3 ms·

> If they’ve “debunked” the 27 year figure, then what is the correct average lifespan of fiat currencies? The question is kind of ill-formed in the first place

> If they’ve “debunked” the 27 year figure, then what is the correct average lifespan of fiat currencies? The question is kind of ill-formed in the first place. Take the current US dollar. How long has it been around? Per Wikipedia, it was established by Congress in 1792, which gives it a sedate 230 years of existence. But given that the original analysis is by a gold bug, I suspect the intent is to limit it only to the 51 years that have passed since the end of the gold standard in 1971. If the goal of the question is to work out how long a fiat currency not backed by gold will last before it's hyperinflated into nothingness, then it stands to reason that the metric which best reaches that conclusion would be in fact the earlier date: the Nixon Shock wasn't an episode of hyperinflation (inflation reached a measly 10-20% annualized). Events like the creation of the euro are even more starkly not relevant to answering that question. There's also severe methodological issues with completely omitting currencies that haven't failed yet, which ought to be patently obvious. There's another severe bias in terms of the inclusion of currencies on the list, since there's going to be several currencies for which is there is likely insufficient data to establish the lifespan correctly, because records tend not to preserve very well after several centuries. To attempt to answer your question, I don't have any hard data in front of me. But I would be shocked if the mean lifespan of a currency were substantially less than a century--there are several currencies that lasted several centuries during the Medieval period, such as the ducat lasting ~730 years.

roenxi 4y ago
I do broadly agree, the "27 years" figure is a rhetorical number that doesn't mean anything in itself. That said... > If the goal of the question is to work out how long a fiat currency not backed by gold will last before it's hyperinflated into nothingness That isn't completely fair. The ducat lasted ~730 years and preserved a reasonably consistent amount of value all through that time. Someone holding a dollar in 1971 has effectively lost 95% the value that they expected it to have vs gold. Even as demand for gold has presumably plummeted now that it is no longer officially involved int he monetary system. Just because they are destroying the value of the currency on purpose doesn't change the fact that the value will be destroyed. It doesn't need to be an unexpected event like a hyperinflation - normal inflation is also enough.
- jcranmer 4y ago
  > The ducat lasted ~730 years and preserved a reasonably consistent amount of value all through that time. Not really. Inflation long predates modern times, there's a reason that the terminology is called "debasement" (adding base metal to gold coins). I don't have hard numbers on the value of the ducat (because that pretty much requires trawling historian journals I don't have access to), but judging from other coins that pop up, the annual inflation rate would have averaged perhaps 0.5% for the Medieval and Early Modern. Why should a steady 2-5% inflation rate in modern times be considered destructive to value, but not the steady 0.2-1% of earlier periods?
  - roenxi 4y ago
    > Why should a steady 2-5% inflation rate in modern times be considered destructive to value, but not the steady 0.2-1% of earlier periods? Because they are different by an order of magnitude. Over a 70 year lifetime, at 0.2% inflation a coin is worth 90% of its value at the start of the life. At 2%, it is worth a hair less than 25% (at 5%, it would be effectively worthless because the coin has lost 97% of its initial value). That is quite a different outcome - one of those rates I could save using coins and not do too terribly in real terms.

roenxi 4y ago

I do broadly agree, the "27 years" figure is a rhetorical number that doesn't mean anything in itself. That said... > If the goal of the question is to work out how long a fiat currency not backed by gold will last before it's hyperinflated into nothingness That isn't completely fair. The ducat lasted ~730 years and preserved a reasonably consistent amount of value all through that time. Someone holding a dollar in 1971 has effectively lost 95% the value that they expected it to have vs gold. Even as demand for gold has presumably plummeted now that it is no longer officially involved int he monetary system. Just because they are destroying the value of the currency on purpose doesn't change the fact that the value will be destroyed. It doesn't need to be an unexpected event like a hyperinflation - normal inflation is also enough.

jcranmer 4y ago
> The ducat lasted ~730 years and preserved a reasonably consistent amount of value all through that time. Not really. Inflation long predates modern times, there's a reason that the terminology is called "debasement" (adding base metal to gold coins). I don't have hard numbers on the value of the ducat (because that pretty much requires trawling historian journals I don't have access to), but judging from other coins that pop up, the annual inflation rate would have averaged perhaps 0.5% for the Medieval and Early Modern. Why should a steady 2-5% inflation rate in modern times be considered destructive to value, but not the steady 0.2-1% of earlier periods?
- roenxi 4y ago
  > Why should a steady 2-5% inflation rate in modern times be considered destructive to value, but not the steady 0.2-1% of earlier periods? Because they are different by an order of magnitude. Over a 70 year lifetime, at 0.2% inflation a coin is worth 90% of its value at the start of the life. At 2%, it is worth a hair less than 25% (at 5%, it would be effectively worthless because the coin has lost 97% of its initial value). That is quite a different outcome - one of those rates I could save using coins and not do too terribly in real terms.