Summary of Saifedean Ammous's The Fiat Standard

Everest Media

Description

Please note: This is a companion version & not the original book.
Sample Book Insights:
#1 The Fiat Standard has survived for 50 years, which makes it unreasonable to dismiss it as an irredeemable fraud on the brink of collapse. Understanding how the fiat standard works and how it frequently fails is essential knowledge for navigating it.
#2 The first seven chapters of The Bitcoin Standard explained the history and function of money, and its importance to the economic order. With bitcoin showing us how an advanced monetary system can function independently of government control, we can better understand the properties required for a monetary system to operate on the free market.
#3 The fiat system was not a carefully designed financial operating system like bitcoin, but rather it evolved through a process of compromise between political constraints and expedience in managing government default.
#4 The fiat monetary system was a solution to the gold standard’s low spatial salability. It allowed governments to transfer value across space without having to worry about the gold standard’s constraints. But it allowed governments to exploit their citizens by giving them easy fiat tokens that they could use to pay their taxes.

Sujets

• Vente
• E-Commerce
• E-commerce
• E-Commerce
• E-Commerce
• E-Commerce
• Electronic commerce
• Commerce électronique
• E-commerce
• Général

Informations

• Publié par: Everest Media LLC
• Date de parution: 28 mars 2022
• Nombre de lectures: 0
• EAN13: 9781669368922
• Langue: English
• Poids de l'ouvrage: 1 Mo

Extrait

Insights on Saifedean Ammous's The Fiat Standard
Contents Insights from Chapter 1 Insights from Chapter 2 Insights from Chapter 3
Insights from Chapter 1

#1

The Fiat Standard has survived for 50 years, which makes it unreasonable to dismiss it as an irredeemable fraud on the brink of collapse. Understanding how the fiat standard works and how it frequently fails is essential knowledge for navigating it.

#2

The first seven chapters of The Bitcoin Standard explained the history and function of money, and its importance to the economic order. With bitcoin showing us how an advanced monetary system can function independently of government control, we can better understand the properties required for a monetary system to operate on the free market.

#3

The fiat system was not a carefully designed financial operating system like bitcoin, but rather it evolved through a process of compromise between political constraints and expedience in managing government default.

#4

The fiat monetary system was a solution to the gold standard’s low spatial salability. It allowed governments to transfer value across space without having to worry about the gold standard’s constraints. But it allowed governments to exploit their citizens by giving them easy fiat tokens that they could use to pay their taxes.

#5

The second part of the book focuses on the impacts of fiat money. It explains how government-granted debt is used as money and how this affects individuals, families, education, food, science, health, fuels, and international geopolitics.

#6

The Bank of England began the global monetary system’s move away from a gold standard on August 6, 1915, when it issued an appeal to the public to use notes instead of gold coins whenever possible.

#7

The Bank of England’s problems started at the dawn of the Great War. On July 31, 1914, large crowds stood outside the doors of its Threadneedle Street headquarters looking to convert their bank balances and banknotes into gold coins before the August bank holiday.

#8

In the prewar period, the bank had also offered its own currency as a reserve for the central banks of its colonies, under what was known as the gold-exchange standard. The bank had exported its inflation to the colonies, financing its operations but placing itself in a precarious liquidity position.

#9

The Bank of England decided to continue the gold standard, but its dwindling stockpiles meant it had to figure out some way to stem the tide of redemptions. It declared an unofficial war on gold, and instructed banks to collect coins and hold them in reserve to be at the disposal of the Treasury.

#10

The British government confiscated 14,684,941 ounces of gold, or around 455. 2 metric tons, during the war. The entire operation cost £5,516, at a rate of a little over £1 per £10,000 collected.

#11

The Bank of England used the war to suspend redeemability abroad and discourage it at home, which allowed the bank to finance the war effort without officially coming off the gold standard. By controlling banks and confiscating gold, central banks could create money by fiat.

#12

The British pound was overvalued, which caused problems for the average Englishman when prices increased. The war’s end brought millions of military servicemen home, but the price and wage controls made it difficult for the economy to accommodate their return to the workforce.

#13

The British economy was unable to return to the gold standard after the war, as union demands would not allow wages to be lowered. As a result, Britain began to inflate its money supply to make up for the loss of gold.

#14

The British government and the Bank of England tried to ease the pressure on their currency by convincing the United States to engage in expansionary monetary policy. However, it was difficult for the British government and the Bank of England to face a price liquidation in England when they had over a million unemployed people receiving government aid.

