Fate of Paper Money

[alexamenos]

"Paper money eventually returns to its intrinsic value - zero." (Voltaire)

Interesting Article --> Fate of Paper Money

This fellow gives a pretty nice rundown on the history of paper currencies, and it's a history worth knowing. I have some quibbles, for instance, I don't think he adequately distinguishes between paper currencies and fiat currencies, and there is a difference -- a bank note backed by gold, for instance, can be a paper currency but it's not the same as a fiat currency.

For instance, he says the US Dollar has been extant for 200+ years. I would say that it is more accurate to say that there have been at least three distinct "US Dollar" currencies over that period: 1) pre-1933, about 20 US Dollars = one ounce of gold; 2) 1933 - 1971, about 35 US Dollars = 1 ounce of gold; and 3) 1971 - present, one US Dollar = whatever the king says.

So, the US Dollar as a fiat currency has actually "only" been in existence for 37 some odd years, and I say "only" because this is actually a fairly good run for a fiat currency (notwithstanding that the value of the US Dollar has declined very substantially since then).

Regardless the gist of the study is the same, to wit....

...the long run value of fiat currency is zero....

there are 609 currencies no longer in circulation. Of these, at least 153 were destroyed as a result of hyperinflation caused by over-issuance. The remainder were revalued, destroyed by military occupation/liberation, renamed for political reasons, or were converted to another currency. The median age for these currencies is only seventeen years.

We (dallasmavs.commers) have lived our entire lives under the aegis of a fiat currency, so the situation seems reasonably stable enough to us but over the longer course of history the fate of fiat currencies has been quite dismal. There's every (empircal, theoretical) reason to believe that we will live to see the demise the US Dollar as we know it today during our lifetimes.