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Why a Fiat Currency Must Collapse , Even If On A Gold Standard.

June 7, 2012

Why a Fiat Currency Must collapse, even if on a gold standard.

Almost all economist agree that inflation is the most destructive weapon that a fiat currency could encounter with the ability to make that currency collapse. Even on a gold standard, whatever is used as the means of conveyance (paper,wood coin ) could suffer the same fate,total collapse.

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of the voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” — Ludwig von Mises

 Almost all economist would agree:

…. that the best weapon they have to combat inflation is the use of interest rates.

…that there is no means known that would absolutely prevent inflation.

However since history is only a recording of what has happened in the past, it is not an unbroken rule of what must be in the future. There is no guarantee that inflation will always be contained, therefore preventing the total currency collapse.

All currency, regardless of what it has as a basis could collapse. All currency is subject to booms and busts and as in inflation, they too,  also seem not to be preventable.

Since there is no method available to prevent harmful inflation, bubbles, and busts, it may be fair to conclude that if a nations currency were to encounter one or even more of these hazards in such a magnitude that it would suffer a total collapse.

We need to remember, “Housing prices can only go up. The Dow at 36,000 0r 50,000. A monetary sovereignty can print all it desires”.  History has shown that yes for a time these can be true and it could be for a relative long period of time. BUT we need to understand that forever may be just to long a period of time for any movement ” to continue in motion “without being acted on by some outside force.”

Yet contained in any problem there may be a solution.

If uncontrolled inflation, massive bubbles, busts are the problem then simply stated, Control or prevent them and one would have the solution.

Justaluckyfool would like to suggest the following, with the hope that all would challenge these suggestions so as to improve them, edit them, or endorse them. And if ,perhaps, justaluckyfool is really a lucky fool use the solution as your guide.

1*-Any Monetary sovereignty must have one source and ONLY ONE SOURCE  for the supply of its currency.Regardless of what backs the currency,be it “the faith and credit” of its government, gold or other metals really does not matter.

2*-The supply can be placed in circulation only with a way and means by which that currency must come back to the issuer. This is the means for control of the quality and quantity of the currency that is in circulation. The method being that all new currency is put into circulation by way of  INTEREST BEARING LOANS. Terms and conditions being set by economic conditions.

3*-All transactions in that currency must be made on a 100% liquidity basis, domestic or foreign.No more hostel inflation, bubbles, busts.No one could gain or lose what is not there in currency, they could only redistribute.

 Read “Don’t End The Fed, Amend The Fed”

How about this method being used to solve  the worldwide financial crises and at the same time help us.The issuer of the worlds reserve currency could issue $10 trillion as a funded pool to help other nations (PIIGS) get control over their economy.

Giving them time by lending them currency at a rate of 2% for a term of 36 years. Allow them the opportunity to increase job and production growth with commercial loans at 1% for 6 years with first payment due on first year anniversity date.

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