 euro-euphoria, 116–17 Europe, 151 free trade area in, 44–45 growth rates in, 63–64, 69, 73–74, 74, 75, 163 military conflicts in, 196 social models of, 21 European Central Bank (ECB), 7, 17, 80, 112–13, 117, 144, 145–73, 274, 313, 362, 368, 380 capture of, 158–59 confidence in, 200–201 corporate bonds bought by, 141 creation of, 8, 85 democratic deficit and, 26, 27 excessive expansion controlled by, 250 flexibility of, 269 funds to Greece cut off by, 59 German challenges to, 117, 164 governance and, 157–63 inequality created by, 154–55 inflation controlled by, 8, 25, 97, 106, 115, 145, 146–50, 151, 163, 165, 169–70, 172, 250, 256, 266 interest rates set by, 85–86, 152, 249, 302, 348 Ireland forced to socialize losses by, 134, 156, 165 new mandate needed by, 256 as political institution, 160–62 political nature of, 153–56 quantitative easing opposed by, 151 quantitative easing undertaken by, 164, 165–66, 170, 171 regulations by, 249, 250 unemployment and, 163 as unrepresentative, 163 European Commission, 17, 58, 161, 313, 332 European Court of Human Rights, 45 European Economic Community (EEC), 6 European Exchange Rate Mechanism (ERM), 30, 335 European Exchange Rate Mechanism II (ERM II), 336 European Free Trade Association, 44 European Free Trade Association Court, 44 European Investment Bank (EIB), 137, 247, 255, 301 European Regional Development Fund, 243 European Stability Mechanism, 23, 246, 357 European Union: budget of, 8, 45, 91 creation of, 4 debt and deficit limits in, 87–88 democratic deficit in, 26–27 economic growth in, 215 GDP of, xiii and lower rates of war, 196 migration in, 90 proposed exit of UK from, 4 stereotypes in, 12 subsidiarity in, 8, 41–42, 263 taxes in, 8, 261 Euro Summit Statement, 373 eurozone: austerity in, see austerity banking union in, see banking union counterfactual in, 235–36 double-dip recessions in, 234–35 Draghi’s speech and, 145 economic integration and, xiv–xx, 23, 39–50, 51–57 as flawed at birth, 7–9 framework for stability of, 244–52 German departure from, 32, 292–93 Greece’s possible exit from, 124 hours worked in, 71–72 lack of fiscal policy in, 152 and move to political integration, xvi, 34, 35, 51–57 Mundell’s work on dangers of, 87 policies of, 15–17 possible breakup of, 29–30 privatization avoided in, 194 saving, 323–26 stagnant GDP in, 12, 65–68, 66, 67 structure of, 8–9 surpluses in, 120–22 theory of, 95–97 unemployment in, 71, 135, 163, 177–78, 181, 331 working-age population of, 70 eurozone, proposed structural reforms for, 239–71 common financial system, see banking union excessive fiscal responsibility, 163 exchange-rate risks, 13, 47, 48, 49–50, 125, 235 exchange rates, 80, 85, 288, 300, 338, 382, 389 of China, 251, 254, 350–51 and competitive devaluation, 105–6 after departure of northern countries, 292–93 of euro, 8, 42–43, 46–47, 86–87, 92, 93, 94, 102, 105, 215–16, 240, 244, 249, 252, 254, 286, 297 flexible, 50, 248, 349 and full employment, 94 of Germany, 254–55, 351 gold and, 344–45 imports and, 86 interest rates and, 86 quantitative easing’s lowering of, 151 real, 105–6 and single currencies, 8, 42–43, 46–47, 86–87, 92, 93, 94, 97–98 stabilizing, 299–301 and trade deficits, 107, 118 expansionary contractions, 95–96, 208–9 exports, 86, 88, 97–99, 98 disappointing performance of, 103–5 external imbalances, 97–98, 101, 109 externalities, 42–43, 121, 153, 301–2 surpluses as, 253 extremism, xx, 4 Fannie Mae, 91 farmers, US, in deflation, xii Federal Deposit Insurance Corporation (FDIC), 91 Federal Reserve, US, 349 alleged independence of, 157 interest rates lowered by, 150 mandate of, 8, 147, 172 money pumped into economy by, 278 quantitative easing used by, 151, 170 reform of, 146 fiat currency, 148, 275 and taxes, 284 financial markets: lobbyists from, 132 reform of, 214, 228–29 short-sighted, 112–13 financial systems: necessity of, xix real economy of, 149 reform of, 257–58 regulations needed by, xix financial transaction system, 275–76 Finland, 16, 81, 122, 126, 292, 296, 331, 343 growth in, 296–97 growth rate of, 75, 76, 234–35 fire departments, 41 firms, 138, 186–87, 245, 248 fiscal balance: and cutting spending, 196–98 tax revenue and, 190–96 Fiscal Compact, 141, 357 fiscal consolidation, 310 fiscal deficits, see deficits, fiscal fiscal policy, 148, 245, 264 in center of macro-stabilization, 251 countercyclical, 244 in EU, 8 expansionary, 254–55 stabilization of, 250–52 fiscal prudence, 15 fiscal responsibility, 163 flexibility, 262–63, 269 flexible euro, 30–31, 272, 296–305, 307 cooperation needed for, 304–5 food prices, 169 forbearance, 130–31 forecasts, 307 foreclosure proposal, 180 foreign ownership, privatization and, 195 forestry, 81 France, 6, 14, 16, 114, 120, 141, 181–82, 331, 339–40, 343 banks of, 202, 203, 231, 373 corporate income tax in, 189–90 euro creation regretted in, 340 European Constitution referendum of, 58 extreme right in, xi growth in, 247 Freddie Mac, 91 Freefall (Stiglitz), 264, 335 free mobility of labor, xiv, 26, 40, 125, 134–36, 142–44, 242 Friedman, Milton, 151, 152–53, 167, 339 full employment, 94–97, 379 G-20, 121 gas: import of, 230 from Russia, 37, 81, 93 Gates Foundation, 276 GDP-indexed bonds, 267 German bonds, 114, 323 German Council of Economic Experts, 179, 365 Germany, xxi, 14, 30, 65, 108, 114, 141, 181–82, 207, 220, 286, 307, 331, 343, 346, 374 austerity pushed by, 186, 232 banks of, 202, 203, 231–32, 373 costs to taxpayers of, 184 as creditor, 140, 187, 267 debt collection by, 117 debt in, 105 and debt restructuring, 205, 311 in departure from eurozone, 32, 292–93 as dependent on Russian gas, 37 desire to leave eurozone, 314 ECB criticized by, 164 EU economic practices controlled by, 17 euro creation regretted in, 340 exchange rate of, 254–55, 351 failure of, 13, 78–79 flexible exchange of, 304 GDP of, xviii, 92 in Great Depression, 187 growing poverty in, 79 growth of, 78, 106, 247 hours worked per worker in, 72 inequality in, 79, 333 inflation in, 42, 338, 358 internal solidarity of, 334 lack of alternative to euro seen by, 11 migrants to, 320–21, 334–35, 393 minimum wage in, 42, 120, 254 neoliberalism in, 10 and place-based debt, 136 productivity in, 71 programs designed by, 53, 60, 61, 202, 336, 338 reparations paid by, 187 reunification of, 6 rules as important to, 57, 241–42, 262 share of global employment in, 224 shrinking working-age population of, 70, 78–79 and Stability and Growth Pact, 245 and structural reforms, 19–20 “there is no alternative” and, 306, 311–12 trade surplus of, 117, 118–19, 120, 139, 253, 293, 299, 350–52, 381–82, 391 “transfer union” rejected by, 22 US loans to, 187 victims blamed by, 9, 15–17, 177–78, 309 wages constrained by, 41, 42–43 wages lowered in, 105, 333 global financial crisis, xi, xiii–xiv, 3, 12, 17, 24, 67, 73, 75, 114, 124, 146, 148, 274, 364, 387 and central bank independence, 157–58 and confidence, 280 and cost of failure of financial institutions, 131 lessons of, 249 monetary policy in, 151 and need for structural reform, 214 originating in US, 65, 68, 79–80, 112, 128, 296, 302 globalization, 51, 321–23 and diminishing share of employment in advanced countries, 224 economic vs. political, xvii failures of, xvii Globalization and Its Discontents (Stig-litz), 234, 335, 369 global savings glut, 257 global secular stagnation, 120 global warming, 229–30, 251, 282, 319 gold, 257, 275, 277, 345 Goldman Sachs, 158, 366 gold standard, 148, 291, 347, 358 in Great Depression, xii, 100 goods: free movement of, 40, 143, 260–61 nontraded, 102, 103, 169, 213, 217, 359 traded, 102, 103, 216 Gordon, Robert, 251 governance, 157–63, 258–59 government spending, trade deficits and, 107–8 gravity principle, 124, 127–28 Great Depression, 42, 67, 105, 148, 149, 168, 313 Friedman on causes of, 151 gold standard in, xii, 100 Great Malaise, 264 Greece, 14, 30, 41, 64, 81, 100, 117, 123, 142, 160, 177, 265–66, 278, 307, 331, 343, 366, 367–68, 374–75, 386 austerity opposed by, 59, 60–62, 69–70, 207–8, 392 balance of payments, 219 banks in, 200–201, 228–29, 231, 270, 276, 367, 368 blaming of, 16, 17 bread in, 218, 230 capital controls in, 390 consumption tax and, 193–94 counterfactual scenario of, 80 current account surplus of, 287–88 and debt restructuring, 205–7 debt-to-GDP ratio of, 231 debt write-offs in, 291 decline in labor costs in, 56, 103 ECB’s cutting of funds to, 59 economic growth in, 215, 247 emigration from, 68–69 fiscal deficits in, 16, 186, 215, 233, 285–86, 289 GDP of, xviii, 183, 309 hours worked per worker in, 72 inequality in, 72 inherited debt in, 134 lack of faith in democracy in, 312–13 living standards in, 216 loans in, 127 loans to, 310 migrants and, 320–21 milk in, 218, 223, 230 new currency in, 291, 300 oligarchs in, 16, 227 output per working-age person in, 70–71 past downturns in, 235–36 pensions in, 16, 78, 188, 197–98, 226 pharmacies in, 218–20 population decline in, 69, 89 possible exit from eurozone of, 124, 197, 273, 274, 275 poverty in, 226, 261, 376 primary surplus of, 187–88, 312 privatization in, 55, 195–96 productivity in, 71, 342 programs imposed on, xv, 21, 27, 60–62, 140, 155–56, 179–80, 181, 182–83, 184–85, 187–88, 190–93, 195–96, 197–98, 202–3, 205, 206, 214–16, 218–23, 225–28, 229, 230, 231, 233–34, 273, 278, 308, 309–11, 312, 315–16, 336, 338 renewable energy in, 193, 229 social capital destroyed in, 78 sovereign spread of, 200 spread in, 332 and structural reforms, 20, 70, 188, 191 tax revenue in, 16, 142, 192, 227, 367–368 tools lacking for recovery of, 246 tourism in, 192, 286 trade deficits in, 81, 194, 216–17, 222, 285–86 unemployment in, xi, 71, 236, 267, 332, 338, 342 urgency in, 214–15 victim-blaming of, 309–11 wages in, 216–17 youth unemployment in, xi, 332 Greek bonds, 116, 126 interest rates on, 4, 114, 181–82, 201–2, 323 restructuring of, 206–7 green investments, 260 Greenspan, Alan, 251, 359, 363 Grexit, see Greece, possible exit from eurozone of grocery stores, 219 gross domestic product (GDP), xvii decline in, 3 measurement of, 341 Growth and Stability Pact, 87 hedge funds, 282, 363 highways, 41 Hitler, Adolf, 338, 358 Hochtief, 367–68 Hoover, Herbert, 18, 95 human capital, 78, 137 human rights, 44–45, 319 Hungary, 46, 331, 338 hysteresis, 270 Iceland, 44, 111, 307, 354–55 banks in, 91 capital controls in, 390 ideology, 308–9, 315–18 imports, 86, 88, 97–99, 98, 107 incentives, 158–59 inclusive capitalism, 317 income, unemployment and, 77 income tax, 45 Independent Commission for the Reform of International Corporate Taxation, 376–377 Indonesia, 113, 230–31, 314, 350, 364, 378 industrial