Why non gold linked currency (Fiat money) collapse in the past- Hyperinfation-? We are going in the same direction with the dollar.



A brief great video to easily understand fiat money and how it affects us: http://www.youtube.com/watch?v=hx16a72j__8

Past examples of Fiat money failures: 
When a government has the power and will to print unlimited monies; there is a sense of prosperity for awhile.
At the same time the government is increasing its own power base (because it doles out the money).
Eventually though excessive currency creation (especially of great magnitude) usually (if not always) leads to waste, corruption, and

What is Fiat Money?

Fiat money (usually paper, or coinage) acquires its value from government decree. It has no commodity value.
In other words the only reason it is valuable is because people trust in their government and are willing to use it for financial transactions.
The money is valueless if the populous loses all faith in the government.
You can see this yourself by visiting a local coin shop. Ask to see fiat currencies from around the world from failed governments, currencies or both. The coin shops usually have a box of worthless paper fiat currencies, and a bin of essentially worthless coins.
Below are some examples of key nations that debased their money to a fiat currency system and how they fared afterwards.


Athens - The First Fiat Currency Failure
Athens was the world's first democracy. It was the strongest city state in Greece for a time. Athens developed free enterprise and a tax system.
When gold and silver become coinage in Athens it helped the city flourish for many years. Like many great civilizations they lost their way and became involved in a power struggle with the Spartans called the Peloponnesian War (from 431 to 404 BC).
After twenty two years of war they started to finance the war by debasing their currency. They mixed copper with their gold and silver. This deficit spending had disastrous results.
Over the next couple of years the once strong commodity money became practically worthless as it devolved into a fiat currency. People who were wise enough to employ Wealth Management techniques and put some of their wealth into gold and silver fared much better.
The economic costs were staggering and felt throughout Athens and Greece. Athens was devastated and never become a significant power again.

The Roman Empire – Fiat Currency Failures 
For over 750 years The Roman Empire used currency debasement to pay for wars, public works programs and social programs. There were various methods including:

Coin Clipping - The clippings were melted down to make more coins.
 Lesser metals were used – Metals such as copper were mixed into the gold and silver.
Redenomination – The same coins were minted, but at a higher face value.
 Minting more coins without commodity backing.
Over time inflation in the Roman Empire went out of control.
Note: The first documented hyperinflation was recorded from the Roman Empire. A pound of gold was worth 50,000 denarii in 301AD. By mid century it was only worth 2.12 billion denarii. The price of gold had risen approximately 42,000 times. In other words, the currency had become worthless.
Currency debasement and deficit spending for the military, public works and social programs condemned the Roman Empire to the scrap pile of failed empires and nations.

Germany-The Weimar Republic Collapse- Fiat Currency Failures
During the early 1920s after World War 1 the German Weimer Republic government had no goods to trade and their gold reserves had been depleted paying war reparations.
The government cranked up the printing presses to deal with the crisis. Hyperinflation occurred because of the worthless paper money that the government printed to help the formally great industrialists pay back their loans from the war.
The bank notes were printed to a thousand times their normal value. The value of the Papiermark declined from 4.2 per U.S. dollar from the beginning of WW1 TO 1 Million to one by August of 1923. By then the German Papiermark was essentially worthless.

France:1789 to 1796
The first issue of assignats had some very positive short term effects, stimulating commerce as paper wealth spread. However, the government took only a few months to spend the money raised and very soon cries were raised for more. This time a new issue was approved by a large majority. We look at how this paper money inflation started to drive prices higher, encouraging the creation of more paper in increasing amounts as the government and its clients became addicted to newly-created money. Rising prices were blamed on all manner of scapegoats in order to divert attention from the real cause: money printing.
As the situation worsened, the worst rose to the top, with Clavière becoming Minister of Finance with the promise to increase printing. Gresham's law started to act in full force, driving good money out of circulation with such force that silver, gold and even copper disappeared from the market. Attempts to put ceilings on prices through the 'Law of the Maximum' and to prop up the value of assignats failed, and only succeeded in criminalising most commerce with increasingly harsh penalties – eventually including death – for those that sold above established prices or refused to accept payment in worthless government paper. Even the guillotine was not enough backing to ensure the assignat's survival.
Eventually food riots brought down the revolutionary government, and after several interim reactionary governments culminated with Napoleon's military rule. Napoleon brought back the gold standard, which survived until the first World War.
more:http://en.wikipedia.org/wiki/Assignat
video: www.goldmoney.com/video/fiat-money-inflation-in-france-part-2-assignats.html

