What's the half-life of a fiat currency?

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Erik T.'s picture
Erik T.
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What's the half-life of a fiat currency?

I was talking with someone about Crash Concepts last night, and was asked a question I couldn't answer. Maybe someone here knows?

Throughout recorded history, what is the longest period of time (in years) that a pure-fiat currency has lasted without hyperinflation or some other form of collapse or failure? Then the corollary question is, of all the pure-fiat currencies that have collapsed, what was the average number of years that the currency lasted before hyperinflation or some other collapse event began?

This is a hugely important question! Many of us on this site are extremely concerned about the current 38-year old experiment with a pure-fiat dollar, and we frequently cite the fact that pure-fiat currencies always fail. But where are we chronogolically with respect to historical benchmarks? Does the U.S. Dollar's 4-decade run as a pure fiat currency make it a record holder, or are there other examples that have lasted much longer before collapsing?

Erik

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Re: What's the half-life of a fiat currency?

I have no backing that I can get it quickly but I have read that a fiat currency collapses in on itself in 40 years. 

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Re: What's the half-life of a fiat currency?

mpelchat wrote:
I have no backing that I can get it quickly but I have read that a fiat currency collapses in on itself in 40 years. 

Oh, cool! No worries then... We still have until August 15, 2011 before it's all over!

It would be fantastic if someone has citations to support this. Also, we need to know not just the average but the standard deviation - what's the range of time periods throughout history that fiat currencies have lasted?

Erik

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Re: What's the half-life of a fiat currency?

Erik -

Doesn't answer your specific question about timeline, but provides some historical perspective and interesting background.

http://www.dailyreckoning.com/fiat-currency/

http://www.gold-eagle.com/editorials_04/greene032104.html

http://www.kwaves.com/fiat.htm

Looks like it took Rome about 200 years (54 AD to 244 AD) to implode so I'd say we have a few more years of some really good ideas by our government.....

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Re: What's the half-life of a fiat currency?

I was going to reply proudly that the British Pound goes back to Anglo Saxon times, but of course it was not then a fiat currency. (It was the value of one pound of silver, hence the name.)

I am amazed to see from Wikipedia that it was only World War 1 which necessitated printing of paper pound notes, and in 1931 we finally left the gold standard. How sad.

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Re: What's the half-life of a fiat currency?

According to http://www.marketoracle.co.uk/Article8100.html :

Some quotes: 

Quote 1: 

At present there are 176 currencies in circulation in the world.

The median age for all existing currencies in circulation is only 39 years and at least one, the Zimbabwe dollar, is in the throes of hyperinflation.

Quote 2:

This analysis includes 599 currencies that are no longer in circulation . The median age for these currencies is only fifteen years.

/Bengt 

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Re: What's the half-life of a fiat currency?

For a counterexample: look at http://en.wikipedia.org/wiki/Tally_sticks

The split tally was a Brittish fiat currency that lasted for seven centuries. I think this disproves that fiat currencies are inherently less stable than fiat ones.

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Re: What's the half-life of a fiat currency?

Thanks Woupiestek, it was interesting to read about tally sticks. I had never heard of them before. Would you really say they were a currency though? I would have thought they were more like a modern receipt or even a mortgage document.

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Re: What's the half-life of a fiat currency?

I wonder what would have happened if there were tally stick derivatives. The world is not the same as it was before and comparing with the past is not completely possible. Without research i would guess that greed and getting away with it for a long time was probably the cause every time. Banks, governments and nowadays corporations tightening their grip, squeezing out the last until people got fed up and start to lose faith.

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Re: What's the half-life of a fiat currency?

FYI, Canada has had fiat currency since the 1930's.

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Re: What's the half-life of a fiat currency?

After much reading on this subject over the past few months, I cannot improve on the succinct wording of The New Yorker last October: "We're Screwed". That pretty well sums it up.

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Re: What's the half-life of a fiat currency?

If you're working with wealth based currency, it has no half life as it is a stable currency.  We would not know what this is in America because the very first thing the founders did was setup a debt monetary system, thanks to Alexander Hamilton.

 

In a debt monetary system, its life cycle is somewhere between 200-300 years.  Around 18 years ago, china adopted a debt monetary system nearly identical to the US and European models so after the complete economic destruction of America, the banks will simply move onto another country to destroy.

 

The USA is coming to the usable life cycle on it's debt monetary system, but we can change it.

 

There is a bill in the Minnesota House and the Minnesota Senate that can be the first step to fix all this.  SF 705 and HF 888, also known as The Minnesota Transportation Act.  Until people decide its time to quit whining, and put forth some action, our ecomonic situation is only going to get worse under a debt monetary system. 

