What is Fiat Currency?
No matter who you listen to, any mention of a Fiat Currency seems to bring to mind visions of tinfoil hats, conspiracy theories and give the impression that the person mentioning it would be more at home in a mental institution than out on the streets to infect the thoughts of more “rational” people.
In case you have not figured it out yet, the entire purpose of the government conspiracy portion of this website is to not only debunk many of the more outrageous conspiracy theories, but also to show that many topics should be discussed and uninhibited by labels that put them in the same categories as the truly crazy conspiracy theories.
If the mere topic of fiat currency brings to mind visions of tinfoil hats, then should not any discussion of our monetary system be viewed with equally jaded lenses? We do in fact have and use a fiat currency on a daily basis.
If you really believe that to be an insane concept, you are more than welcome to donate your fiat currency to me and I assure you, I will put it to good use.
Somehow or another that really does not surprise me at all. What surprises me is the fact that so many people think an actual and factual discussion of the financial makeup of our economy somehow or another relates to delusional conspiracy theorists in tin foil hats!
If you can get past the kool aid jug for a moment, let’s take a look at our currency and why it is not money and why this system is bound to fail.
Fiat: /ˈfiɑt, -æt; ˈfaɪət, -æt/ Show Spelled[fee-aht, -at; fahy-uht, -at] Show IPA. noun. 1. an authoritative decree, sanction, or order: a royal fiat.
Legal: adjective. 1. permitted by law; lawful: Such acts are not legal. 2. of or pertaining to law; connected with the law or its administration: the legal profession.
Tender: Adjective. Showing gentleness and concern or sympathy: "he was being so kind and tender".
Verb. Offer or present (something) formally: "he tendered his resignation as leader".
Noun. An offer to carry out work, supply goods, or buy land, shares, or another asset at a stated fixed price.
A person who looks after someone else or a machine or place: "the engine tenders".
adjective. soft - delicate - gentle - mild - affectionate - loving
verb. offer - present - proffer - submit - propose - bid
noun. offer - bid
We have legal tender that is backed by what? Our Legal Tender is backed by the “Faith and Good Credit of the Government of the United States of America”.
Yeah? So what?
Let’s Spend our way out of debt!
Let’s look at that whole “good credit” thing for a moment here. At present, the national debt is somewhere in the neighborhood of twenty trillion dollars give or take a few hundred billion … but hey, what is a few hundred billion in tender between lobbyists and donors using your currency to play with?
At least, this is the size of the national debt when looked at through government tinted glasses … but what does that mean for you and me? Mind you, this also completely discounts the existing unfunded liabilities which add roughly one hundred and twenty trillion dollars more to the national debt, except with no way to pay it back, or even to discharge those debts.
The numbers tend to change greatly when the national debt is figured in accordance with GAAP or Generally Accepted Accounting Practices. That means, if you look at the national debt in the same way that you and I are required to keep our financial records for this very same government just in case you do not know.
If you figure the national debt out according to GAAP While it is not so widely reported, the US Treasury actually does figure out the national debt in accordance with GAAP standards as well. If you looked at these numbers, you should really start getting nervous.
According to the US Treasury Department … yeah, I know, those bastards at the Treasury Department are all part of the vast right wing conspiracy we keep hearing about from the people who deride anyone who brings up the economy as crazy conspiracy theorists … huh?
But I digress … According to the US Treasury Department, as of 2008, the actual National Debt in accordance with GAAP was larger than the GDP (Gross Domestic Product) of the entire world!!!
So someone please tell me where this whole good credit thing is going to back up the currency in my pocket?
But I Have Faith!
So how much faith do you have in the federal government?
Do you have enough faith in the federal government to believe that they can get out of a debt in which taxing one hundred percent of the people of the world, one hundred percent of their income … would not be enough money to get the federal government out of debt?
Maybe you have that much faith in government but I do not. And of course, assuming that we were to get out of debt, it would require us to give up all of this excessive government spending. Call me crazy … as many on the left already do anyhow … but I do not see any efforts by the government to curb spending now or any time in the near future.
What is the big Economic Picture?
We have a fiat currency, a currency that is legal because the government says it is so. It is legal by fiat … by a stroke of the pen. It has no real value and is why it is not money but only a currency or medium of financial measurement and exchange.
We have a fiat currency that is backed by the good credit of a government without good credit and the good faith of a government in which we (or most of us) have no faith. Is any of this starting to get through to you now?
So What is a Fiat Currency and how does it work
A fiat currency is a very clever way to create debt out of nothing. Let us take a look at an imaginary scenario … and while it is an incredibly simplified view of the picture, it is a very (sadly) accurate representation of a fiat currency and why it will not work.
Imagine you are a parent. You give your child three cookies. However, before your child runs off to consume those nummy little treasures, you tell them that they have to give you back four cookies at the end of the day.
Huh? It will not work!
Which is EXACTLY the same problem we are facing now.
To understand that, let us take a look at how the fiat currency comes about.
Remember that when this program was initiated, the world’s industrialized nations all went off the gold standard and to centralized banking with fiat currencies within a span of a few years … leading up to World War One which is the only thing that got us out of the financial troubles it created.
To Create a Fiat Currency the Fed or Federal Reserve prints out paper currency based on the proposed debt of the United States federal government. Effectively, it is printing currency up out of thin air based on “human resources” and the capacity of “the people” (or body politic) to earn and pay off that debt.
Though in reality, the debt is already so large it can never be paid off.
It is also important to understand that under House Joint Resolution 292, no debt can ever be paid off, but merely discharged, save of course, those debts owed to the federal reserve which must be paid in real money, not in currency or fiat currency.
It then loans this money to the federal government to pay off its debt.
There is a great big caveat here though. At the end of the day, the federal government has to pay back the original debt as well as interest … in cash money and not in (effectively worthless) currency.
The Federal Reserve Bank has created a debt out of absolutely nothing, given it out as a loan and demanded actual money plus interest in return … that is right … we may have gotten those cookies but they were never even real in the first place.
This is not some tinfoil hat wearing, raving lunatic concept but the very basis of our national economic system and exactly why it needs to be changed.
The Fed is unencumbered by anything short of Congressional oversight and even that little “reach-around” generally means only that the government gets to see the results of what the fed has done and has absolutely no control over anything before it actually happens.
Welcome to the world of economic reality my friend … no tinfoil hat or conspiracy theory required!
Let us know what you think please!