An Honest Account of Fiat Money
Discussions about Bitcoin often start from the presumption that fiat money is terrible and against the will of the people. We think a discussion about money and Bitcoin should start by acknowledging both — the good, and the bad — of the fiat system.
Bitcoin has an immense pull on all critics of the current fiat system. Bitcoiners tend to be “sound money”-advocates — meaning, they prefer money that can’t be created or destroyed by a central party and instead has a fixed or at least predictable supply, like gold, instead of one where the government can centrally manage the money supply.
While sovereign money has undeniably led to a lot of abuse, as evidenced by instances of hyperinflation, seizures or capital controls, the absence of all control brings problems of its own. In the example of the Euro countries entered a monetary union without a fiscal union. The result is a currency that strongly benefits the export-oriented nations like Germany while hurting net importers like Greece or Portugal.
Fiat is incredibly useful when people want their country to have monetary sovereignty. Ceding control over the money supply to a foreign institution (for example by pegging to an uncontrollable asset like gold or…