policies, 138–39, 301 and restructuring, 217, 221, 223–25 Industrial Revolution, 3, 224 industry, 89 inequality, 45, 72–73, 333 aggregate demand lowered by, 212 created by central banks, 154 ECB’s creation of, 154–55 economic performance affected by, xvii euro’s increasing of, xviii growth’s lowering of, 212 hurt by collective action, 338 increased by neoliberalism, xviii increase in, 64, 154–55 inequality in, 72, 212 as moral issue, xviii in Spain, 72, 212, 225–26 and tax harmonization, 260–61 and tax system, 191 inflation, 277, 290, 314, 388 in aftermath of tech bubble, 251 bonds and, 161 central banks and, 153, 166–67 consequences of fixation on, 149–50, 151 costs of, 270 and debt monetization, 42 ECB and, 8, 25, 97, 106, 115, 145, 146–50, 151, 163, 165, 169–70, 172, 255, 256, 266 and food prices, 169 in Germany, 42, 338, 358 interest rates and, 43–44 in late 1970s, 168 and natural rate hypothesis, 172–73 political decisions and, 146 inflation targeting, 157, 168–70, 364 information, 335 informational capital, 77 infrastructure, xvi–xvii, 47, 137, 186, 211, 255, 258, 265, 268, 300 inheritance tax, 368 inherited debt, 134 innovation, 138 innovation economy, 317–18 inputs, 217 instability, xix institutions, 93, 247 poorly designed, 163–64 insurance, 355–356 deposit, see deposit insurance mutual, 247 unemployment, 91, 186, 246, 247–48 integration, 322 interest rates, 43–44, 86, 282, 345, 354 in aftermath of tech bubble, 251 ECB’s determination of, 85–86, 152, 249, 302, 348 and employment, 94 euro’s lowering of, 235 Fed’s lowering of, 150 on German bonds, 114 on Greek bonds, 4, 114, 181–82 on Italian bonds, 114 in late 1970s, 168 long-term, 151, 200 negative, 316, 348–49 quantitative easing and, 151, 170 short-term, 249 single, eurozone’s entailing of, 8, 85–88, 92, 93, 94, 105, 129, 152, 240, 244, 249 on Spanish bonds, 114, 199 spread in, 332 stock prices increased by, 264 at zero lower bound, 106 intermediation, 258 internal devaluation, 98–109, 122, 126, 220, 255, 388 supply-side effects of, 99, 103–4 International Commission on the Measurement of Economic Performance and Social Progress, 79, 341 International Labor Organization, 56 International Monetary Fund (IMF), xv, xvii, 10, 17, 18, 55, 61, 65–66, 96, 111, 112–13, 115–16, 119, 154, 234, 289, 309, 316, 337, 349, 350, 370, 371, 381 and Argentine debt, 206 conditions of, 201 creation of, 105 danger of high taxation warnings of, 190 debt reduction pushed by, 95 and debt restructuring, 205, 311 and failure to restore credit, 201 global imbalances discussed by, 252 and Greek debts, 205, 206, 310–11 on Greek surplus, 188 and Indonesian crisis, 230–31, 364 on inequality’s lowering of growth, 212–13 Ireland’s socialization of losses opposed by, 156–57 mistakes admitted by, 262, 312 on New Mediocre, 264 Portuguese bailout of, 178–79 tax measures of, 185 investment, 76–77, 111, 189, 217, 251, 264, 278, 367 confidence and, 94 divergence in, 136–38 in education, 137, 186, 211, 217, 251, 255, 300 infrastructure in, xvi–xvii, 47, 137, 186, 211, 255, 258, 265, 268, 300 lowered by disintermediation, 258 public, 99 real estate, 199 in renewable energy, 229–30 return on, 186, 245 stimulation of, 94 in technology, 137, 138–39, 186, 211, 217, 251, 258, 265, 300 investor state dispute settlement (ISDS), 393–94 invisible hand, xviii Iraq, refugees from, 320 Iraq War, 36, 37 Ireland, 14, 16, 44, 113, 114–15, 122, 178, 234, 296, 312, 331, 339–40, 343, 362 austerity opposed in, 207 debt of, 196 emigrants from, 68–69 GDP of, 18, 231 growth in, 64, 231, 247, 340 inherited debt in, 134 losses socialized in, 134, 156–57, 165 low debt in, 88 real estate bubble in, 108, 114–15, 126 surplus in, 17, 88 taxes in, 142–43, 376 trade deficits in, 119 unemployment in, 178 irrational exuberance, 14, 114, 116–17, 149, 334, 359 ISIS, 319 Italian bonds, 114, 165, 323 Italy, 6, 14, 16, 120, 125, 331, 343 austerity opposed in, 59 GDP per capita in, 352 growth in, 247 sovereign spread of, 200 Japan, 151, 333, 342 bubble in, 359 debt of, 202 growth in, 78 quantitative easing used by, 151, 359 shrinking working-age population of, 70 Java, unemployment on, 230 jobs gap, 120 Juncker, Jean-Claude, 228 Keynes, John Maynard, 118, 120, 172, 187, 351 convergence policy suggested by, 254 Keynesian economics, 64, 95, 108, 153, 253 King, Mervyn, 390 knowledge, 137, 138–39, 337–38 Kohl, Helmut, 6–7, 337 krona, 287 labor, marginal product of, 356 labor laws, 75 labor markets, 9, 74 friction in, 336 reforms of, 214, 221 labor movement, 26, 40, 125, 134–36, 320 austerity and, 140 capital flows and, 135 see also migration labor rights, 56 Lamers, Karl, 314 Lancaster, Kelvin, 27 land tax, 191 Latin America, 10, 55, 95, 112, 202 lost decade in, 168 Latvia, 331, 346 GDP of, 92 law of diminishing returns, 40 learning by doing, 77 Lehman Brothers, 182 lender of last resort, 85, 362, 368 lending, 280, 380 discriminatory, 283 predatory, 274, 310 lending rates, 278 leverage, 102 Lichtenstein, 44 Lipsey, Richard, 27 liquidity, 201, 264, 278, 354 ECB’s expansion of, 256 lira, 14 Lithuania, 331 living standards, 68–70 loans: contraction of, 126–27, 246 nonperforming, 241 for small and medium-size businesses, 246–47 lobbyists, from financial sector, 132 location, 76 London interbank lending rate (LIBOR), 131, 355 Long-Term Refinancing Operation, 360–361 Lucas, Robert, xi Luxembourg, 6, 94, 142–43, 331, 343 as tax avoidance center, 228, 261 luxury cars, 265 Maastricht Treaty, xiii, 6, 87, 115, 146, 244, 298, 339, 340 macro-prudential regulations, 249 Malta, 331, 340 manufacturing, 89, 223–24 market failures, 48–49, 86, 148, 149, 335 rigidities, 101 tax policy’s correction of, 193 market fundamentalism, see neoliberalism market irrationality, 110, 125–26, 149 markets, limitations of, 10 Meade, James, 27 Medicaid, 91 medical care, 196 Medicare, 90, 91 Mellon, Andrew, 95 Memorandum of Agreement, 233–34 Merkel, Angela, 186 Mexico, 202, 369 bailout of, 113 in NAFTA, xiv Middle East, 321 migrant crisis, 44 migration, 26, 40, 68–69, 90, 125, 320–21, 334–35, 342, 356, 393 unemployment and, 69, 90, 135, 140 see also labor movement military power, 36–37 milk, 218, 223, 230 minimum wage, 42, 120, 254, 255, 351 mining, 257 Mississippi, GDP of, 92 Mitsotakis, Constantine, 377–78 Mitsotakis, Kyriakos, 377–78 Mitterrand, François, 6–7 monetarism, 167–68, 169, 364 monetary policy, 24, 85–86, 148, 264, 325, 345, 364 as allegedly technocratic, 146, 161–62 conservative theory of, 151, 153 in early 1980s US, 168, 210 flexibility of, 244 in global financial crisis, 151 political nature of, 146, 153–54 recent developments in theory of, 166–73 see also interest rates monetary union, see single currencies money laundering, 354 monopolists, privatization and, 194 moral hazard, 202, 203 mortgage rates, 170 mortgages, 302 multinational chains, 219 multinational development banks, 137 multinationals, 127, 223, 376 multipliers, 211–12, 248 balanced-budget, 188–90, 265 Mundell, Robert, 87 mutual insurance, 247 mutualization of debt, 242–43, 263 national development banks, 137–38 natural monopolies, 55 natural rate hypothesis, 172 negative shocks, 248 neoliberalism, xvi, 24–26, 33, 34, 98–99, 109, 257, 265, 332–33, 335, 354 on bubbles, 381 and capital flows, 28 and central bank independence, 162–63 in Germany, 10 inequality increased by, xviii low inflation desired by, 147 recent scholarship against, 24 Netherlands, 6, 44, 292, 331, 339–40, 343 European Constitution referendum of, 58 New Democracy Party, Greek, 61, 185, 377–78 New Mediocre, 264 New World, 148 New Zealand, 364 Nokia, 81, 234, 297 nonaccelerating inflation rate of unemployment (NAIRU), 379–80 nonaccelerating wage rate of unemployment (NAWRU), 379–80 nongovernmental organizations (NGOs), 276 nonperforming loans, 241 nontraded goods sector, 102, 103, 169, 213, 217, 359 North American Free Trade Agreement (NAFTA), xiv North Atlantic Treaty Organization (NATO), 196 Norway, 12, 44, 307 referendum on joining EU, 58 nuclear deterrence, 38 Obama, Barack, 319 oil, import of, 230 oil firms, 36 oil prices, 89, 168, 259, 359 oligarchs: in Greece, 16, 227 in Russia, 280 optimal currency area, 345 output, 70–71, 111 after recessions, 76 Outright Monetary Transactions program, 361 overregulate, 132 Oxfam, 72 panic of 1907, 147 Papandreou, Andreas, 366 Papandreou, George, xiv, 60–61, 184, 185, 220, 221, 226–27, 309, 312, 366, 373 reform of banks suggested by, 229 paradox of thrift, 120 peace, 34 pensions, 9, 16, 78, 177, 188, 197–98, 226, 276, 370 People’s Party, Portugal, 392 periphery, 14, 32, 171, 200, 296, 301, 318 see also specific countries peseta, 14 pharmacies, 218–20 Phishing for Phools (Akerlof and Shiller), 132 physical capital, 77–78 Pinochet, Augusto, 152–53 place-based debt, 134, 242 Pleios, George, 377 Poland, 46, 333, 339 assistance to, 243 in Iraq War, 37 police, 41 political integration, xvi, 34, 35 economic integration vs., 51–57 politics, economics and, 308–18 pollution, 260 populism, xx Portugal, 14, 16, 64, 177, 178, 331, 343, 346 austerity opposed by, 59, 207–8, 315, 332, 392 GDP of, 92 IMF bailout of, 178–79 loans in, 127 poverty in, 261 sovereign spread of, 200 Portuguese bonds, 179 POSCO, 55 pound, 287, 335, 346 poverty, 72 in Greece, 226, 261 in Portugal, 261 in Spain, 261 predatory lending, 274, 310 present discount value, 343 Price of Inequality, The (Stiglitz), 154 prices, 19, 24 adjustment of, 48, 338, 361 price stability, 161 primary deficit, 188, 389 primary surpluses, 187–88 private austerity, 126–27, 241–42 private sector involvement, 113 privatization, 55, 194–96, 369 production costs, 39, 43, 50 production function, 343 productivity, 71, 332, 348 in manufacturing, 223–24 after recessions, 76–77 programs, 17–18 Germany’s design of, 53, 60, 61, 187–88, 205, 336, 338 imposed on Greece, xv, 21, 27, 60–62, 140, 155–56, 179–80, 181, 182–83, 184–85, 187–88, 190–93, 195–96, 197–98, 202–3, 205, 206, 214–16, 218–23, 225–28, 229, 230, 231, 233–34, 273, 278, 308, 309–11, 312, 315–16, 336, 338 of Troika, 17–18, 21, 155–57, 179–80, 181, 182–83, 184–85, 187–93, 196, 202, 205, 207, 208, 214–16, 217, 218–23, 225–28, 229, 231, 233–34, 273, 278, 308, 309–11, 312, 313, 314, 315–16, 323–24, 346, 366, 379, 392 progressive automatic stabilizers, 244 progressive taxes, 248 property rights, 24 property taxes, 192–93, 227 public entities, 195 public goods, 40, 337–38 quantitative easing (QE), 151, 164, 165–66, 170–72, 264, 359, 361, 386 railroads, 55 Reagan, Ronald, 168, 209 real estate bubble, 25, 108, 109, 111, 114–15, 126, 148, 172, 250, 301, 302 cause of, 