fiat, excuse me.
Ok vimes, so what's the difference between the Chinese, Egyptian, and Iraqi monetary systems as opposed to actual "fiat money"?
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July 3rd, 2008 at 5:29 am
A "Flat" or "Fiat" currency? I'm not sure what you mean by flat.
July 3rd, 2008 at 5:29 am
China has had something like it for about 1500 years.
It has been in Iraq and Egypt, one form or another, for 4000 years.
Fiat money on the other hand is only a couple of hundred years old.
July 3rd, 2008 at 5:29 am
That is a tough question because it may not be a unique answer. I will give the reason. Until World War I the entire planet was either on a gold, silver or joint standard. Europe was gold based, Asia was silver based and the Americas are a mixed group and depended on who their trading partners and their natural resource mix.
After World War I there was an unfortunate attempt to return to the pre-WWI metals standard. Unfortunately the War had broken all prior social contracts and so the standard should have been different, to reflect the new circumstances. The result was the Great Depression.
During the Depression many nations went off a metals based standard. Following World War II all nations of the world went onto a gold/dollar standard under the Bretton Woods treaty. When the US was forced off the gold standard in 1972 by the British Ambassador appearing at the gold window at the Treasury demanding roughly a third of the nation's gold supply, that kicked nearly the entire planet off a metals based system by default. Bretton Woods allowed nations to use either dollars or gold, because if you held dollars then in effect you held gold. Since most nations lacked the gold to back their currency when the US left gold almost the entire planet left gold. Some countries, like Switzerland, are an exception.
It is important to remember that a pegged currency, pegged to a gold standard currency, is the same in practice as a metals based currency. So the Indian rupee, which had been a pegged currency for most of its existence, has had the legal features of a fiat currency but the operational features of a metals currency for most of its existence. Until 1966 the rupee had been redeemable in shillings, after then in dollars, but either redeemable asset was ultimately redeemable in gold.
I doubt there is a clear answer to your question. Even in the US, during the free banking period, where you had literally thousands of currencies in effect in the United States, you still ordinarily had some form of pegging either directly to gold or to notes redeemable in gold.