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Alasdair Macleod: The prospects for money
By Alasdair Macleod
GoldMoney.com, St. Helier, Jersey, Channel Islands
Thursday, June 30, 2016
In my view, this new bout of turmoil in financial markets is the prelude to the final demise of government currency.
If I'm right, a long-expected collapse in the purchasing power, and of the very concept of fiat currency, will evolve from current events. The purpose of this article is to explain why monetary theory predicts a currency collapse.
The question at the heart of today's market instability is the validity of fiat currency; that is to say, forms of money issued and sanctioned by individual governments, with no backing other than faith in those governments' creditworthiness, and the enforcement of its use by law. The risks they impose on all of us will be evidenced one day by both the speed of the fall in each individual fiat money's purchasing power, and inevitably by their comparison with gold's more stable purchasing power. Essentially, an awareness of the dangers of unsound money will gradually become evident to every economic actor.
So far, or at least since the days when fiat money was freely exchangeable for gold, central banks have managed to enforce upon us their currencies as money, originally on the basis they were gold substitutes. That pretense was finally dropped in 1971. The purchasing power of fiat currencies has never been seriously challenged since, except in relatively few extreme cases, such as Zimbabwe and Venezuela. Not even the financial crisis eight years ago threatened a collapse in fiat currencies, when banks had to be rescued with unlimited extra quantities of money and credit. ...
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