198 real estate investment, 199 real exchange rate, 105–6, 215–16 recessions, recovery from, 94–95 recovery, 76 reform, 75 theories of, 27–28 regulations, 24, 149, 152, 162, 250, 354, 355–356, 378 and Bush administration, 250–51 common, 241 corporate opposition to, xvi difficulties in, 132–33 of finance, xix forbearance on, 130–31 importance of, 152–53 macro-prudential, 249 in race to bottom, 131–34 Reinhardt, Carmen, 210 renewable energy, 193, 229–30 Republican Party, US, 319 research and development (R&D), 77, 138, 217, 251, 317–18 Ricardo, David, 40, 41 risk, 104, 153, 285 excessive, 250 risk markets, 27 Rogoff, Kenneth, 210 Romania, 46, 331, 338 Royal Bank of Scotland, 355 rules, 57, 241–42, 262, 296 Russia, 36, 264, 296 containment of, 318 economic rents in, 280 gas from, 37, 81, 93, 378 safety nets, 99, 141, 223 Samaras, Antonis, 61, 309, 377 savings, 120 global, 257 savings and loan crisis, 360 Schäuble, Wolfgang, 57, 220, 314, 317 Schengen area, 44 schools, 41, 196 Schröeder, Gerhard, 254 self-regulation, 131, 159 service sector, 224 shadow banking system, 133 shareholder capitalism, 21 Shiller, Rob, 132, 359 shipping taxes, 227, 228 short-termism, 77, 258–59 Silicon Valley, 224 silver, 275, 277 single currencies: conflicts and, 38 as entailing fixed exchange rates, 8, 42–43, 46–47, 86–87, 92, 93, 94, 97–98 external imbalances and, 97–98 and financial crises, 110–18 integration and, 45–46, 50 interest rates and, 8, 86, 87–88, 92, 93, 94 Mundell’s work on, 87 requirements for, 5, 52–53, 88–89, 92–94, 97–98 and similarities among countries, 15 trade integration vs., 393 in US, 35, 36, 88, 89–92 see also euro single-market principle, 125–26, 231 skilled workers, 134–35 skills, 77 Slovakia, 331 Slovenia, 331 small and medium-sized enterprises (SMEs), 127, 138, 171, 229 small and medium-size lending facility, 246–47, 300, 301, 382 Small Business Administration, 246 small businesses, 153 Smith, Adam, xviii, 24, 39–40, 41 social cohesion, 22 Social Democratic Party, Portugal, 392 social program, 196 Social Security, 90, 91 social solidarity, xix societal capital, 77–78 solar energy, 193, 229 solidarity fund, 373 solidarity fund for stabilization, 244, 254, 264, 301 Soros, George, 390 South Dakota, 90, 346 South Korea, 55 bailout of, 113 sovereign risk, 14, 353 sovereign spreads, 200 sovereign wealth funds, 258 Soviet Union, 10 Spain, 14, 16, 114, 177, 178, 278, 331, 335, 343 austerity opposed by, 59, 207–8, 315 bank bailout of, 179, 199–200, 206 banks in, 23, 186, 199, 200, 242, 270, 354 debt of, 196 debt-to-GDP ratio of, 231 deficits of, 109 economic growth in, 215, 231, 247 gold supply in, 277 independence movement in, xi inequality in, 72, 212, 225–26 inherited debt in, 134 labor reforms proposed for, 155 loans in, 127 low debt in, 87 poverty in, 261 real estate bubble in, 25, 108, 109, 114–15, 126, 198, 301, 302 regional independence demanded in, 307 renewable energy in, 229 sovereign spread of, 200 spread in, 332 structural reform in, 70 surplus in, 17, 88 threat of breakup of, 270 trade deficits in, 81, 119 unemployment in, 63, 161, 231, 235, 332, 338 Spanish bonds, 114, 199, 200 spending, cutting, 196–98 spread, 332 stability, 147, 172, 261, 301, 364 automatic, 244 bubble and, 264 central banks and, 8 as collective action problem, 246 solidarity fund for, 54, 244, 264 Stability and Growth Pact, 245 standard models, 211–13 state development banks, 138 steel companies, 55 stock market, 151 stock market bubble, 200–201 stock market crash (1929), 18, 95 stock options, 259, 359 structural deficit, 245 Structural Funds, 243 structural impediments, 215 structural realignment, 252–56 structural reforms, 9, 18, 19–20, 26–27, 214–36, 239–71, 307 from austerity to growth, 263–65 banking union, 241–44 and climate change, 229–30 common framework for stability, 244–52 counterproductive, 222–23 debt restructuring and, 265–67 of finance, 228–29 full employment and growth, 256–57 in Greece, 20, 70, 188, 191, 214–36 growth and, 232–35 shared prosperity and, 260–61 and structural realignment, 252–56 of trade deficits, 216–17 trauma of, 224 as trivial, 214–15, 217–20, 233 subsidiarity, 8, 41–42, 263 subsidies: agricultural, 45, 197 energy, 197 sudden stops, 111 Suharto, 314 suicide, 82, 344 Supplemental Nutrition Assistance Program (SNAP), 91 supply-side effects: in Greece, 191, 215–16 of investments, 367 surpluses, fiscal, 17, 96, 312, 379 primary, 187–88 surpluses, trade, see trade surpluses “Swabian housewife,” 186, 245 Sweden, 12, 46, 307, 313, 331, 335, 339 euro referendum of, 58 refugees into, 320 Switzerland, 44, 307 Syria, 321, 342 Syriza party, 309, 311, 312–13, 315, 377 Taiwan, 55 tariffs, 40 tax avoiders, 74, 142–43, 227–28, 261 taxes, 142, 290, 315 in Canada, 191 on capital, 356 on carbon, 230, 260, 265, 368 consumption, 193–94 corporate, 189–90, 227, 251 cross-border, 319, 384 and distortions, 191 in EU, 8, 261 and fiat currency, 284 and free mobility of goods and capital, 260–61 in Greece, 16, 142, 192, 193–94, 227, 367–68 ideal system for, 191 IMF’s warning about high, 190 income, 45 increase in, 190–94 inequality and, 191 inheritance, 368 land, 191 on luxury cars, 265 progressive, 248 property, 192–93, 227 Reagan cuts to, 168, 210 shipping, 227, 228 as stimulative, 368 on trade surpluses, 254 value-added, 190, 192 tax evasion, in Greece, 190–91 tax laws, 75 tax revenue, 190–96 Taylor, John, 169 Taylor rule, 169 tech bubble, 250 technology, 137, 138–39, 186, 211, 217, 251, 258, 265, 300 and new financial system, 274–76, 283–84 telecoms, 55 Telmex, 369 terrorism, 319 Thailand, 113 theory of the second best, 27–28, 48 “there is no alternative” (TINA), 306, 311–12 Tocqueville, Alexis de, xiii too-big-to-fail banks, 360 tourism, 192, 286 trade: and contractionary expansion, 209 US push for, 323 trade agreements, xiv–xvi, 357 trade balance, 81, 93, 100, 109 as allegedly self-correcting, 98–99, 101–3 and wage flexibility, 104–5 trade barriers, 40 trade deficits, 89, 139 aggregate demand weakened by, 111 chit solution to, 287–88, 290, 299–300, 387, 388–89 control of, 109–10, 122 with currency pegs, 110 and fixed exchange rates, 107–8, 118 and government spending, 107–8, 108 of Greece, 81, 194, 215–16, 222, 285–86 structural reform of, 216–17 traded goods, 102, 103, 216 trade integration, 393 trade surpluses, 88, 118–21, 139–40, 350–52 discouragement of, 282–84, 299–300 of Germany, 118–19, 120, 139, 253, 293, 299, 350–52, 381–82, 391 tax on, 254, 351, 381–82 Transatlantic Trade and Investment Partnership, xv, 323 transfer price system, 376 Trans-Pacific Partnership, xv, 323 Treasury bills, US, 204 Trichet, Jean-Claude, 100–101, 155, 156, 164–65, 251 trickle-down economics, 362 Troika, 19, 20, 26, 55, 56, 58, 60, 69, 99, 101–3, 117, 119, 135, 140–42, 178, 179, 184, 195, 274, 294, 317, 362, 370–71, 373, 376, 377, 386 banks weakened by, 229 conditions of, 201 discretion of, 262 failure to learn, 312 Greek incomes lowered by, 80 Greek loan set up by, 202 inequality created by, 225–26 poor forecasting of, 307 predictions by, 249 primary surpluses and, 187–88 privatization avoided by, 194 programs of, 17–18, 21, 155–57, 179–80, 181, 182–83, 184–85, 187–93, 196, 197–98, 202, 204, 205, 207, 208, 214–16, 217, 218–23, 225–28, 229, 231, 233–34, 273, 278, 308, 309–11, 312, 313, 314, 315–16, 323–24, 348, 366, 379, 392 social contract torn up by, 78 structural reforms imposed by, 214–16, 217, 218–23, 225–38 tax demand of, 192 and tax evasion, 367 see also European Central Bank (ECB); European Commission; International Monetary Fund (IMF) trust, xix, 280 Tsipras, Alexis, 61–62, 221, 273, 314 Turkey, 321 UBS, 355 Ukraine, 36 unemployment, 3, 64, 68, 71–72, 110, 111, 122, 323, 336, 342 as allegedly self-correcting, 98–101 in Argentina, 267 austerity and, 209 central banks and, 8, 94, 97, 106, 147 ECB and, 163 in eurozone, 71, 135, 163, 177–78, 181, 331 and financing investments, 186 in Finland, 296 and future income, 77 in Greece, xi, 71, 236, 267, 331, 338, 342 increased by capital, 264 interest rates and, 43–44 and internal devaluation, 98–101, 104–6 migration and, 69, 90, 135, 140 natural rate of, 172–73 present-day, in Europe, 210 and rise of Hitler, 338, 358 and single currency, 88 in Spain, 63, 161, 231, 235, 332, 338 and structural reforms, 19 and trade deficits, 108 in US, 3 youth, 3, 64, 71 unemployment insurance, 91, 186, 246, 247–48 UNICEF, 72–73 unions, 101, 254, 335 United Kingdom, 14, 44, 46, 131, 307, 331, 332, 340 colonies of, 36 debt of, 202 inflation target set in, 157 in Iraq War, 37 light regulations in, 131 proposed exit from EU by, 4, 270 United Nations, 337, 350, 384–85 creation of, 38 and lower rates of war, 196 United States: banking system in, 91 budget of, 8, 45 and Canada’s 1990 expansion, 209 Canada’s free trade with, 45–46, 47 central bank governance in, 161 debt-to-GDP of, 202, 210–11 financial crisis originating in, 65, 68, 79–80, 128, 296, 302 financial system in, 228 founding of, 319 GDP of, xiii Germany’s borrowing from, 187 growing working-age population of, 70 growth in, 68 housing bubble in, 108 immigration into, 320 migration in, 90, 136, 346 monetary policy in financial crisis of, 151 in NAFTA, xiv 1980–1981 recessions in, 76 predatory lending in, 310 productivity in, 71 recovery of, xiii, 12 rising inequality in, xvii, 333 shareholder capitalism of, 21 Small Business Administration in, 246 structural reforms needed in, 20 surpluses in, 96, 187 trade agenda of, 323 unemployment in, 3, 178 united currency in, 35, 36, 88, 89–92 United States bonds, 350 unskilled workers, 134–35 value-added tax, 190, 192 values, 57–58 Varoufakis, Yanis, 61, 221, 309 velocity of circulation, 167 Venezuela, 371 Versaille, Treaty of, 187 victim blaming, 9, 15–17, 177–78, 309–11 volatility: and capital market integration, 28 in exchange rates, 48–49 Volcker, Paul, 157, 168 wage adjustments, 100–101, 103, 104–5, 155, 216–17, 220–22, 338, 361 wages, 19, 348 expansionary policies on, 284–85 Germany’s constraining of, 41, 42–43 lowered in Germany, 105, 333 wage stagnation, in Germany, 13 war, change in attitude to, 38, 196 Washington Consensus, xvi Washington Mutual, 91 wealth, divergence in, 139–40 Weil, Jonathan, 360 welfare, 196 West Germany, 6 Whitney, Meredith, 360 wind energy, 193, 229 Wolf, Martin, 385 worker protection, 56 workers’ bargaining rights, 19, 221, 255 World Bank, xv, xvii, 10, 61, 337, 357, 371 World Trade Organization, xiv youth: future of, xx–xxi unemployment of, 3, 64, 71 Zapatero, José Luis Rodríguez, xiv, 155, 362 zero lower bound, 106 ALSO BY JOSEPH E.

