Throughout history, there has never been a successful fiat currency. It doesn't matter how we define success, or in this case failure. Fiat currencies are simply the tools of Keynesians whether it was before the time of John Maynard Keynes or not.
Some currencies have lasted longer, or limited debasement longer than others, but in the long run, all currencies are dead (poking at Keynes' most famous quote). Fiat failures are blanketed throughout history with the Roman Denarius, French Livres, Assignats and Francs, and Weimar Germany Marks. In more recent times we've seen fiat failures in Argentina, Mexico, Thailand, Russia, and Zimbabwe.
Currency Cuts
It's irrelevant whether the currency completely imploded, or was simply systematically debased. When a currency isn't backed by a tangible asset, man has simply not been able to resist greed by implementing the silent tax of inflation.
This couldn't be more true today as the race to inflate has begun. Let's look at some of the more recent actions by monetary authorities around the world starting with the Oct. 29 50 BP rate cut by the Federal Reserve:
United States-50 BP to 1%
Euro Zone-50 BP to 3.25%
England-150 BP to 3%
Switzerland-50 BP and then 100 BP to .5%
Those were some of the drastic and noted cuts, but we also saw the Reserve Bank of Australia cut 100 BP, the Reserve Bank of New Zealand cut 100 BP, the Bank of Canada cut by 25 BP and plans another 25 BP, and the Riksbank of Sweden cut by 50 BP and plans another 25 BP cut.
If the failures of fiat currencies throughout history haven't taught us an important lesson about the liabilities of fiat currencies, the global monetary authorities are doing their best to show us their ultimate weakness now.
The Consequences of a Currency Collapse
Unfortunately, the system is unique today by historic standards. It's impossible to say for sure if these banks would have cut rates had the U.S. held rates steady. I imagine that some would have, some wouldn't have, and those that didn't would have eventually succumbed to the economic pressure.
It's irrelevant. The fact of the matter is that if the world wants to postpone financial Armageddon they had to cut in sync with the United States. Otherwise we are looking at a situation where the dollar acting as the reserve currency of the world would come to a viscous end.
Don't get me wrong. I believe the end of the dollar as a global reserve currency to be inevitability, and this cohersed currency devaluation doesn't change that. It only delays it. The end of the dollar as the reserve currency of the world will only occur when the bubble that is U.S. government debt collapses.
This is simply the end game for all fiat currencies. The tidal wave of consequences that will result in this particular collapse will be unique because of the extreme level (and growing at levels not seen historically) of outstanding U.S. dollars. The means are the same, but the end will be something talked about in history books.
Nicholas Jones,
Analyst, Oxbury Research
Some currencies have lasted longer, or limited debasement longer than others, but in the long run, all currencies are dead (poking at Keynes' most famous quote). Fiat failures are blanketed throughout history with the Roman Denarius, French Livres, Assignats and Francs, and Weimar Germany Marks. In more recent times we've seen fiat failures in Argentina, Mexico, Thailand, Russia, and Zimbabwe.
Currency Cuts
It's irrelevant whether the currency completely imploded, or was simply systematically debased. When a currency isn't backed by a tangible asset, man has simply not been able to resist greed by implementing the silent tax of inflation.
This couldn't be more true today as the race to inflate has begun. Let's look at some of the more recent actions by monetary authorities around the world starting with the Oct. 29 50 BP rate cut by the Federal Reserve:
United States-50 BP to 1%
Euro Zone-50 BP to 3.25%
England-150 BP to 3%
Switzerland-50 BP and then 100 BP to .5%
Those were some of the drastic and noted cuts, but we also saw the Reserve Bank of Australia cut 100 BP, the Reserve Bank of New Zealand cut 100 BP, the Bank of Canada cut by 25 BP and plans another 25 BP, and the Riksbank of Sweden cut by 50 BP and plans another 25 BP cut.
If the failures of fiat currencies throughout history haven't taught us an important lesson about the liabilities of fiat currencies, the global monetary authorities are doing their best to show us their ultimate weakness now.
The Consequences of a Currency Collapse
Unfortunately, the system is unique today by historic standards. It's impossible to say for sure if these banks would have cut rates had the U.S. held rates steady. I imagine that some would have, some wouldn't have, and those that didn't would have eventually succumbed to the economic pressure.
It's irrelevant. The fact of the matter is that if the world wants to postpone financial Armageddon they had to cut in sync with the United States. Otherwise we are looking at a situation where the dollar acting as the reserve currency of the world would come to a viscous end.
Don't get me wrong. I believe the end of the dollar as a global reserve currency to be inevitability, and this cohersed currency devaluation doesn't change that. It only delays it. The end of the dollar as the reserve currency of the world will only occur when the bubble that is U.S. government debt collapses.
This is simply the end game for all fiat currencies. The tidal wave of consequences that will result in this particular collapse will be unique because of the extreme level (and growing at levels not seen historically) of outstanding U.S. dollars. The means are the same, but the end will be something talked about in history books.
Nicholas Jones,
Analyst, Oxbury Research
