321gold’s Darryl Robert Schoon on the origin of paper currency (he quotes Ralph T. Foster’s book, Fiat Paper Money, The History and Evolution of Our Currency)
By 1661, China finally learned its lesson and the new Qing dynasty officially outlawed paper money. Regarding China’s 600 year experiment, Foster writes:
“Over the course of 600 years, five dynasties had implemented paper money and all five made frequent use of the printing press to solve problems. Economic catastrophe and political chaos inevitably followed. Time and again, officials looked to paper money for instant liquidity and the immediate transfer of wealth. But its ostensible virtues could not withstand its tragic legacy: those who held it as a store of value found that in time all they held were worthless pieces of paper. (page 29) [emphasis mine]
As the above excerpt shows, the paper money system has been an age old predicament for political leaders who always try to circumvent the fundamental laws of economics, but always ended up a failure.
Today, paper money has been repackaged and sold to the public as a product of modernity anchored upon central banking—operating on the platform of technology aided complex and sophisticated math or quant models.
And where lessons seem to have never been assimilated or learned, the same outcome should be expected as in the past. As Voltaire once said, “Paper money eventually returns to its intrinsic value…zero.”
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