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pages: 491 words: 131,769

Crisis Economics: A Crash Course in the Future of Finance
by Nouriel Roubini and Stephen Mihm
Published 10 May 2010

That raises the unnerving prospect that the dollar’s days may be numbered in years rather than decades. How such an abrupt and disorderly decline might play out is difficult to know. Historically, currencies had some relationship to gold or silver; only in the 1970s was this connection severed entirely. The world’s monetary system now rests not on gold but on a fiat currency—a currency that has no intrinsic value, is not backed by precious metals, and is in no way fixed in value. In a way, the dollar occupies the role that gold once did, and its collapse would be no less calamitous than if the regents and bankers of centuries past had opened their vaults one day to find that their precious piles of coin had turned to dust.

…

That said, if governments resort to monetizing their deficits, triggering higher inflation, gold could rise sharply in price. But should that happen, central banks would probably not try to corner scarce supplies of gold. More likely they would invest more in oil and other commodities as a hedge against inflation. In other words, they would rush into real assets as they fled fiat currencies like the dollar. That leaves the renminbi as the long-term alternative to the dollar. China looks much like the United States did when it came to power: it runs large current account surpluses, has become the world’s biggest exporter, has a relatively small budget deficit, and carries much less debt relative to other countries.

pages: 182 words: 53,802

The Production of Money: How to Break the Power of Banks
by Ann Pettifor
Published 27 Mar 2017

Others, like the Bank of England, support both the private banking sector, but also the government’s economic objectives. The most important role of any central bank is the determination and, if possible, maintenance of the value of a currency. The central bank’s power to issue and maintain the value of a fiat currency is closely linked to the government’s capacity to tax its citizens. In this sense fiscal policy acts as a vital backstop to monetary policy. Central banks also play a critical role in managing the banking system as a whole, and in supporting private banks through lending and other operations.

pages: 309 words: 54,839

Attack of the 50 Foot Blockchain: Bitcoin, Blockchain, Ethereum & Smart Contracts
by David Gerard
Published 23 Jul 2017

Nakamoto’s 2008 white paper alluded to these ideas, but the 2009 release announcement for Bitcoin 0.1 states them outright:20 The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.

pages: 248 words: 57,419

The New Depression: The Breakdown of the Paper Money Economy
by Richard Duncan
Published 2 Apr 2012

Hyperinflation would not prevent economic collapse, however. It would destroy the savings of the middle class, as it did in Weimar Germany during the 1920s. It would also cause devastatingly high rates of interest. Finally, it would completely destroy the value of the dollar and the value of all the other fiat currencies affected by hyperinflation. Although hyperinflation would not be a solution, if the past is any guide, politicians would resort to it as a desperate expedient nevertheless. Andrew White wrote a fascinating account of the politics and economic consequences of hyperinflation during the French Revolution, which he published as a small book in 1912, Fiat Money Inflation in France.

pages: 180 words: 61,340

Boomerang: Travels in the New Third World
by Michael Lewis
Published 2 Oct 2011

That I’m wrong about the chronology of events. But I’m convinced what the ultimate outcome is.” He still owned stacks of gold and platinum bars that had roughly doubled in value, but he remained on the lookout for hard stores of wealth as a hedge against what he assumed was the coming debasement of fiat currency. Nickels, for instance. “The value of the metal in a nickel is worth six point eight cents,” he said. “Did you know that?” I didn’t. “I just bought a million dollars’ worth of them,” he said, and then, perhaps sensing I couldn’t do the math: “twenty million nickels.” “You bought twenty million nickels?”