Argentina[edit source]

Argentina went through steady inflation from 1975 to 1991. At the beginning of 1975, the highest denomination was 1,000 pesos. In late 1976, the highest denomination was 5,000 pesos. In early 1979, the highest denomination was 10,000 pesos. By the end of 1981, the highest denomination was 1,000,000 pesos. In the 1983 currency reform, 1 peso argentino was exchanged for 10,000 pesos. In the 1985 currency reform, 1 austral was exchanged for 1,000 pesos argentinos. In the 1992 currency reform, 1 new peso was exchanged for 10,000 australes. The overall impact of hyperinflation: 1 (1992) peso = 100,000,000,000 pre-1983 pesos. Annual inflation hit 12,000% in 1989.[19]
Start and End Date: May 1989- Mar. 1990
Peak Month and Rate of Inflation: Mar. 1990, 197%[18]

Brazil[edit source]

From 1967–1994, the base currency unit was shifted seven times to adjust for inflation in the final years of the Brazilian military dictatorship era. A 1967 cruzeiro was, in 1994, worth less than one trillionth of a US cent, after adjusting for multiple devaluations and note changes. In that same year, inflation reached a record 2,075.8%. A new currency called real was adopted in 1994, and hyperinflation was eventually brought under control.[26] The real was also the currency in use until 1942; 1 (current) real is the equivalent of 2,750,000,000,000,000,000 of Brazil's first currency (called réis in Portuguese).
Start and End Date: Dec. 1989- Mar. 1990
Peak Month and Rate of Inflation: Mar. 1990, 82.4%[18]
Reference: 
http://en.wikipedia.org/wiki/Hyperinflation

China[edit source]

As the first user of fiat currency, China has had an early history of troubles caused by hyperinflation. The Yuan Dynasty printed huge amounts of fiat paper money to fund their wars, and the resulting hyperinflation, coupled with other factors, led to its demise at the hands of a revolution. The Republic of China went through the worst inflation 1948–49. In 1947, the highest denomination was 50,000 yuan. By mid-1948, the highest denomination was 180,000,000 yuan. The 1948 currency reform replaced the yuan by the gold yuan at an exchange rate of 1 gold yuan = 3,000,000 yuan. In less than a year, the highest denomination was 10,000,000 gold yuan. In the final days of the civil war, the Silver Yuan was briefly introduced at the rate of 500,000,000 Gold Yuan. Meanwhile the highest denomination issued by a regional bank was 6,000,000,000 yuan (issued by Xinjiang Provincial Bank in 1949). After the renminbi was instituted by the new communist government, hyperinflation ceased with a revaluation of 1:10,000 old Renminbi in 1955. The overall impact of inflation was 1 Renminbi = 15,000,000,000,000,000,000 pre-1948 yuan.
(1) Start and End Date: Jul. 1943- Aug. 1945
(1) Peak Month and Rate of Inflation: Jun. 1945, 302%
(2) Start and End Date: Oct. 1947- Mid. May 1949
(2) Peak Month and Rate of Inflation: Apr. 5070%[29]

France[edit source]

During the French Revolution, the National Assembly issued bonds backed by seized church property called Assignats. These evolved into fiat legal tender money, were overprinted and caused hyperinflation. Napoleon replaced them with the franc in 1803, at which time the assignats were basically worthless Despite the fact that the assignat is normally considered to be the currency of this time, it was actually the mandat the experienced the peak month of hyperinflation.
Start and End Date: May 1795- Nov. 1796
Peak Month and Rate of Inflation: Mid-Aug. 1796, 304%[31]
Reference: 
http://en.wikipedia.org/wiki/Hyperinflation

Final Thoughts on Fiat Currency Failures
The theme is clear. Fiat currency failures occur when governments irresponsibly get into a vicious cycle of debasing the money supply and creating massive inflation. This monster eventually gains a life of its own and can't be controlled. This is a disaster to an economy.

Governments never seem to learn that the fundamentals of a strong economy require a commodity backed money supply. Otherwise the temptation for politicians to debase the currency to fund wars, social programs, and public works with fiat currency is too great.
Also, the leaking of moneys seems to go hand in hand with currency debasement. When huge sums of money are being printed the difficulty of tracking the money increases significantly. Too much money is siphoned off to political graft and unscrupulous people.

