All This Fuss About a Fiat Dollar
20th March 2026
Throughout the First World, and, particularly in the US, there is an increasing consciousness that fiat currency, far from being the solution to economic problems, is, in fact, a cause of them.
There are even those who, over the years, have predicted that the continued massive creation of fiat dollars may well lead to price controls, destruction of savings, looting, riots and, possibly, even revolution. A decade ago, such predictions were regarded by most as nonsense. Today, all of these eventualities seem more likely, although there still remains a strong contingent (possibly even a majority) who believe that, “It can’t happen here.”
What is ‘money’? Money is two things:
- A store of value. When people produce more than they need, or more than they can trade for something they need, they put the extra aside for a rainy day. If I grow more tomatoes than I can eat, or that I can trade to my neighbors for potatoes or strawberries, then I can ‘can’ them (put them up in mason jars) so they will keep longer and be available should I want to eat them or trade them in the future.
- A medium of exchange. If I have ‘canned’ tomatoes that will keep for a while, then later on I can trade them to my neighbors for stuff that they have and for which they are willing to accept ‘canned’ tomatoes in exchange. My neighbor might hate tomatoes but know people who don’t and might take them in trade, so the ‘canned tomatoes standard’ is an effective currency.
Everything proceeds from those two facts. Of course, tomatoes have intrinsic value—I can eat them, and people that I trade them to can eat them—unlike a paper dollar. BUT I can’t eat gold or silver, either; popular mythology aside, neither gold nor silver has any use value (unless you are an artist). Just like a paper dollar, gold or silver are ‘valuable’ because a lot of people will accept them in trade for stuff that is actually useful.
When I was a young man living in New York City in the early 1970s, I usually carried a pocket full of ‘New York money’: subway tokens. Such tokens cost 25 cents and were good for a subway ride. Almost everybody in New York rode the subway every day, so almost everybody in New York would accept a subway token place of a quarter. By itself, a subway token was useless—a pretty piece of metal. But it would get you a subway ride anywhere in the city, and so it had a kind of use value.
The problem with ‘fiat currency’ is that producing it is always cheap and easy; it’s basically just an IOU. The problem comes when the government wants to trade them for actual goods and services, in effect trading what is effectively nothing for what is actually something. This works because the government has guns and if you won’t ‘trade’ your goods and services for government paper, they will just take them anyway and leave you with the paper.