pages: 192 words: 72,822

Freedom Without Borders
by Hoyt L. Barber
Published 23 Feb 2012

That is a pretty big statement, and, if true, would reverse the global soft-currency trend and harm other currencies. Historically, currencies have shifted between soft-money cycles and hard-money cycles. Soft money is not backed by any real value, such as gold, and permits and tempts those who have the control of the printing presses to produce as much “fiat” or counterfeit currency as they like. With a fiat currency—and that’s what they all are today—the Fed needs to be quite disciplined in managing the money supply through a conservative monetary policy. This policy needs to be followed up by actual sound fiscal practices so that the currency exhibits strength and maybe even appreciates and, in turn, encourages and contributes to building a healthy economy and stable government.

pages: 218 words: 63,471

How We Got Here: A Slightly Irreverent History of Technology and Markets
by Andy Kessler
Published 13 Jun 2005

This was not good news for anti-Bullionists, even though they were probably right. Law was soon exiled after winning a duel and lived in Paris. While there, he became buddies with the Duke of Orleans. After the death of Louis XIV, the French monetary system was une mess, and with the Duke’s help, Law volunteered to fix it. He set up Banque Generale, which issued fiat currency, backed by zip. And despite his Real Bills Doctrine, Law issued currency like it was, well, paper. Around the same time, he set up the Mississippi Company, whose stock ballooned concurrent with the English South Sea Company, eventually being worth more than all the gold and silver in France, which from the looks of the reserves of Banque Generale, was FOOL’S GOLD 79 not very much.

pages: 272 words: 64,626

Eat People: And Other Unapologetic Rules for Game-Changing Entrepreneurs
by Andy Kessler
Published 1 Feb 2011

Still, more money needs to be created to fill the bigger bucket. But since no one knows what the velocity of money is, no one knows how much money is needed to keep the economy working just right. So it’s virtually impossible to fill the bucket just up to the rim. The Federal Reserve, the U.S. central bank that creates our fiat currency by allowing fractional reserve banks to operate, just guesses and creates what they think is the right amount of money. As we all know, too much money chasing too few goods creates inflation, a situation where prices go up above and beyond what they normally would if the supply of money and the actual wealth in society were perfectly matched.

pages: 244 words: 66,977

Subscribed: Why the Subscription Model Will Be Your Company's Future - and What to Do About It
by Tien Tzuo and Gabe Weisert
Published 4 Jun 2018

Adyen helps companies do business all around the world by processing almost every payment method under the sun. Venmo is a digital wallet that helps you split the bill or cab fare with friends (if you’ve never heard of Venmo, ask your younger colleagues about it). Everything is up for grabs, including the whole concept of fiat currency. A NEW PATH TO GROWTH There’s lots more we could talk about. We work with companies in agriculture, communications, travel, wellness, telecommunications, life sciences, aviation, food and beverage, fitness, gaming. But here’s the through-line: subscriptions lead to growth. Once customers can get the outcome they want, without having to worry about owning the physical assets, that’s where the demand goes, and that’s where new revenue streams are created.

pages: 246 words: 70,404

Come and Take It: The Gun Printer's Guide to Thinking Free
by Cody Wilson
Published 10 Oct 2016

At the bottom of this passage is Brave New Books. Just before turning through the shop’s glass-pane threshold, I stood agog before a cinder-block wall festooned with every species of flyer and circular. Fresh pamphlets were pinned over discolored meeting announcements, which themselves papered over aged printouts decrying everything from fiat currency to the murderous Austin police department. Higher up the wall and pressed over a large swath of this paper scaling, I saw a large cardboard poster of the president, arms folded, framed in banner text: Establishment Demagogue. I stepped past the open door and walked inside toward a wooden island.

pages: 583 words: 182,990

The Ministry for the Future: A Novel
by Kim Stanley Robinson
Published 5 Oct 2020

For every ton of carbon not burned, or sequestered in a way that would be certified to be real for an agreed-upon time, one century being typical in these discussions so far, you are given one carbon coin. You can trade that coin immediately for any other currency on the currency exchanges, so one carbon coin would be worth a certain amount of other fiat currencies. The central banks would guarantee it at a certain minimum price, they would support a floor so it couldn’t crash. But also, it could rise above that floor as people get a sense of its value, in the usual way of currencies in the currency exchange markets. Mary said, So really this is just a form of quantitative easing.

…

This made for a kind of double standard, or rather something finally to replace the lost gold standard; they had now a carbon standard, and also the dollar to use for exchanges. But the carboni, as more and more people called it, was also complementing the euro, the renminbi, and all the rest of the fiat currencies that had underwritten the new one. As significantly, money itself was now almost completely blockchained, thus recorded unit by unit in the consolidated central banks and through the digital world, such that any real fiat money now traveled within a panopticon that was in itself a global state of sorts, unspoken as yet, emerging from the fact of money itself.

pages: 238 words: 73,121

Does Capitalism Have a Future?
by Immanuel Wallerstein , Randall Collins , Michael Mann , Georgi Derluguian , Craig Calhoun , Stephen Hoye and Audible Studios
Published 15 Nov 2013

Because of its unpopularity, the United States financed the last years of the Vietnam War largely on credit. Seeking to manage economic difficulties in the 1970s, the United States and other core capitalist countries brought the Bretton Woods monetary system to an end, replacing the stabilization of backing by precious metals with floating, infinitely tradable fiat currencies. After the 1973 Arab-Israeli war OPEC oil producers restricted supply, vastly multiplying their returns from a world deeply dependent on petroleum, and then channeled much of the money into sovereign wealth funds. But financialization was at its most extreme in the world’s long-standing core capitalist economies (and weaker economies yoked to them, for example by membership in the European Union or asymmetrical commodity trade).

pages: 225 words: 11,355

Financial Market Meltdown: Everything You Need to Know to Understand and Survive the Global Credit Crisis
by Kevin Mellyn
Published 30 Sep 2009

This was without doubt one of the greatest acts of bad faith in all financial history. CURRENCIES FLOAT Without the last remnant of the gold standard, the world’s currencies began to ‘‘float.’’ All countries’ money was now pure ‘‘fiat money,’’ money that was only worth something because of the power of the government over its citizens—a fiat. This meant that fiat currencies were only worth what the foreign exchange—FX in bank-speak— markets centered in London said that they were worth, not in terms of gold or some other commodity ‘‘yardstick’’ but in terms of each other. The FX grew very quickly and became a ‘‘professional market’’ only loosely tied to the real-economy requirement for foreign currency to settle debts.

pages: 268 words: 74,724

Who Needs the Fed?: What Taylor Swift, Uber, and Robots Tell Us About Money, Credit, and Why We Should Abolish America's Central Bank
by John Tamny
Published 30 Apr 2016

It did not matter what the Federal Reserve said.1 In 1933, FDR made the decision to devalue the dollar from 1/20th of an ounce of gold to 1/35th of an ounce.2 Forgetting the lesson of the early 1920s, when the integrity of the dollar was maintained, Roosevelt devalued the dollar and thereby marked the first time the United States defaulted on its debt. As Carmen Reinhart and Kenneth Rogoff describe in This Time Is Different (2009), “The abrogation of the gold clause in the United States in 1933, which meant that public debts would be repaid in fiat currency rather than gold, constitutes a restricting of nearly all the government’s domestic debt.”3 With the United States heavily in debt thanks to spending that was logically failing to stimulate the economy, FDR reduced the value of the dollars being returned to holders of U.S. debt. Importantly, what Roosevelt did was much bigger than a default.

pages: 290 words: 72,046

5 Day Weekend: Freedom to Make Your Life and Work Rich With Purpose
by Nik Halik and Garrett B. Gunderson
Published 5 Mar 2018

This stealthy predator loiters unabated by killing the purchasing power of your hard-earned after-tax dollars. No money actually leaves your bank account. Yet every single day, your purchasing power is being stolen from you. Inflation is dangerous. In fact, $1 in 1913 is worth about $.03 today. After moving from the gold standard to our current fiat currency system, a $100,000 savings in 1971 only has the purchasing power of $16,667 today. In light of inflation, there are other considerations that erode your purchasing power: Planned obsolescence: Products needing to be constantly replaced Technological advances: Future purchases that don’t even exist today As a rule of thumb you should ensure that you generate a minimum return of 7 percent per year growth to combat inflation.

pages: 236 words: 77,546

The Cult of Smart: How Our Broken Education System Perpetuates Social Injustice
by Fredrik Deboer
Published 3 Aug 2020

We should rather see it as part of a sweeping set of changes to our basic social contract, a policy agenda that will rescue those who have no college degrees as well as those struggling under their debt burdens. As for that $1.5 trillion, well, if default rates are as high as some people believe, we’re not going to be seeing a good portion of that money back anyway. Besides—we control the world’s fiat currency and own some printing presses. We can afford it. Of course, before it’s a debt crisis, it’s a tuition crisis. The rise of college costs could be (and has been) the subject of entire books. Many causes have been advanced, including the rise of expensive amenities in dorms, gyms, and dining halls; the perverse competition between institutions where higher tuition is actually treated as somehow a marker of more elite status; and the proliferation of administrators handling a mushrooming number of duties, some of them tied to compliance with increasingly onerous accreditation standards as well as more stringent norms of gender and racial equality.

pages: 650 words: 204,878

Reminiscences of a Stock Operator
by Edwin Lefèvre and William J. O'Neil
Published 14 May 1923

Louis shook his fist at the manager and yelled: “You ought to’ve known better, you poor boob, than to let this guy get into you. He’s Livingston. You had your orders.” 2.18 Gold notes or gold certificates were a paper currency redeemable for gold coin and issued until the early 1930s. Known as “yellow backs,” they contrasted with greenbacks or United States notes, which were a fiat currency not transferable into precious metal on demand. 2.19 Exchanges’ efforts to destroy the bucket shops culminated in a landmark 1909 federal law banning them in the District of Columbia. This photo shows a crowd gathering outside the Mallers Building in Chicago during a police raid of a bucket shop in 1905.

