Thursday, August 4, 2011

Hyperinflation by fiat

Fiat currency or money, is money that has value only because of government regulation or law. That means there is no tangible commodity that the money can exchanged for, except its equivalent value in other denominations. So, one American dollar will get you four quarters made of some base metal combination, which at least has some heft to it. That is the law in the U. S., but once an American dollar was worth a pre-determined amount of gold, and then things changed.
The bill pictured is 1 x 10 to the 14th Zimbabwean dollars - one hundred trillion Zim dollars. Today, that bill is worth about $5.00 Canadian/US, as a collectors item. In 2008 that amount would purchase a cart of groceries, while 700 Billion Zim Dollars bought a loaf of bread. That's what happens when a currency collapses and hyperinflation ensues.
As posted here, the average life expectancy of a fiat currency is 27 years and as Stefan Molyneux explains in a recent posting below, the world's current reserve currency, the U. S. dollar, may be nearing the end of its life expectancy.

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