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Fiat Currencies’ Surprisingly Shoddy Track Records - Visualised

Liz Louw
Liz Louw
18 February 2019

On January the 3rd, the Bitcoin blockchain celebrated the 10th anniversary of its Genesis Block, the first block mined on the network. Although 10-years makes quite a milestone for those of us who have been around since the start, I wouldn’t blame new supporters for wondering if Bitcoin’s not too wet behind the ears to be a serious currency contender. After all, the Pound Sterling has been around since before you were born and it will probably be around after you’ve gone. Why fix (or replace) something that ain’t broke?

So glad you asked!

The Historical Track Record of Fiat Currencies

For many people, and mostly for those of us who live in wealthy nations, government-issued currency has gained the reputation of being stable, trustworthy, and almost immortal. The historical track record of fiat currencies paints a different picture, though:

“The average life expectancy for a fiat currency is twenty-seven years with the shortest lifespan being one month.” (SRSrocco Report)

How about the British Pound? How does it measure up?

According to Michael G. Pento’s book, The Coming Bond Market Collapse: How to Survive the Demise of the U.S. Debt Market, the Pound achieves a top score, as long as you don’t ask ‘too many’ questions:

“Founded in 1694, the British Pound Sterling is the oldest fiat currency in existence. At a ripe old age of 317 years, it must be considered a highly successful fiat currency. However, success is relative. The British Pound was defined as 12 ounces of silver, so it’s worth less than 1/200 or 0.5 per cent of its original value. In other words, the most successful long standing currency in existence has lost 99.5% of its value.”

Now, you might not see the point of competing with your ancestors for the ounces of silver your money can buy, but let me illustrate the impact of the Pound’s devaluation on your purchasing power.  

(Click to view or download full size infographic)

And that’s why, even if you get those annual salary increases, it’s difficult to keep up with the rising costs of meeting your family’s daily needs (and the odd pint at the pub, of course).

Here’s another way to look at the situation:

(Click to view or download full size infographic)

Devaluation of Modern Currencies Against Gold

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Measuring the value of your fiat currency by its buying power gives you a concrete, effect-on-your-pocket, view of the situation. Another way to judge the value of currency over a period of time is to compare it to the best store of value in history, gold. The overall picture indicates that this is going to be a fierce competition for fiat currencies.

(Click to view or download full size infographic)

Now, let’s consider some of the top performing modern fiat currencies. How successful have they been at retaining their value (against gold) over the past 20-years?

(Click to view or download full size infographic)

The Fiat Currency Graveyard

Does knowing of the slow corrosion of the money in your pocket (assuming it’s Pounds) make you feel uncomfortable and apprehensive? I’m afraid there’s more bad news. For many currencies, a slow death is more than they can wish for, as indicated by a study by Dollardaze. In looking at 775 fiat currencies in history, the study found...

“...there is no historical precedence for a fiat currency that has succeeded in holding its value. Twenty per cent failed through hyperinflation, 21% were destroyed by war, 12% destroyed by independence, 24% were monetarily reformed, and 23% are still in circulation approaching one of the other outcomes.”

You could also picture it like this:

(Click to view or download full size infographic)

Fiat Currency Is Not Forever

"The only constant is change", the Greek philosopher, Heraclitus is supposed to have said. When it comes to fiat currencies, the principle is true enough. Given enough time, “Fiat currency always eventually returns to its intrinsic value - zero.” Before they’re replaced, and the cycle begins again…

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