…

The groundwork for the corner attempt was laid a decade before it occurred in the financing of the Civil War. The government of Abraham Lincoln had issued millions of dollars’ worth of “greenbacks,” or paper money not redeemable into precious metal, to pay its bills. They were backed by bonds sold in Europe. Naturally this new policy of issuing a fiat currency was considered inflationary, so citizens hoarded gold as a store of value. Gold began trading at a premium to the dollar, with the spread fluctuation based on the fortunes of the Union Army. Traders figured that if the North were defeated, greenbacks would become worthless. In contrast, they believed victory by the Union Army would bring the resumption of the gold standard and greenback redemption at face value.

pages: 262 words: 83,548

The End of Growth
by Jeff Rubin
Published 2 Sep 2013

In the days of the gold standard, paper currency could be physically exchanged for gold bullion. During the American Civil War, the government suspended the convertibility of the American dollar into gold. And during the Great Depression, in 1933, Washington once again stepped into the currency market, reducing the amount of gold that backed each US dollar. In the modern world of fiat currency (the term for the paper money we all know and use), old-time currency debasement has been replaced by exchange rate depreciation. Instead of a sovereign ruler instructing the royal mint to use less gold in each coin, governments now tell central bankers to print more money. A surplus of a currency in the market lowers its value in relation to the currencies of other countries.

pages: 332 words: 81,289

Smarter Investing
by Tim Hale
Published 2 Sep 2014

12.4 Gold Gold has always been an asset that has attracted significant attention, particularly as a store of value at times of extreme uncertainty. A case can certainly be made for holding some physical gold, perhaps in the form of coins or ingots, in the liquidity reserves of those who fear the breakdown of fiat currencies at times of extreme market events such as those surrounding the collapse of Lehman Brothers. In the extreme collapse of the financial system, paper gold (e.g. via a gold fund) would be less favourable given the counterparty risk of failure and inability to access the value of the gold. This is a purely personal decision that sits outside a long-term investment portfolio.

pages: 291 words: 80,068

Framers: Human Advantage in an Age of Technology and Turmoil
by Kenneth Cukier , Viktor Mayer-Schönberger and Francis de Véricourt
Published 10 May 2021

In other cases, new frames peacefully coexist with the old. Einsteinian and Newtonian physics both have their place in explaining motion, just as proprietary software and open-source code can flourish. Places like Britain, Belgium, Bhutan, and Thailand can meld democracy and monarchy. Central banks manage fiat currencies but people still barter or use Bitcoin. Yet in all cases, reframing an issue allows us to see it from a new perspective, which reveals alternatives that we might not otherwise have imagined. That, in turn, helps us make good decisions and achieve better outcomes. A place where a useful reframing took place was the city of Camden in southern New Jersey.

pages: 279 words: 85,453

Breaking Twitter: Elon Musk and the Most Controversial Corporate Takeover in History
by Ben Mezrich
Published 6 Nov 2023

Reaching the double doors to the room he paused, his mind already whirling forward as he contemplated the call he had just received. There was another window set halfway up the doors, its single pane of grimy glass offering a distorted view of the rows of young people sitting at their desks. It wasn’t really rubles on his mind. Nobody in his business worked in fiat currency anymore. The job he’d just agreed to would involve a deposit of bitcoin into a numbered crypto account, which would eventually be transferred to a cold storage device he kept in his apartment in the nicer section of Aktobe, right in the center of the McDonald’s delivery zone. A much more sophisticated process than the old days back in Moscow, when it was suitcases of cash dropped off in the coatroom of a fancy hotel, or duffel bags left in the trunk of a Lada.

pages: 298 words: 95,668

Milton Friedman: A Biography
by Lanny Ebenstein
Published 23 Jan 2007

So you have a situation in the eurozone where Ireland has inflation and rapid expansion while Germany and France have stalled and had the difficulties of adjusting. The euro is going to be a big source of problems, not a source of help. The euro has no precedent. To the best of my knowledge, there has never been a monetary union, putting out a fiat currency, composed of independent states. There have been unions based on gold or silver, but not on fiat money—money tempted to inflation—put out by politically independent entities. At the moment, of course, Germany cannot get out of the euro. What it has to do, therefore, is make the economy more flexible—to eliminate the restrictions on prices, on wages and on employment; in short, the regulations that keep 10 percent of the German workforce unemployed.

pages: 348 words: 99,383

The Financial Crisis and the Free Market Cure: Why Pure Capitalism Is the World Economy's Only Hope
by John A. Allison
Published 20 Sep 2012

Under banking regulatory standards (Basel), banks do not have to hold any capital to support sovereign risk (such as the debt of a euro country). In the United States, banks do not have to hold any capital to support U.S. Treasury bonds. The theory is that if the government goes broke, the banks will inevitably fail (which is certainly true in the United States, where we have fiat currency). In Europe, this regulatory capital standard encouraged banks to purchase large qualities of sovereign debt from Greece, Spain, Italy, Portugal, and other countries that were running large deficits. Of course, in the European system, the strong countries (such as Germany) were not directly guaranteeing the debt of the weak countries.

pages: 378 words: 94,468

Drugs 2.0: The Web Revolution That's Changing How the World Gets High
by Mike Power
Published 1 May 2013

Of course not all of the pennies will be 95 per cent copper, but the portion of 95 per cent copper pennies in the box have the proportional gain,’ he told me. ‘I have to sort the copper pennies from the zinc pennies and I have designed a system to automate the sorting based on pattern recognition of metal composition. So I use technology to sort and reach a scale of efficiency that makes the process profitable. In my opinion, fiat currencies are doomed simply because of the deception involved. As the populace is educated (and it looks like that education is about to be painfully forced on the masses – look at Greece) it will be a force of nature – the destruction of the fiat model. Anonymity or the ability to act anonymously is a critical means to preserving individual freedom in the midst of tyrants.

pages: 304 words: 91,566

Bitcoin Billionaires: A True Story of Genius, Betrayal, and Redemption
by Ben Mezrich
Published 20 May 2019

There’s still a lot of regulatory uncertainty, and there are so few people in the market, that it’s extremely sensitive to day-to-day news. But that’s exactly why we think there’s so much opportunity. With high risk comes high reward. Bitcoin is only going to attract more and more attention. Cyprus was just a starting point. People are going to realize there are better places to store their wealth than government fiat currency. And because of Bitcoin’s fixed supply, the more people buy into it, the more the price has to appreciate. Classic supply and demand.” Tyler looked at the small group gathered on the semicircular couch in front of him, which included his brother, of course, his head propped up next to one of the windows that lined the body of the plane.

pages: 1,082 words: 87,792

Python for Algorithmic Trading: From Idea to Cloud Deployment
by Yves Hilpisch
Published 8 Dec 2020

All these trading strategies can be classified as mainly alpha seeking strategies, since their main objective is to generate positive, above-market returns independent of the market direction. Canonical examples throughout the book, when it comes to financial instruments traded, are a stock index, a single stock, or a cryptocurrency (denominated in a fiat currency). The book does not cover strategies involving multiple financial instruments at the same time (pair trading strategies, strategies based on baskets, etc.). It also covers only strategies whose trading signals are derived from structured, financial time series data and not, for instance, from unstructured data sources like news or social media feeds.

pages: 282 words: 93,783

The Future Is Analog: How to Create a More Human World
by David Sax
Published 15 Jan 2022

Other speakers included the founders of groundbreaking artificial intelligence and robotics start-ups, brilliant professors of computer science, software magnates from all over the world, and even a cryptocurrency billionaire from a former Soviet republic who dressed in a comically maniacal outfit of black turtlenecks and velour blazers and publicly predicted the imminent end of fiat currency every time he opened his mouth. After thirteen hours in the air, I emerged into the arrivals hall of Incheon International Airport, exhausted and rumpled, where a three-foot-tall security robot on wheels greeted me with a digital smile and said in a cheery voice, “Welcome to Seoul. Please stick with your luggage.”

The Age of Turbulence: Adventures in a New World (Hardback) - Common
by Alan Greenspan
Published 14 Jun 2007

I have always thought that measured inflation at a rate as low as 1 percent cannot be sustained in an economy using a fiat currency in a competitively democratic society with any remnant of populism (is any country immune?). 1 Such a currency, by its very nature, has as the only constraint on its supply the actions of the central bank, and cannot be entirely insulated from political influences. The U.S. inflations of 1946, 1950, and the late 1970s remain too vivid in my memory. (I had that view challenged in 2003 by the Japanese deflation, though, in the end, deflation did not take hold in the United States.) If a typical inflation rate of a democratically mandated fiat currency is north of 1 to 2 percent, what force could keep inflation below that mark as the two major disinflationary forces that I have discussed in this chapter recede?

pages: 848 words: 227,015

On the Edge: The Art of Risking Everything
by Nate Silver
Published 12 Aug 2024

It was at once the digital equivalent of a proof-of-life photograph—where a newspaper is used to provide contemporaneous evidence of when a picture was taken—and a nod to the Global Financial Crisis. The GFC had inspired Nakamoto—and convinced him that governments couldn’t be trusted. “The root problem with conventional currency is all the trust that’s required to make it work,” he wrote. “The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” Nakamoto wanted to create a decentralized digital currency that wasn’t dependent upon trust, or the authority of the government or any central bank. The Genesis Block is still included in every copy of the Bitcoin blockchain—and every copy of the blockchain is the same, except for how they describe very recent transactions that have not yet been verified.