Have you ever wondered how the creation of money works in the bank behind the scenes?  Watch this next video.

 

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Re: What's the half-life of a fiat currency?

The instability of our system is not in the currency, but in the financial sector. The stability of currencies in the middle ages, whether gold or fiat, had everything to do with the prohibition of usury by the church. Without source income, there hardly was a financial sector, and there where no financial crises. On the other hand: the Great Depression saw many European countries dropping the gold standard. Many of these currecies only 'perished' because of the introduction of the euro, not because of hyperinflation.

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In Praise of the Prohibtion of Usury

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Re: What's the half-life of a fiat currency?

c1oudfire,

 Have you read the Baltimore Catechism?  I haven't myself, I only have the new one.  I am curious though.

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Catholic Church and the History of Usury

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Obama entered the matrix today (humor)

 

 

Wsn't  sure where I should post this . .

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Re: Obama entered the matrix today (humor)

c1oudfire wrote:

 

 

Wsn't  sure where I should post this . .

 

Maybe he's going to have a chat w/the Oracle?  I hope he likes cookies...

 

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woupiestek Re: What's the half-life of a fiat currency?

woupiestek,

Whilst I am no historian and have no opinion on the prohibition of usury by the Church (which is not just lending but is the activity of lending someone money with the
agreement that they will pay back a very much larger amount of money
later), I would have thought that the plague had an enormous impact on society generally in the Middle Ages (and are we just talking England or China through Europe etc?) - certainly the dire shortage of able bodied people in England had a great influence on the ability
of those left to obtain higher wages and escape from serfdom and debt.

DavidC

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Re: Obama entered the matrix today (humor)

SagerXX wrote:
Maybe he's going to have a chat w/the Oracle?  I hope he likes cookies...

With a little luck, maybe she'll tell him that he's not The One . . .

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Re: Obama entered the matrix today (humor)

c1oudfire wrote:

SagerXX wrote:
Maybe he's going to have a chat w/the Oracle?  I hope he likes cookies...

With a little luck, maybe she'll tell him that he's not The One . . .

 

And he'll learn There Is No Spoon... 

(it evidently ran away with some Dish) 

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Re: woupiestek Re: What's the half-life of a fiat currency?

DavidC wrote:

woupiestek,

Whilst I am no historian and have no opinion on the prohibition of usury by the Church (which is not just lending but is the activity of lending someone money with the agreement that they will pay back a very much larger amount of money later), I would have thought that the plague had an enormous impact on society generally in the Middle Ages (and are we just talking England or China through Europe etc?) - certainly the dire shortage of able bodied people in England had a great influence on the ability of those left to obtain higher wages and escape from serfdom and debt.

DavidC

So we need the plague to keep us save from credit crunches?

I think it is good to have a financial sector. But we should have something better than a financial sector that once in a while distroys itself.

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Re: woupiestek Re: What's the half-life of a fiat currency?

woupiestek wrote:

So we need the plague to keep us save from credit crunches?

I think it is good to have a financial sector. But we should have something better than a financial sector that once in a while distroys itself.

woupie -

How about the Health Services sector?  That might boom during a plague.  Then we could all run over the the Retail Sector with our profits and spend our way back to prosperity.

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Plague

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Re: What's the half-life of a fiat currency?

One problem that a plague may solve is rising unemployment and I think it also helps with entitlement...

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Re: What's the half-life of a fiat currency?

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Re: What's the half-life of a fiat currency?

woupiestek wrote:
One problem that a plague may solve is rising unemployment and I think it also helps with entitlement...

woupie -

"Help" might be a reach unless you are framing it in a Malthusian focus.  The Black Death in the 14th Century was pretty indiscriminate with regards to taking down the proletariat, bourgeoisie and the aristocratic classes (and everything in between).

But stepping back and looking at it from a completely detached perspective it would solve a lot of problems.  And who knows, if the survivors piled all the dead in one place, in a couple of million years they might have new oil reserves.

And then we play the whole symphony all over again.....

Okay, that was bleak.

 

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Re: What's the half-life of a fiat currency?

woupiestek wrote:
One problem that a plague may solve is rising unemployment and I think it also helps with entitlement...

Name one problem that cannot be attributed to the fact that there are too many people on this planet.

food, energy, finance, wars, and all the rest. No problem if no people.

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Re: What's the half-life of a fiat currency?

Boll weevils

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Re: What's the half-life of a fiat currency?

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Re: What's the half-life of a fiat currency?

kenc wrote:

Name one problem that cannot be attributed to the fact that there are too many people on this planet.

food, energy, finance, wars, and all the rest. No problem if no people.

 

No puns, either.  Dunno if I could live without those.  Oh wait, I wouldn't be around to miss them.  

Carry on. 

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