What makes a Fiat worthless? - page 6.

Periodik

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Quote from: Wysi on October 26, 2019, 10:27:40 AM

We have come across so many national currency becoming worthless and recently we have heard the news of barter system in Zimbabwe due to the fall in the value of national currency but what really makes the Fiat worthless? Is it corruption or war or national economical crisis? Or the National GDP which makes it fall?

A combination of all. It hardly falls straight to worthlessness with only a single factor playing. Normally, it will be the interplay of falling GDP, enormous rise of inflation, corruption, economic crises, and some other factors. Over printing of fiat is also enough reason for it to lose its value. Wars, especially huge enough to cover the entire country, could also kill their fiat system.

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I think that for the time being Fiat is still very valuable and Fiat will really be worthless when it starts when many people use payments and transactions using digital currency because it will reduce the use of paper money, even though everything is digital, there will still be Fiat money only created very little because everything has a gradual process.

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Quote from: Wysi on October 26, 2019, 10:27:40 AM

We have come across so many national currency becoming worthless and recently we have heard the news of barter system in Zimbabwe due to the fall in the value of national currency but what really makes the Fiat worthless? Is it corruption or war or national economical crisis? Or the National GDP which makes it fall?

It boils down to lack of popular confidence in the currency. Free floating (unbacked) currencies only retain value because people believe in them. They aren't like backed currencies that are convertible to the underlying.

In Zimbabwe, runaway currency printing caused hyperinflation. As prices skyrocketed, people could plainly see the currency had no firm basis for value. Anyone holding it naturally lacked confidence that it would hold up. This created a situation where everyone was desperate to get rid of it, and no one was willing to accept it. Confidence was completely broken.

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Quote from: Wysi on October 26, 2019, 10:27:40 AM

We have come across so many national currency becoming worthless and recently we have heard the news of barter system in Zimbabwe due to the fall in the value of national currency but what really makes the Fiat worthless? Is it corruption or war or national economical crisis? Or the National GDP which makes it fall?

I think fiat currency becomes worthless when it becomes too inflated, or when people stop trading it all together and start utilizing another type of currency, usually a stronger foreign fiat. The the U.S uses a fractional reserve system through the federal reserve, so the dollar is no longer backed by a gold standard I think. Money is real complicated, there are many systems that make it work. I honestly don't know the full mechanics of the monetary system. I'm in doubt about crytpo currency ever completely replacing fiat, at least not any time soon, as it is way easier for the modern man to use fiat cash. You can simply exchange physical fiat faster for transactions than having to whip out your smart phone or ledger and scan a QR code and send a transaction, then wait for it to be approved
In order for cold hard cash to be replaced, you'll have to put a smart phone in every single persons hand, including those who are poverty stricken, in remote areas, etc. Seems like its much easier to deal in physical cash for now. Who know 20 years from now?

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Quote from: Wysi on October 26, 2019, 10:27:40 AM

We have come across so many national currency becoming worthless and recently we have heard the news of barter system in Zimbabwe due to the fall in the value of national currency but what really makes the Fiat worthless? Is it corruption or war or national economical crisis? Or the National GDP which makes it fall?

Inflation, it's always inflation.

As to what causes inflation - usually restrictions on trade. So if you can't import say wheat, and your domestic wheat harvest yields are not so good, then prices rise. What you can buy with one unit of currency then drops - and that's how a currency becomes worthless. Usually needs price rises of several hundred percent for it to happen though.

jossiel

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IMHO, Hyper inflation.

That's the cause of why fiat money becomes worthless in some countries like Venezuela. And those what you have mentioned triggers the economic status of that country which results to HI. A war will totally wipe out a lot of resources on that involved area and printing of more cash will also contribute to it.

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The main reason comes down to the fact that fiat is intrinsically worthless.

To put it more strictly, its intrinsic value is simply the piece of paper that it's printed on. Since central banks can simply "print" more of it, or in the modern era, create more bank reserves, it essentially means that there is no cap on the scarcity.

If anything doesn't have a capped supply it's bound to depreciate in the long run, especially when there is uncontrolled money issuance.

palle11

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Quote from: Wysi on October 26, 2019, 10:27:40 AM

Is it corruption or war or national economical crisis? Or the National GDP which makes it fall?

These are all factors that can lead to inflation. Inflation devalues the currency because when corruption, war are the other of the day, These things disrupts the program of governance and that sets the GDP down as there won't be export. They all affect the currency in one way or the other.

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Well, all you have mentioned are contributors.

Currencies are forms of value. And currencies increase in value when there is increase in demand of it. What leads to increases in demand of any country’s currency is the products they can offer. When a country ain’t that productive, they have less they can sell. Therefore, potential reduction in the value of their currency.

However, It’s more of a demand and supply thing. The supply of money will have to be balanced with demand for it. The moment there is too much supply of money from the central bank and less demand for it, the money loses its value. And less demand happens when there is less products to buy. They call it Inflation.

This is just my cent on the matter.

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Quote from: Wysi on October 26, 2019, 10:27:40 AM

We have come across so many national currency becoming worthless and recently we have heard the news of barter system in Zimbabwe due to the fall in the value of national currency but what really makes the Fiat worthless? Is it corruption or war or national economical crisis? Or the National GDP which makes it fall?

Every currency is tied to the the economy of that specific country so when factors like employment, inflation, interest rates, banking and other micro economics factors are on the negative side of things it makes the currency fall. This is specifically my opinion of the matter.

Wysi

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We have come across so many national currency becoming worthless and recently we have heard the news of barter system in Zimbabwe due to the fall in the value of national currency but what really makes the Fiat worthless? Is it corruption or war or national economical crisis? Or the National GDP which makes it fall?

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