In the United States, fiat money turns 40 years old this year. (Thanks Dick!)
How old was the oldest fiat money before it finally became worthless paper? Which country?
Strictly speaking, didn’t American fiat money begin with the United States Note of 1862, which is still legal tender (though of course worth more as collector piece)?
Gold is much older than that. In fact, I can’t think of any non-fiat money which has lasted longer than gold.
Oooh… you’ll get angry responses. 
By definition, gold is not fiat money. Don’t argue. That’s just how it is. Anything else makes some people very angry.
Mangosteen: Is the modern British pound the same thing as the pre-decimalization British pound?
Sterling is 317 years old. The British pound was defined as 12 troy ounces of silver, so it’s worth less than 1/200 or 0.5% of its original value. This is about 3% per year.
In 1816, the gold standard was adopted officially, with the silver standard reduced to 66 shillings (66/-, 2.3 pounds weight), rendering silver coins a “token” issue.
In 1940, an agreement with the U.S.A. pegged the pound to the U.S. dollar at a rate of £1 = $4.03. The pound floated freely from August 1971 onwards.
The average lifespan of a fiat currency is 39 years. I don’t class sterling or the dollar as average.
Maybe you could just explain? Or link an explanation.
There’s nothing about gold that makes it inherently valuable.
Gold is, as Zsofia mentioned, a form of fiat money. However, for quite a long time now there has been a serious fetish in some parts of the political world for money based on gold (the gold standard). Supporters believe, in the way only people unencumbered by facts and logic can believe, that gold is the only ‘honest’ money and that gold is the path to freedom from all government interference, particularly government-caused inflation.
Telling any of them that gold currency (specie), or a gold-backed currency, is fiat money would provoke in them a holy rage the likes of which you have apparently never seen before, or else you wouldn’t have asked that question.
I’m no aurophile, but really if you argue gold or gold-based currencies are fiat currency, can you name something that isn’t? Of course gold doesn’t have inherent value-- if we only traded in things that did, it’s called bartering.
I think the essential part of the definition of fiat money (and wiki at least seems to agree) is that it derives its value solely from the backing of a government. Obviously gold is not backed by a government and only derives its value from what little industrial demand there is and the fact that people have historically agreed that it is valuable. I’d personally argue that gold is worse than a fiat currency, but I wouldn’t argue that it is one.
I think that Derleth’s point isn’t so much that gold doesn’t have an inherent value, but that in currencies based on a gold standard, the gov’t fixes the value of gold in the same way they fix the value of money in other fiat money systems, so that there isn’t really a functional difference between the two.
Ah, got it. That makes sense.
Yeah, the value of a “gold dollar” isn’t linked to how gold trades on the exchange.
With a currency that is backed by gold, you get a piece of paper that says you can exchange it for a fixed amount of gold.
The piece of paper might say, “good for one ounce of gold”. This makes it impossible for the government to print more pieces of paper than it has in gold reserves.
With fiat money its only value is that the government will accept it as payment when it comes time to pay taxes. The amount of fiat money a government can print is not limited. It can print (electronically or physically) as many fiat dollars as it wants until the paper becomes worthless. (Hyperinflation)
Which would you rather be paid in, a gold backed currency or fiat money?
I wouldn’t care, provided I lived in a country where I could freely convert my funds into gold, toupees, frozen concentrated orange juice or (best of all) interest bearing deposits. Heck absent exchange controls, I can even convert funds into the foreign currency of my choice.
If you think that gold is such a wonderful store of value, by all means go for the gold. Over the past 50+ years it’s been far more volatile than the dollar, but hey who’s to say what the future will bring?
but that’s assuming that the government will honour the promise to redeem the money for the set amount of gold - in other words, gold-backed currency gets its value from the backing of the government.
I’d rather avoid the panics of the 19th Century, thank you, and avoid the massive hyperdeflation which would occur if we went on the gold standard at this point: Hyperdeflation is when people know their money is going to be worth so much more in the future they don’t spend or invest, because sitting on it is a much better investment. This is great if you have money and like to see economies freeze to death, but if you owe money you’re not only screwed, you’re screwed in holes that don’t even exist in healthy people.
Why? Because if you owe $10,000 of the old inflationary currency, you’re still going to owe $10,000 of the new deflationary one, which means it’s going to take you much, much longer to pay off. Deflationary means a given amount of money takes more goods and services to earn later compared to now. So you get hit with both the interest rate (and I’m sure they’d be willing to give that up :rolleyes: ) and the fact $10,000 went from being the down-payment on a small bungalow to being the total assessed value of something Donald Trump would regard as ‘too much’.
Also:
First, most money is not currency. Second, if it was, your economy would be not only hamstrung, it would be a paraplegic tied to a ten-ton block of lead. Doubly so if you tied your currency to your stores a very fixed commodity. Finally, we aren’t the only ones who mine gold, and tying our economy to a commodity our enemies are capable of possessing is just about equivalent to giving them all baseball bats and telling them how ugly their mommas looked while they were pleasuring us orally.
And, on preview, Northern Piper is right: Governments only stick to gold as long as it isn’t too painful. Murray Rothbard is not only dead, he’s stopped responding to requests to manage national economies.
It certainly did not make it impossible, any more than it made it impossible for banks to print money that they could not back up with their reserves.
Hey, anyone have an answer to the OP?
The OP is a fuzzy question. It doesn’t mention whether it assumes currency backed by gold/silver/something else.
When come back, bring better OP.