Monday, March 16, 2009

What Happens When a Fiat Currency Collapses

Quoted from Wikipedia

Fiat currency (fiat money) is money that exists because an authority or custom declares it to be money. (From the Latin fiat, which means "let it be done"). It achieves value because a government requires it in payment of taxes and says it can be used to pay debt or buy goods and services and because people trust that the value of the currency will be reasonably stable.

What happens when a fiat currency collapses? Watch this video first before continuing. Sorry, embedding has been disabled.

Obviously, I am not basing my conclusions on economic studies and/or theories, but on real life events and a current situation which has clearly become a humanitarian crisis. When money that is only as valuable as it is declared to be collapses, people will turn to what has real value. And we should realize, especially in these hard economic times, that what we choose to represent value should itself be backed by something of undeniable value, whatever it may be. I think the lesson is simple, clear and demonstrated for all to see in this video. I just hope we take heed and make amends before we are in a situation as desperate as the Zimbabweans.

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