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Fiat Currency
Fiat Currency

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[{$pagename}] does not have use value, and has value only because a [Government Entity] maintains its value, or because parties engaging in exchange agree on its value.
[{$pagename}] does not have use value, and has value only because a [Government Entity] maintains its value, or because parties agree on it as a [Medium of exchange] and to its value.
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[The History of Money|Money#section-Money-THEHISTORYOFMONEY] shows that [{$pagename}] first began to be used in [China] in the 11th century. Since then, it has been used by various countries, usually concurrently with commodity currencies. [{$pagename}] started to dominate in the 20th century. Since the decoupling of the [United States] dollar from [gold] by Richard Nixon in [1971|Year 1971], a system of national fiat currencies has been used globally.
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Fiat money first began to be used in [China] in the 11th century. Since then, it has been used by various countries, usually concurrently with commodity currencies. [{$pagename}] started to dominate in the 20th century. Since the decoupling of the [United States] dollar from gold by Richard Nixon in [1971|Year 1971], a system of national fiat currencies has been used globally.
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King William's administration came up with a novel answer: borrow a huge sum of money, and use taxes to pay back the interest over time. In 1694, the English government borrowed 1.2 million pounds at a rate of eight per cent, paid for by taxes on ships’ cargoes, beer, and spirits. In return, the lenders were allowed to incorporate themselves as a new company, the Bank of England. The bank had the right to take in deposits of gold from the public and—a second big innovation—to print “Bank notes” as receipts for the deposits. These new deposits were then lent to the King. The banknotes, being guaranteed by the deposits, were as good as gold money, and rapidly became a generally accepted new currency.
King William's administration came up with a novel answer: borrow a huge sum of money, and use taxes to pay back the interest over time. In 1694, the English government borrowed 1.2 million pounds at a rate of eight per cent, paid for by taxes on ships’ cargoes, beer, and spirits. In return, the lenders were allowed to incorporate themselves as a new company, the Bank of England. The bank had the right to take in deposits of gold from the public and—a second big innovation—to print “Bank notes” as receipts for the deposits. These new deposits were then lent to the King. The banknotes, being guaranteed by the deposits, were as good as [gold] money, and rapidly became a generally accepted new currency.
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A strict adherence to the gold standard would limit the potential for damaging inflation this is because the amount of money supply in the system is naturally limited by the amount of gold that is kept in reserves.
A strict adherence to the gold standard would limit the potential for damaging inflation this is because the amount of money supply in the system is naturally limited by the amount of [gold] that is kept in reserves.
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The convertibility of gold was a pressing issue for [Franklin Delano Roosevelt] during the great depression as it limited the money supply.
[Franklin Delano Roosevelt] he actually issued an executive order which made owning gold illegal and required everyone to convert it into us dollars.
The convertibility of [gold] was a pressing issue for [Franklin Delano Roosevelt] during the great depression as it limited the money supply.
[Franklin Delano Roosevelt] he actually issued an [Executive order] [6102|Executive Order 6102] which made owning gold illegal and required everyone to convert [gold] into us dollars.
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The reason that he did this was to set a government price for that gold that was quite inflated this would then allow the federal reserve to inflate its balance sheet by over 70 percent.
The reason that he did this was to set a government price for that [gold] that was quite inflated this would then allow the federal reserve to inflate its balance sheet by over 70 percent.
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So yes the gold standard was not ideal for these governments but at least it kept them in check it kept a certain degree of confidence in the value of money and when applied correctly could prevent hyperinflation. So confident were countries in the virtues of the gold standard that in [1944|Year 1944], 44 countries signed on to what was called the [Bretton Woods Agreement|]. Within the Breton Woods system all national currencies were valued in relation to the us dollar this therefore made the us dollar the dominant reserve currency. The dollar in turn was convertible to gold at a fixed rate of $35 dollars per ounce. So you can think of it as a quasi gold standard still backed by gold; but indirectly. The [Bretton Woods Conference] system had a pretty decent run until [1971|Year 1971] when Richard Nixon committed his first impeachable offense yes Nixon's termination of the convertibility of [United States Dollar] into gold should have sunk him before watergate this is because Richard Nixon set the wheels in motion for the current fiat money system that we know today a glorified confidence game backed by nothing. \\ So what exactly happened?well in august of 1971 Nixon said that the u.s would quote suspend temporarily the convertibility of the dollar into gold or other reserve assets except in amounts and conditions determined to be in the interests of money stability and in the best interest of the united states.Well it turns out that that temporary suspension became permanent.
So yes the [Gold Standard] was not ideal for these [governments] but at least it kept them in check it kept a certain degree of confidence in the value of money and when applied correctly could prevent hyperinflation. So confident were countries in the virtues of the gold standard that in [1944|Year 1944], 44 countries signed on to what was called the [Bretton Woods Conference]. Within the [Bretton Woods Conference] all national [currencies|Currency] were valued in relation to the [United States Dollar] this therefore made the [United States Dollar] the dominant reserve currency. The [United States Dollar] in turn was convertible to gold at a fixed rate of $35 dollars per ounce. So you can think of it as a quasi [gold] standard still backed by [gold]; but indirectly.
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The [Bretton Woods Conference] system had a pretty decent run until [1971|Year 1971] when Richard Nixon committed his first impeachable offense. Nixon's termination of the convertibility of [United States Dollar] into gold should have sunk him before watergate this is because Richard Nixon set the wheels in motion for the current fiat money system that we know today a glorified confidence game backed by nothing.
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So what exactly happened?
Well in august of [1971|Year 1971] Nixon said that the [United States federal government] would "suspend temporarily" the convertibility of the dollar into gold or other reserve assets except in amounts and conditions determined to be in the interests of money stability and in the best interest of the [United States]. Well it turns out that that temporary suspension became permanent.
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* [#2] - [Nixon_shock|Wikipedia:Nixon_shock|target='_blank'] - based on information obtained 2021-08-19
* [#3] - [Executive Order 6102|Wikipedia:Executive_Order_6102|target='_blank'] - based on information obtained 2021-10-16
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