Like bad cooks politicians can't seem to figure out the correct mixture of financing to:

• Help people who work hard to have the opportunity to prosper if they do a good job, and fail if they don't.

• Provide adequate food, shelter, housing, and medical assistance for the very young, the very old, the very sick and the very crippled.

• Not leak huge sums of monies to the growing number of freeloaders.

• Not leak huge sums of moneys to political corruption.


This has only been a sampling of fiat currency failures. There are many more than have occurred throughout history.

Note: All of the civilized countries today (including the United States) currently use a fiat money system. See any problems here?
Also: http://www.financial-planning-techniques.com/Fiat-Currency-Failures.html

In recent times, fiat failures have become more common occurrences. For the sake of time, I won’t go into extensive details of all these examples of paper money failures, because there are SO many. But here you have it:
In 1932, Argentina had the eighth largest economy in the world before its currency collapsed. In 1992, Finland, Italy, and Norway had currency shocks that spread through Europe.
In 1994, Mexico went through the infamous “Tequila Hangover,” which sent the peso tumbling and spread economic hardships throughout Latin America.
In 1997, the Thai baht fell through the floor and the effects spread to Malaysia, the Philippines, Indonesia, Hong Kong, and South Korea.
The Russian ruble was not the currency you wanted your investments denominated in in 1998, after its devaluation brought on economic recession. In the early 21st century, we have seen the Turkish lira experience strokes of hyperinflation similar to that of the mark of Weimar Germany.
In present times, we have Zimbabwe, which was once considered the breadbasket of Africa and was one of the wealthiest countries on the continent. Now Mugabe’s attempts at price controls, combined with hyperinflation, have the nation unable to supply the most basic essentials such as bread and clean water.


Read more: Fiat Currency http://dailyreckoning.com/fiat-currency/#ixzz2PQvte7lf
 
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From Kitco.com:
No paper currency has survived in its original form while gold has been used as money since time immemorial. Every fiat currency since Roman times has ended in devaluation and eventual collapse, of not only the currency, but often of the host economy. The usual course of events is that paper currencies are inflated away until worthless. The purchasing power of the US dollar, for example, has declined by 90% since 1950, also true for most currencies.
The Roman Denarius was a coin of pure silver at the beginning of the first century C.E. Hundred years later the denarius' silver content was down to 85%. Roman emperors liked the idea of devaluing their currency in order to pay the bills and by 218 C.E. the Denarius was down to 43% silver. Around the time of the collapse of the Romans Empire, the Denarius contained only 0.02% silver and was no longer universally accepted as a medium of exchange or a store of value.
There are numerous other examples of failed experiences in fiat money, the "Flying Money" of China, The Livres and Assignats of France. The German Mark under the Weimar republic deserves special mention, since this period influences Germany's thinking today. Post-World War I Weimar Germany is infamous as an example of the greatest hyperinflation ever. The Treaty of Versailles that ended World War I punished Germany by forcing it to make reparations. The only way Germany could meet its obligations was by running the printing press. Inflation got so bad that Germans were using stacks of Marks to heat their furnaces and used wagonloads to buy bread. In 1919, 12 German marks equaled one U.S. dollar. By 1923 the rate was 4.2 trillion marks for one U.S. dollar. In more recent history we have had currency shocks in Argentina, Finland, Italy, Norway Mexico, Thailand, Russia, Turkey and there are many more examples.
So what's in the future for the dollar?
History teaches us that when governments come under financial pressure they can never resist printing money to pay for debts, be it for wars or excessive spending. Gold is the only currency which has no liability attached to it, nor can it be printed, counterfeited or reproduced (well, silver and platinum are exceptions here). Among its many stellar qualities is the fact that it cannot be destroyed by fire, water or time. Gold doesn't expire, it is mobile, divisible and internationally accepted for the last few thousands of years.
The above part of text is from an article is from KITCO which is a well known commodity portal. URL http://www.kitco.com/ind/Radomski/20120705.html
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videos:
Germany inflation
https://www.youtube.com/watch?v=bOxRb2QGMlU
France:
https://www.youtube.com/watch?v=U4aRuiO1OuQ
Rome:
https://www.youtube.com/watch?v=S4KuDlCaWPA

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