How Global Conflicts Ride on the Backs of Fiat Currencies
In a world where governments have minted paper fortunes for centuries, Satoshi Nakamoto had a different vision when he created Bitcoin. He was looking forward to finding a solution to the drawbacks of traditional fiat currencies. More than 800 currencies have emerged and disappeared from the financial world. The fundamentals for establishing the fiat financial system remain unexplained. People wonder at the necessity for the government to create this whimsical paper game. Many seem to support the concept that it was created for corruption and conflict.
Unmasking the Connection Between Fiat Money and Warfare
The US presidential hopeful, Robert Kennedy Jr., doesn't shy away from the spotlight. He recently said, "Fiat currency was invented to fund the cause of war." It's a bold claim, no doubt. But if we flip through the annals of history, Kennedy's assertion gets a standing ovation. Long before plastic cards and digital transactions, people traded in commodities and precious metals, shaping them into tangible coins. However, the practice changed during the Yuan Dynasty under Kublai Khan.
Fiat currency emerged from the shadows of the financial world. It's government-issued money, not tethered to shiny nuggets of gold or silver. Its worth is built on trust and a little faith in humanity. Unlike money backed by materials or a representative promise, fiat money derives its value from the government's aura. The Yuan Dynasty of ancient China, and its "Jiaochao," is one of the earliest fiat currencies.
Did Jiaochao fund wars? Certainly. The fledgling fiat system flexed its financial muscles by supporting massive military campaigns until 1368. These Jiaochao notes sponsored grand adventures like the Song Dynasty conquest and jaunts to Japan, Southeast Asia, and Java. It was like the Yuan leaders had a golden ticket to the military chocolate factory, thanks to their monopoly on the money-making machines. But as with any binge, there was a hangover, and overproduction led to some sky-high inflation.
After the Yuan's curtain call, the Ming Dynasty took center stage, reviving metal coins while sneakily introducing fiat currency. But as they say, 'history repeats itself'; the story repeats itself. Rampant inflation crept in, and the "Da Ming Baochao" paper currency bankrolled the Great East Asian War, a.k.a. the Imjin War. The plot twists again in 1656 when Stockholms Banco in Sweden became the world's first central bank. They too dabbled in fiat money, with "Stockholms Banco Sedlar" bankrolling battles galore.
This Swedish act powered wars like the Thirty Years’ War, the Second Northern War, and the Scanian War. But, like an ill-conceived sequel, this fiat model met a not-so-happy ending, thrusting Sweden into a financial cliffhanger. Fiat money in the US played a role in both the Revolutionary War and the Civil War. While the Continental Currency had a spectacular meltdown, the Greenbacks, the true heroes of the Civil War, decided to go on a depreciating spree.
Once upon a time, the US played by the golden rules, but things took an unexpected turn after the Bretton Woods conference and the infamous 1971 Nixon shocks. In this episode, the US dollar, or Federal Reserve Notes (FRNs), decided to take a break from gold. And as they say, "break a deal, face the wheel." It's rumored that Nixon's gold-digging escapade was a move to boost support for the Vietnam War.
Fiat Money's Dubious Role in History's Battles
Fiat currencies seem to have a knack for cozying up to wars and misdeeds. Some even claim they had their hands in events like the 2007-2008 mortgage crisis, the 2020 COVID-19 pandemic, and countless financial bailouts. Instead of adopting the Roman strategy of reducing metal content, modern fiat central planners play with interest rates. Kennedy's words echo in the ears of alternative currency fans, who demand a divorce between the state and its money, much like the separation of church and state.
Governments can manipulate fiat currencies with the grace of a puppeteer. They print more money to fund defense projects, play with interest rates to boost borrowing and military spending, and even go on a shopping spree with deficit spending. A strong currency backed up with foreign exchange reserves can make those shiny military toys more affordable. But, just like a wild roller coaster, these fiscal levers come with their fair share of risks.
Such fiscal levers, while potent, come with risks. As history shows, prolonged reliance on these strategies can lead to inflation, eroding public purchasing power, and potentially shaking confidence in the currency. Over time, unchecked manipulation can jeopardize the overall economic health of a fiat currency, ultimately leading it to fail.
As history books reveal, prolonged reliance on these strategies can lead to a money meltdown, eroding the public's purchasing power and shaking their confidence in the currency. Over time, unchecked manipulation can put the health of a fiat currency at risk.
What is your take on the fiat currencies and their ties with war and corruption? Please share your thoughts and opinions about this subject in the comments section below.
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