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Fiat Currencies Are Not Ponzi Schemes
They have little in common.
4 min readJun 3, 2025
A Ponzi scheme is a fake investment scheme where initial investors receive dividends coming from the latest investors’ investments.
- Julie invests 100 euros in my Ponzi where I promise her a 10% dividend yearly.
- Marie invests 100 euros a few weeks later.
- At the end of the year, I’ll take 10 euros from Marie and give it to Julie.
Ponzi schemes collapse when investors fail to retrieve their initial capital due to its redistribution.
This structure has little to do with how fiat currencies, and broadly, the economy, work, for two reasons.
- A Ponzi scheme is a redistributive scheme that does not entail the creation of wealth. It’s theft.
- Ponzi schemes run out of steam and collapse; the economy almost never does (an economic collapse being defined as “everyone stops making stuff” which is different from a financial collapse).
How do fiat currencies work?
Fiat currencies are neutral means of exchange that economic participants desire to acquire because they can be exchanged against everything else.
