Research Shows ALL Fiat Paper Money Systems Eventually Fail
Dec 07, 2012
We often read or hear quotes like “paper money eventually fail” and “paper money always returns to its intrinsic value which is zero.” In this article, we provide evidence why these statements are true, backed by research in which 599 different forms of paper money have been analyzed. We explain in an easy to understand way what money fundamentally is, how monetary policies of governments are affecting everyone of us and how gold is first and foremost an alternative form of money (for each and every one of us, not only for an elite). Courtesy of Vince Cate for the incredibly valuable research and David Morgan who referred us to the research materials.
Gold analysts argue that gold is the only form of real money, as it is the only tangible form of money that has survived 5,000 years of monetary history. Against that background, a critical event has taken place on August 15th 1971: former US President Nixon “closed the gold window.” He announced the decision to give up the Bretton Woods agreement (click to see the original version of his speech). What seems to most people a political decision is in reality affecting everyone of us in a way only a minority of people can understand. In fact, it’s touching our lives today more than ever.
President Nixon ended the Bretton Woods agreement, which was a worldwide agreement to use the US dollar as the only world reserve currency. The exchange rates between foreign currencies and the US dollar were fixed at a low rate to stimulate economies worldwide. Moreover foreign holders could redeem their dollars for gold at a fixed rate of $ 35 per ounce. So a certain amount of gold should be held by the US as their reserves. As such, it was a form of a worldwide gold standard. President Nixon however “concluded” it was better for the American citizens to give up the Agreement and – more importantly in our opinion – to entirely cut the tie between the paper money (bank notes and regular coins) and its gold backing, as announced at this point in his speech. The President clearly stated: “Your dollar will be worth just as much tomorrow as it is today. The effect of this action is to stabilize the dollar.” Well, looking at the long term chart of the value of the dollar, it seems that those words were to be taken very, very literally. On the following chart, we see a waterfall decline in the value of the dollar since the 60’s, which only deteriorated after 1971.