Kerby Anderson
This month of August is the 53rd anniversary of our government going off the gold standard. Saifedean Ammous wrote his book The Fiat Standard to explain the impact that political and economic decision has had on our lives.
His earlier book, The Bitcoin Standard, was a bestselling book that has been translated into more than two dozen languages. He argues that by first understanding the operation of bitcoin, someone can then better understand the equivalent operations in fiat. “It is easier to explain an abacus to a computer user than it is to explain a computer to an abacus user.”
Why the complexity? The reason is simple. The fiat system (we use today) was not a carefully constructed economic system. It was not a deliberately designed operating system like bitcoin. Rather, it “evolved through a complex process of compromise between political constraints and expedience in managing government default.”
He explains that fiat currency affects what economists describe as time preference. A person with high time preference focuses on present needs, while a person with low time preference is willing to delay present gratification and places more emphasis on future needs.
When the world was on the gold standard, people knew that money would hold its value in the future. This enticed people to save. But when the countries moved to fiat currency, the value of the currency declined and there is less inclination to save.
His book describes how the “fiat standard” has affected such diverse items as fiat food, fiat science, fiat fuels, and fiat states. He also explains why the quality of the buildings we construct and the goods we buy are declining. That is also why our dollars are worth less.
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Penna Dexter