…

But I was very surprised when the response was a lot of maximalism and hostility.” Some of this is because of the origins of the respective blockchains and the cultural baggage they carry with them: Ethereum was a quasi–Silicon Valley startup, while Bitcoin was a cyberlibertarian alternative to fiat currency. “Ethereum is an ecosystem for venture capitalists to make bets on the future of computing and, like, Web3 and DeFi and gaming and NFTs and all that shit,” said Levine. “Bitcoin is a place to make bets on future institutional adoption of an economic asset class.” But that doesn’t fully explain the fervently anti-Ethereum attitudes that Buterin encountered.

pages: 370 words: 102,823

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth
by Michael Jacobs and Mariana Mazzucato
Published 31 Jul 2016

Federal Budget Deficit (% of GDP) 1975 8.5% 3.2% 1992 7.5% 4.4% 1976 7.7% 3.9% 1993 6.9% 3.7% 1982 9.7% 3.8% 2003 6.0% 3.3% 1983 9.6% 5.7% 2004 5.5% 3.4% 1984 7.5% 4.6% 2008 5.8% 3.1% 1985 7.2% 4.9% 2009 9.3% 9.8% 1986 7.0% 4.8% 2010 9.6% 8.7% 1987 6.2% 3.0% 2011 8.9% 8.4% 1990 5.6% 3.7% 2012 8.1% 6.7% 1991 6.9% 4.4% 2013 7.4% 4.0% For some countries, this is easier said than done.53 But for nations that spend, tax and borrow in their own non-convertible fiat currencies, there is the potential for a radical break from the prevailing economic wisdom that promotes shared sacrifice over prosperity-enhancing investments in our people and planet. The case for such a break was laid out most cogently by Abba Lerner,54 who urged policy-makers to abandon the paralysing philosophy of so-called ‘sound finance’ in favour of a mission-oriented approach he dubbed ‘functional finance’.

pages: 343 words: 101,563

The Uninhabitable Earth: Life After Warming
by David Wallace-Wells
Published 19 Feb 2019

Five years ago, hardly anyone outside the darkest corners of the internet had even heard of Bitcoin; today mining it consumes more electricity than is generated by all the world’s solar panels combined, which means that in just a few years we’ve assembled, out of distrust of one another and the nations behind “fiat currencies,” a program to wipe out the gains of several long, hard generations of green energy innovation. It did not have to be that way. And a simple change to the algorithm could eliminate that Bitcoin footprint entirely. These are just a few of the reasons to believe that what the Canadian activist Stuart Parker has called “climate nihilism” is, in fact, another of our delusions.

pages: 363 words: 98,024

Keeping at It: The Quest for Sound Money and Good Government
by Paul Volcker and Christine Harper
Published 30 Oct 2018

My immediate reply was that was “a pretty good reputation,” a sign we were making progress. Trust in our currency is fundamental to good government and economic growth. The influence extends far beyond our shores, given the role of the dollar and the American financial system in the world. Our monetary system, like that of almost all countries, rests on a fiat currency. There is no gold or other valued hard asset into which a paper dollar (or bank deposit) can be exchanged at a fixed price. Implicitly, we take for granted, or should, the stability of our currency in terms of what it can buy today, tomorrow, and for years ahead—groceries, a home, or maybe even a bond that promises to pay a fixed amount of dollars into the future.

pages: 354 words: 105,322

The Road to Ruin: The Global Elites' Secret Plan for the Next Financial Crisis
by James Rickards
Published 15 Nov 2016

Today there are no circulating gold or silver coins. Such coins as exist are bullion, kept out of sight. The disappearance of gold and silver has not obviated world money. Only the form of world money changed. Parallel to the diminution in the role of gold and silver was the rise of bank notes, or fiat currency. Fiat critics point to August 15, 1971, as the day gold ceased to be money. That day President Richard Nixon temporarily suspended convertibility of foreign dollar holdings into physical gold. That suspension was not by itself dispositive, as France, among others, hoped to return to gold at new parities.

pages: 385 words: 111,113

Augmented: Life in the Smart Lane
by Brett King
Published 5 May 2016

Buncombe, “Pakistani court declares US drone strikes in the country’s tribal belt illegal,” Independent, 9 May 2013. 12 http://www.nest.com Chapter 9 Smart Banking, Payments and Money “The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” Satoshi Nakamoto, pseudonym of the anonymous creator of Bitcoin The evolution of banking and payments has often been correlated with technological advancement. Today, the primary method of transferring money between banks globally is a transaction called a wire transfer or telegraphic transfer, so named because the instructions for these transfers were sent via telegraph or “wire” initially, then later by Telex and now via interbank electronic networks like SWIFT.1 The first mainframe computer ever built was for a bank, too.

pages: 438 words: 109,306

Tower of Basel: The Shadowy History of the Secret Bank That Runs the World
by Adam Lebor
Published 28 May 2013

Unlike the Reichsbank, which had been brought under government control, the BdL, which would now represent Germany at the BIS in Basel, had its independence constitutionally guaranteed. Hjalmar Schacht was not impressed with the deutschmark. It was backed neither by gold nor by foreign currency reserves. It was a fiat currency, imposed by the Western authorities. Schacht told Wilhelm Vocke, the president of the new German national bank, that the deutschmark would collapse in six weeks. But Schacht was wrong. The deutschmark was backed, and by assets even more powerful than gold or foreign exchange: public confidence and postwar planning by the Nazi leadership.

pages: 371 words: 107,141

You've Been Played: How Corporations, Governments, and Schools Use Games to Control Us All
by Adrian Hon
Published 14 Sep 2022

In his “Elon Markets Hypothesis,” Levine describes how Musk’s ability to freely coordinate activity through gamified social media is a source of value in itself: “Money and value are coordination games; what we use for money depends on the channels that we use to coordinate social activity. Once society was mediated by governments, and we used fiat currency. Now society is mediated by Twitter and Reddit and Elon Musk.”81 If the marketplace is gamified, so too is the marketplace of ideas. During the twentieth century, society was also mediated by publishers who controlled the flow of information. This doesn’t mean information was more accurate or useful in the past, rather that there were fewer people making slower decisions on what messages to amplify, with far less feedback on how audiences responded.

pages: 426 words: 115,150

Your Money or Your Life: 9 Steps to Transforming Your Relationship With Money and Achieving Financial Independence: Revised and Updated for the 21st Century
by Vicki Robin , Joe Dominguez and Monique Tilford
Published 31 Aug 1992

The rest is backed by nothing more than the assumption that the economy will keep expanding, allowing people will pay back their loans with interest. Second, the U.S. Treasury has nothing in its vault backing your money. Since Nixon took our currency off the gold standard in 1971 there’s been no gold or any other collateral you can convert your money into. It is “fiat currency”—fiat as in faith. It is held up just by the faith we all have in it being worth something. Because of this, depending solely on the money economy to meet your needs is actually risky business. If we think that money equals wealth or security or success, we are at the mercy of these economic and monetary forces.

pages: 464 words: 116,945

Seventeen Contradictions and the End of Capitalism
by David Harvey
Published 3 Apr 2014

All these oddities in part arise because the three basic functions of money have quite different requirements if they are to be effectively performed. Commodity moneys are good at storing value but dysfunctional when it comes to circulating commodities in the market. Coins and paper moneys are great as a means or medium of payment but are less secure as a long-term store of value. Fiat currencies issued by the state with compulsory circulation (compulsory because taxes have to be paid in this currency) are subject to the policy whims of the issuing authorities (for example, debts can be inflated away by just printing money). These different functions are not entirely consistent with each other.

pages: 302 words: 112,390

Everyday Utopia: What 2,000 Years of Wild Experiments Can Teach Us About the Good Life
by Kristen R. Ghodsee
Published 16 May 2023

Even if we understand in the abstract about the pressures parents face, the strain that child-rearing places on romantic relationships, the high divorce rate, the prevalence of child abuse and intimate partner violence, and the very real possibilities of our own or our partner’s long-term unemployment, disability, or death, we replicate the domestic form that makes us the most vulnerable to these problems because it is convenient and because that’s what everyone expects of us. Just as our entire economy rests on the fiction of what economists call a fiat currency, it also rests on a particular notion of the family, one that is often viewed as either natural or divinely mandated, but which acts to uphold a specific set of social and economic relations. If you look, for instance, at the mission statement of the conservative Institute for Family Studies, it openly admits the potential economic repercussions of challenges to the nuclear family: “The fact that roughly one in two children in America grow up outside of an intact, married family constitutes one of the most significant threats to America’s future stability and prosperity” (my emphasis).7 And in early 2022, one of the institute’s top research issues was precisely “the connection between strong marriages and a thriving economy.”8 American conservatives recognize a fundamental threat to their way of life when they look around and see the declining marriage rate, the plummeting birth rate, the millennials refusing to saddle themselves with huge mortgages, as well as growing demands for what the cultural theorist Kate Soper has called “alternative hedonism,” a new post-consumerist definition of pleasure that no longer rests on the acquisition of material goods.

pages: 410 words: 119,823

Radical Technologies: The Design of Everyday Life
by Adam Greenfield
Published 29 May 2017

(For example, if you find that you’re particularly enjoying this book, you’re entirely welcome to send a BTC-denominated gratuity to my wallet at 1CaMGXfRCdfUVb1FFWfDR8h8Qzbzm5w2FA.) You could buy from an exchange: one among dozens of colorfully named registries like CEX.IO, BTC-e or OKCoin, any of which will be happy to take your state-backed fiat currency, take a smallish cut on the conversion, and send BTC to whatever wallet address you furnish. You may have to use the exchange’s own-brand wallet, you may have to wait until your offer to buy is accepted by someone willing to sell at that price, but you can generally convert any amount of currency you please to Bitcoin.

pages: 453 words: 122,586

Samuelson Friedman: The Battle Over the Free Market
by Nicholas Wapshott
Published 2 Aug 2021

In a meeting in January 1969, shortly before Nixon’s inauguration, Friedman was given the chance to pitch ideas to the president-elect. He put to one side his monetarist theory and urged on Nixon another of his favorite ideas that directly challenged John Maynard Keynes’s legacy: the dismantling of the Bretton Woods currency-fixing agreement that abandoned the gold standard in favor of fiat currencies, set up under Keynes’s auspices in 1944 to moderate the wild swings in world currency prices that in the Thirties had caused economic turbulence. By agreeing to limit the range of prices within which currencies traded, Bretton Woods ensured that national economies stayed in step with each other and that no nation was tempted to devalue its currency to win a short-term advantage in pricing its goods more cheaply on the world market.

pages: 960 words: 125,049

Mastering Ethereum: Building Smart Contracts and DApps
by Andreas M. Antonopoulos and Gavin Wood Ph. D.
Published 23 Dec 2018