#15

The Great Depression of the 1930s was made worse by the suspension of gold redemption and the abundance of government-issued fiat. This gave rise to a bureaucratic monster that lived off inflation.

#16

The U. S. dollar was the global monetary system’s primary currency, and the American economy was the strongest in the world. The Nixon shock was a series of government edicts aimed at containing rising inflation and unemployment.

#17

The history of fiat is the history of government-run financial institutions managing defaults. It was not a technology designed to provide sound money or payment transfers.

#18

Between 1914 and 1971, the global monetary system moved from the gold standard to the fiat standard. Governments took over the banking sector everywhere, or depending on who you ask, the banking sector took over governments.

#19

Blurring the line between money and credit makes it practically impossible to measure the money supply. With a payment system like gold or bitcoin, only mature money can be used to settle payments and debts. Under a fiat system, money that has not matured can be accepted as payment as long as it is guaranteed by a commercial entity with a lending license.

#20

In a free market, it is expected that the investor would prefer to hold their wealth in the harder currency, which cannot be debased to finance credit. However, even without the rational self-interest of the investor, inflation causes a currency to lose value over time next to the harder currency.

#21

The fiat network is based on a layered settlement system for payment clearance. Individual banks handle transfers between their clients on their own balance sheets. National central banks oversee clearance and settlement between banks in their jurisdictions.

#22

The fiat standard does not allow for the emergence of a free market in capital and money where supply and demand determine the interest rate. Lending ultimately determines the money supply, and lending levels are shaped by the interest rate and Federal Reserve policy.

#23

The core functionality of the fiat standard is in the functions of the network’s nodes. Each central bank has four important functions: providing the domestic fiatcoin and determining its supply and price, clearing international payments, lending to its respective national government by buying its bonds, and backing the local currency.

#24

No form of money has ever existed that existed only through government fiat. Even during the century of fiat and supposed gold demonetization, central banks have massively increased their gold holdings and continue to add to them at a rapid pace.

#25

Central bank reserves are used to settle the central bank’s international current account and international capital account. All international payments to and from a country go through its central bank, allowing it a strong degree of control over all its international trade and investment activities.

#26

Under a fractional reserve banking system, the central bank uses its reserves to provide liquidity to individual banks facing liquidity problems. This means that the inevitable credit contractions that follow the banking system’s credit-fueled booms are remedied by central banks using their reserves to support illiquid financial institutions.

#27

The modern central bank and government song-and-dance routine involves the central bank using its reserves to purchase government bonds, thus financing the government. Central banks are the main market makers in government bonds, and the extent of a central bank’s purchase of government bonds is an important determinant of its national currency’s value.

#28

The collapse of the fiat system in 1929 ultimately gave rise to the protectionism of the 1930s, which worsened the economic depression and fueled hostile nationalism. As governments restrict the ability of individuals to accumulate or move capital, it becomes ever harder for individuals to accumulate capital, trade, specialize, and import advanced technologies.

#29

In chapter 4, The Bitcoin Standard examined the history of fiat money from a quantitative perspective. It found that the supply growth of fiat money in the second half of the twentieth century was far higher than that of gold and silver. However, it did not dive too deeply into the operational details of the fiat monetary system.

#30

The most effective restraint against credit growth spiraling out of control in the fiat system is the inevitable deflationary recessions it precipitates, and the concomitant collapses in the money supply.

#31

Central banks have a profound influence over all banks operating in a given country. As such, the fiat standard leaves all of a society's wealth and its monetary and financial system vulnerable to the central bank's reckless monetary central planning and the shenanigans of individual financial institutions.

#32

The treatment of the deflationary credit collapse in the fiat standard is based on the assumption that it must be prevented at all costs. However, without considering how credit inflation itself sets the scene for a deflationary credit collapse, this consensus is built on conceptual quicksand.

#33

The average annual growth rate of the money supply from 1960 to 2020 was 29 percent. The best poster children for low monetary inflation in the fiat standard are Switzerland, with a 6. 5 percent annual growth rate, and the U. S. , with a 7. 4 percent annual growth rate.

#34

The deflation phobia of modern economists and policymakers has extended beyond just worrying about banking collapses. It has progressed to a pathological level, where even a natural decline in prices caused by productivity increases is viewed as economically catastrophic.

#35

The more reliable an individual can be expected to be in providing for their future self