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

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  • Tue, Apr 07, 2009 - 06:59pm

    #1

    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

 

  • Tue, Apr 07, 2009 - 07:03pm

    #2
    Peak Prosperity Admin

    Peak Prosperity Admin

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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. 

  • Tue, Apr 07, 2009 - 07:23pm

    #3
    Peak Prosperity Admin

    Peak Prosperity Admin

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

[quote=mpelchat]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. [/quote]

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

 

  • Tue, Apr 07, 2009 - 07:44pm

    #4
    Peak Prosperity Admin

    Peak Prosperity Admin

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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…..

  • Tue, Apr 07, 2009 - 08:07pm

    #5
    Peak Prosperity Admin

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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.

  • Tue, Apr 07, 2009 - 08:33pm

    #6
    Peak Prosperity Admin

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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 

  • Tue, Apr 07, 2009 - 09:21pm

    #7
    Peak Prosperity Admin

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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.

  • Tue, Apr 07, 2009 - 09:32pm

    #8
    Peak Prosperity Admin

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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.

  • Tue, Apr 07, 2009 - 10:07pm

    #9
    Peak Prosperity Admin

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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.

  • Wed, Apr 08, 2009 - 04:12am

    #10
    Peak Prosperity Admin

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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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