Some more examples of data that might be provided by oracles include: Random numbers/entropy from physical sources such as quantum/thermal processes: e.g., to fairly select a winner in a lottery smart contract Parametric triggers indexed to natural hazards: e.g., triggering of catastrophe bond smart contracts, such as Richter scale measurements for an earthquake bond Exchange rate data: e.g., for accurate pegging of cryptocurrencies to fiat currency Capital markets data: e.g., pricing baskets of tokenized assets/securities Benchmark reference data: e.g., incorporating interest rates into smart financial derivatives Static/pseudostatic data: security identifiers, country codes, currency codes, etc. Time and interval data: for event triggers grounded in precise time measurements Weather data: e.g., insurance premium calculations based on weather forecasts Political events: for prediction market resolution Sporting events: for prediction market resolution and fantasy sports contracts Geolocation data: e.g., as used in supply chain tracking Damage verification: for insurance contracts Events occurring on other blockchains: interoperability functions Ether market price: e.g., for fiat gas price oracles Flight statistics: e.g., as used by groups and clubs for flight ticket pooling In the following sections, we will examine some of the ways oracles can be implemented, including basic oracle patterns, computation oracles, decentralized oracles, and oracle client implementations in Solidity.

pages: 473 words: 132,344

The Downfall of Money: Germany's Hyperinflation and the Destruction of the Middle Class
by Frederick Taylor
Published 16 Sep 2013

Helfferich’s idea for a so-called ‘Rye Bank’, bizarre as it sounds to our current thinking, represented an attempt to do something that had become vitally necessary, at least at this stage in Germany’s crisis: to decouple the worth of the mark from the credibility of the Reich government. The state’s deficit was now so enormous and, particularly so long as the Ruhr crisis continued, so intractable, that no one had any faith in any fiat currency over which the government – or, for that matter, the Reichsbank, which was widely seen as its instrument – presided. The idea for a rye-backed currency, based on a compulsory mortgage of the assets of German agriculture and industry, was something that, apparently, Helfferich had hit upon while on his regular summer break in the Swiss mountains.2 He had already suggested it to the Cuno cabinet, with whom he and most other nationalists stood on good terms.

pages: 420 words: 135,569

Imaginable: How to See the Future Coming and Feel Ready for Anything―Even Things That Seem Impossible Today
by Jane McGonigal
Published 22 Mar 2022

It’s a fantastic example of a community-based approach to futures thinking and imagination. 6 Note that this scenario is not about cryptocurrencies, which use blockchain technology, are not backed by any central bank or government, and are used primarily today as investment vehicles and for speculation. This scenario, instead, is about a central bank digital currency (CBDC). A CBDC is the digital form of a country’s fiat currency. Instead of printing money, the central bank issues electronic coins or an account backed by the full faith and credit of the government.

pages: 495 words: 136,714

Money for Nothing
by Thomas Levenson
Published 18 Aug 2020

This was the climax to one of the most improbable ascents to power anyone has ever accomplished: as far as its economy was concerned, John Law, duelist, adventurer, and Scot, ruled France. * * * — FOR A WHILE, it all seemed to work. It was more complex than the South Sea scheme, as there was no real counterpart to its monetary side in London. No one there proposed a pure paper “fiat” currency instead of metal money, nor could the Bank of England control the money supply. Britain did not farm its taxes, and no one involved in the great mercantile companies saw any value in bringing all those various monopolies under one roof. But as far as the stock market went, the broad outline of both booms was much the same, with Paris becoming, if anything, even more exuberant than London.

pages: 1,242 words: 317,903

The Man Who Knew: The Life and Times of Alan Greenspan
by Sebastian Mallaby
Published 10 Oct 2016

“Private bank notes have value because the word of the banker is as good as gold,” he explained; in contrast, government banknotes were backed not by honor but by coercive fiat—they were accepted because the law required them to be accepted. Echoing a famous passage on money in Atlas Shrugged, Greenspan emphasized the violence implicit in such fiat currency systems: “The ultimate backing of paper currency is not the inviolate word of a private individual but the muzzle of a gun of a government bureaucrat.” Greenspan presented his preference for privately issued money as practical as well as moral. The advantage of private money, he contended, was that its quantity was limited.

…

The comparison given here sharpens Friedman’s point: Greenspan’s record was superior even to Volcker’s second term—that is, it was superior to Volcker’s after his celebrated victory over inflation. 10. Milton Friedman, “‘He Has Set a Standard,’” Wall Street Journal, January 31, 2006. 11. Greenspan tried to reconcile his two selves by saying that he had run America’s fiat currency “as though we were on the gold standard.” House Committee on Financial Services, Monetary Policy and the State of the Economy: Hearing Before the Committee on Financial Services, 109th Cong., 1st sess., 2005, http://www.gpo.gov/fdsys/pkgCHRG-109hhrg23738/pdf/CHRG-109hhrg23738.pdf. Greenspan offered versions of this remark at other hearings of the House committee, always at the prompting of Congressman Ron Paul.

pages: 467 words: 154,960

Trend Following: How Great Traders Make Millions in Up or Down Markets
by Michael W. Covel
Published 19 Mar 2007

President, Altegris Investments, 2nd Quarter 2004 Commentary Trend Following (Updated Edition): Learn to Make Millions in Up or Down Markets “Since currency and derivative trading are zero-sum games, every dollar ‘won’ requires that a dollar was ‘lost.’ Haven’t they realized what a losing proposition this has been? What’s more, why do they keep playing at a losing game? The answer is that the losers are all of us. And, while neither rich nor stupid, we’ve been given no choice but to continue to lose. And every time one of these fiat currencies cannot be ‘defended,’ the workers, seniors, and business owners of that country—folks like us—suffer big time. Indeed, as their currencies are devalued, workers’ savings and future payments, such as their pensions, denominated in those currencies lose purchasing power. Interest rates increase.

pages: 632 words: 159,454

War and Gold: A Five-Hundred-Year History of Empires, Adventures, and Debt
by Kwasi Kwarteng
Published 12 May 2014

But this would risk increasing interest rates (an instance of the old intuitive and observable fact that the more you borrow, the more you have to pay in interest for this privilege). From the point of view of currencies, printing more money could have adverse effects. ‘It is little comfort that the dollar is still the least worst of the major fiat currencies.’ But the gold market suggested a widespread distrust of even the US dollar among international investors. The ‘inexorable rise in the price of gold indicates a large number of investors are seeking a safe haven beyond fiat [paper] currencies’.52 This was palpably true. The average price of gold was $1,227 an ounce during 2010, the year in which he wrote the article, more than four times the average price of $279 in 2000.53 There were undoubtedly other issues driving the gold price, but one of the significant factors had been a loss of confidence in paper money as a store of value.

Crisis and Leviathan: Critical Episodes in the Growth of American Government
by Robert Higgs and Arthur A. Ekirch, Jr.
Published 15 Jan 1987

Desperately seeking means of extricating themselves, some of the hardest pressed farmers gave their support to Populist panaceas such as silver-fed inflation or stricter regulation of railroad rates. The Populist platform of 1892 also endorsed a subtreasury plan whereby the federal government, on the security of crop deposits, would make loans of fiat currency to farmers at interest rates below those prevailing in the financial markets. 31 (Four decades later a similar scheme was enacted by Congress, and it has played an important part in the government's subsidization of farmers ever since.) In 1896 a novel proposal to raise the price of wheat appeared from an unexpected source, the Russian minister at Washington.

pages: 477 words: 144,329

How Money Became Dangerous
by Christopher Varelas
Published 15 Oct 2019

Equinix created the backbone that made it possible for money to move to the cloud. Money keeps shifting into new forms to meet evolving needs. The concept of phone minutes as currency has recently taken hold in some African nations, where the public has so lost faith in their government and its fiat currency that it has become common for people to pay one another or make financial transactions by transferring phone minutes, or “airtime,” between mobile devices. The Economist covered the phenomenon in a 2013 piece: “Unlike mobile money, airtime’s value does not rely directly on a government’s stability or ability to hold down inflation by, say, showing restraint printing money.”

pages: 782 words: 187,875

Big Debt Crises
by Ray Dalio
Published 9 Sep 2018

The central bank can lend to entities other than the government that will use it for stimulus projects (e.g., lending to development banks in China in 2008). Not bothering to go through issuing debt, and instead giving newly printed money directly to the government to spend. Past cases have included printing fiat currency (e.g., in Imperial China, the American Revolution, the US Civil War, Germany in the 1930s, and the UK during World War I) or debasing hard currency (Ancient Rome, Imperial China, 16th-century England). Printing money and doing direct cash transfers to households (i.e., “helicopter money”). When we refer to “helicopter money,” we mean directing money into the hands of spenders (e.g., US veterans’ bonuses during the Great Depression, Imperial China).

pages: 829 words: 187,394

The Price of Time: The Real Story of Interest
by Edward Chancellor
Published 15 Aug 2022

No capitalist was ever more supine than the millennial fixed-income investor. How else could one explain thirty-year Swiss bonds paying less than zero, or Eurozone sovereign debt being styled a ‘negative haven’ just months after the region emerged from its debt crisis?29 ‘The notion that negative-yielding bonds, denominated in a fiat currency, are a “safe” asset is a misconception that belongs in the next edition of Extraordinary Popular Delusions and the Madness of Crowds,’ asserted James Grant, editor of Grant’s Interest Rate Observer in the summer of 2016.30 ‘The biggest bond bubble in world history,’ pronounced hedge fund manager Paul Singer, a month earlier.31 Alan Greenspan was of the same opinion.

pages: 1,088 words: 228,743

Expected Returns: An Investor's Guide to Harvesting Market Rewards
by Antti Ilmanen
Published 4 Apr 2011

Capitalism, democracy, the rule of law, deregulation, and market-friendly economic policies gained ground across the globe over almost the entire period. No wonder market optimism was rife but, as we know, all did not end well. In contrast, the preceding period involved an increasing role for the state and doubts about capitalism, a shift to fiat currencies, two oil shocks, rising inflation and economic volatility, declining productivity, falling asset valuations, and relatively low realized asset returns. This period of mostly bad news did not last the full 20 years from 1968 to 1987, but essentially came to an end in the summer of 1982 when the massive 1980s’ bull market began.

pages: 825 words: 228,141

MONEY Master the Game: 7 Simple Steps to Financial Freedom
by Tony Robbins
Published 18 Nov 2014

So to answer your question, in a system, we can have deflation in certain things, and assets and goods and prices and even services and inflation in others. It’s very seldom that in the world everything will go up in price at the same rate or everything will collapse in price at the same rate. Usually, if you especially have a fiat currency system, those who can print money, and what you will have is the money doesn’t really disappear. It just goes into something else. What can disappear is credit—that’s why you could have an overall price level that would be declining. But for us investors, we essentially want to know which prices will go up.