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It's more fair to say that currencies only decided to 'go infinite' starting in 1971. [1] Up until then Western currencies were still driven by the Bretton Wood

It's more fair to say that currencies only decided to 'go infinite' starting in 1971. [1] Up until then Western currencies were still driven by the Bretton Woods System. [2] In this system the USD was convertible to gold at a fixed rate, which was a defacto gold backing. Of course 50 years feels like an eternity to most of us, because it's literally our entire existence. But on a historic scale 'infinite' currencies may yet end up being one of the most short-lived widescale experimental failures in monetary systems, ever. This is even more true if one considers that after we defaulted on our obligations under Bretton Woods, we almost immediately transitioned to the petro dollar, making the USD the only way to obtain the most in-demand commodity in existence. So it still kind of had a backing. We've only really started to become 'free floating' extremely recently as more major oil producers turn against the petrodollar. And it doesn't seem to be leading to happy places. [1] - https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/ [2] - https://en.wikipedia.org/wiki/Bretton_Woods_system https://en.wikipedia.org/wiki/Bretton_Woods_system

kibwen 3y ago
> So it still kind of had a backing. ...Except for all the other major fiat currencies that are not USD.
- somenameforme 3y ago
  There's a nuance here. When Germany and Canada trade, they settle that balance in USD. This means if another country just prints a bunch of money, they're actually going to suffer for it. By contrast, when the US prints a bunch of money, it means countries whose currencies strengthen against it stand to risk pricing themselves out of the biggest consumer market in the world. It tends to drive other countries to also weaken their currency. This is one of the ways that the US exports its inflation - "exporting inflation" being a term you could find a lot more hits on if this topic interests you. If you look at countries by debt to GDP, the US is peers with economies like Laos, Sudan, Italy, Venezuela, and so on. [1] The unique position of the dollar alongside being the largest consumer economy gives the government immense room to absorb economic blunders. At least until the house of cards collapses, which will make 1929 look like the good ole days. This is one of the many reasons people are interested in currencies that cannot be manipulated outside of normal market forces. [1] - https://en.wikipedia.org/wiki/List_of_countries_by_government_debt https://en.wikipedia.org/wiki/List_of_countries_by_governmen...

kibwen 3y ago

> So it still kind of had a backing. ...Except for all the other major fiat currencies that are not USD.

somenameforme 3y ago
There's a nuance here. When Germany and Canada trade, they settle that balance in USD. This means if another country just prints a bunch of money, they're actually going to suffer for it. By contrast, when the US prints a bunch of money, it means countries whose currencies strengthen against it stand to risk pricing themselves out of the biggest consumer market in the world. It tends to drive other countries to also weaken their currency. This is one of the ways that the US exports its inflation - "exporting inflation" being a term you could find a lot more hits on if this topic interests you. If you look at countries by debt to GDP, the US is peers with economies like Laos, Sudan, Italy, Venezuela, and so on. [1] The unique position of the dollar alongside being the largest consumer economy gives the government immense room to absorb economic blunders. At least until the house of cards collapses, which will make 1929 look like the good ole days. This is one of the many reasons people are interested in currencies that cannot be manipulated outside of normal market forces. [1] - https://en.wikipedia.org/wiki/List_of_countries_by_government_debt https://en.wikipedia.org/wiki/List_of_countries_by_governmen...