5 ms·

> but it's actually only fairly recent in history that we use fiat money. What do you consider to be the starting year of fiat money?

chimeracoder 15y ago
As with many things in history, I don't think there is a single year that we can point to as the turning point, since it's a somewhat gradual shift. Think about it this way - a few hundred years ago, it was commonplace to pay dues to the government using precious metals (like gold). In some parts of the world, this is still the case, but in the majority of the developed world, public and private debts are paid with money that gets its value by fiat. This change can't happen overnight, even if you force it to; if people continue to accept gold (for example) has having liquid value, then it will continue to be used as a currency. I wouldn't even use the beginning or end of Bretton Woods as the turning point (though it was certainly a turning point), because the point is less whether people can convert currency to gold than it is a question of whether they do.
- jpdoctor 15y ago
  > * I don't think there is a single year that we can point to as the turning point, since it's a somewhat gradual shift.* Over what years do you think this shift occurred? Or put another way, you do realize that fiat has been in use at least since the Romans?
  - surrealize 15y ago
    There's a difference between "in use, somewhere" and "almost universally used".
mckoss 15y ago
A good book covering the subject is The History of Money (Jack Weatherford). Money was has had a tradition of being valuable in its own right (gold and silver coin), and eventually banks created paper money that represented an amount of gold held in reserve. The Bank of England, was at first a private entity (established in 1688) and was only nationalized in 1946[1]. The notes they issued were backed by deposits of coin, gold, or silver. They broke with the gold standard in 1931, and it's then we see money tied not to a specific asset, but rather as a debt instrument; it's valuable only because someone promises to pay you back. When the debtor is a nation-state, we have fiat money, and the money is backed only by the faith and credit of the nation who issues it. As Weatherford's book points out, fiat currency was not invented by the British, as the Chinese were using a similar system in the 1st or 2nd century, and continued to use a paper money system until 1399. Abuses destroyed the value of the paper currency, and it did not reappear in China until the 20th century. [1] http://en.wikipedia.org/wiki/Bank_of_England http://en.wikipedia.org/wiki/Bank_of_England
- VladRussian 15y ago
  >and the money is backed only by the faith and credit of the nation who issues it. another view was that the demand for and value of the money is supported by the government collecting back the taxes in supposedly the money printed by the government. But such a view is pretty much out of the window in the modern world of unbalanced budgets, "discount windows" and multiples-of-GDP sovereign debts
- nl 15y ago
  As Weatherford's book points out, fiat currency was not invented by the British, as the Chinese were using a similar system in the 1st or 2nd century, and continued to use a paper money system until 1399. Abuses destroyed the value of the paper currency, and it did not reappear in China until the 20th century. This is accurate, but incomplete. Wikipedia has a decent page on the subject of fiat currency in the 18th & 19th century: http://en.wikipedia.org/wiki/Fiat_money#18th_and_19th_century http://en.wikipedia.org/wiki/Fiat_money#18th_and_19th_centur...
- WA 15y ago
  "Money was has had a tradition of being valuable in its own right (gold and silver coin), and eventually banks created paper money that represented an amount of gold held in reserve." You should read the book Debt: The First 5000 Years. It might be an interesting read for you, as the author points out that times of virtual and "real" currency switched quite often. It shows some really interesting facts about the origin of money - especially the fact that the idea of money is not based on the idea to improve barter.
sethg 15y ago
In the US, during the early 19th century, state-chartered banks (and other countries, such as insurance companies and railroads) would issue their own notes. These were not, technically speaking, money, but they were used as such, because there just wasn’t enough gold and silver coin circulating in the country to be practical for commerce. Cf. the book A Nation of Counterfeiters.

chimeracoder 15y ago

As with many things in history, I don't think there is a single year that we can point to as the turning point, since it's a somewhat gradual shift. Think about it this way - a few hundred years ago, it was commonplace to pay dues to the government using precious metals (like gold). In some parts of the world, this is still the case, but in the majority of the developed world, public and private debts are paid with money that gets its value by fiat. This change can't happen overnight, even if you force it to; if people continue to accept gold (for example) has having liquid value, then it will continue to be used as a currency. I wouldn't even use the beginning or end of Bretton Woods as the turning point (though it was certainly a turning point), because the point is less whether people can convert currency to gold than it is a question of whether they do.

jpdoctor 15y ago
> * I don't think there is a single year that we can point to as the turning point, since it's a somewhat gradual shift.* Over what years do you think this shift occurred? Or put another way, you do realize that fiat has been in use at least since the Romans?
- surrealize 15y ago
  There's a difference between "in use, somewhere" and "almost universally used".

mckoss 15y ago

A good book covering the subject is The History of Money (Jack Weatherford). Money was has had a tradition of being valuable in its own right (gold and silver coin), and eventually banks created paper money that represented an amount of gold held in reserve. The Bank of England, was at first a private entity (established in 1688) and was only nationalized in 1946[1]. The notes they issued were backed by deposits of coin, gold, or silver. They broke with the gold standard in 1931, and it's then we see money tied not to a specific asset, but rather as a debt instrument; it's valuable only because someone promises to pay you back. When the debtor is a nation-state, we have fiat money, and the money is backed only by the faith and credit of the nation who issues it. As Weatherford's book points out, fiat currency was not invented by the British, as the Chinese were using a similar system in the 1st or 2nd century, and continued to use a paper money system until 1399. Abuses destroyed the value of the paper currency, and it did not reappear in China until the 20th century. [1] http://en.wikipedia.org/wiki/Bank_of_England http://en.wikipedia.org/wiki/Bank_of_England

VladRussian 15y ago
>and the money is backed only by the faith and credit of the nation who issues it. another view was that the demand for and value of the money is supported by the government collecting back the taxes in supposedly the money printed by the government. But such a view is pretty much out of the window in the modern world of unbalanced budgets, "discount windows" and multiples-of-GDP sovereign debts
nl 15y ago
As Weatherford's book points out, fiat currency was not invented by the British, as the Chinese were using a similar system in the 1st or 2nd century, and continued to use a paper money system until 1399. Abuses destroyed the value of the paper currency, and it did not reappear in China until the 20th century. This is accurate, but incomplete. Wikipedia has a decent page on the subject of fiat currency in the 18th & 19th century: http://en.wikipedia.org/wiki/Fiat_money#18th_and_19th_century http://en.wikipedia.org/wiki/Fiat_money#18th_and_19th_centur...
WA 15y ago
"Money was has had a tradition of being valuable in its own right (gold and silver coin), and eventually banks created paper money that represented an amount of gold held in reserve." You should read the book Debt: The First 5000 Years. It might be an interesting read for you, as the author points out that times of virtual and "real" currency switched quite often. It shows some really interesting facts about the origin of money - especially the fact that the idea of money is not based on the idea to improve barter.

sethg 15y ago

In the US, during the early 19th century, state-chartered banks (and other countries, such as insurance companies and railroads) would issue their own notes. These were not, technically speaking, money, but they were used as such, because there just wasn’t enough gold and silver coin circulating in the country to be practical for commerce. Cf. the book A Nation of Counterfeiters.