Depending on the capitalization, the term “Fiat/fiat” can mean many things.
In Latin, “fiat” is a commandment from on high meaning “it shall be”. It’s also what Zeus yells before triumphantly flushing the toilet.
Some people cheekily call their Ferraris “Fiat”. Others think of “Fix It Again Tony”, in reference to the repair shop regulars from the 1970’s.
When a lowercase “f” is used, the economically-minded among us think of currency.
Starting with the US Dollar in 1971, the world’s currencies left the gold standard and began comparing their currencies to USD, thereby becoming “fiat” currencies.
Lowercase “f” fiat currency is money that derives its value from government regulation or law, rather than being based on gold or silver. Today, Dollars, Euros, Pesos and the rest of ‘em all work this way. Essentially, they’re just colourful pieces of paper.
So what is currency good for?
Our country’s currencies embodies the means by which we pursue our interests, pay our taxes, and are remunerated for our work. As history has repeatedly shown, currency is also the way that nations repay their war debts.
After several pricey wars with King Louis XIV’s France, King William III of England was more broke than General Motors. As a result,
In 1694, a consortium of English bankers made a loan of £1,200,000 to the king. In return they received a royal monopoly on the issuance of banknotes. What this meant in practice was they had the right to advance IOUs for a portion of the money the king now owed them to any inhabitant of the kingdom willing to borrow from them, or willing to deposit their own money in the bank-in effect, to circulate or ‘monetize’ the newly created royal debt. This was a great deal for the bankers (they got to charge the king 8 percent annual interest for the original loan and simultaneously charge interest on the same money to the clients who borrowed it), but it only worked as long as the original loan remained outstanding. To this day, this loan has never been paid back.
Today, the fiat experiment that began with Nixon in 1971 is drawing to a close.
As you read this, the USD is being driven into the ground. Money printing presses are working overtime, interest rates can’t get lower, and easy credit is once again ballooning stats to show growth where none exists. Under an Everest of debt, the fiat that started it all, the Mighty USD, is breathing its dying breaths.
Money printing will lead to runaway inflation and eventually hyperinflation. When the timing is ripe, the BRICS countries [Brazil, Russia, India, China, South Africa] will rely on gold reserves to back up their currencies. Other fiat currencies without hard-asset backup aren’t likely to gain the trust of investors or ordinary holders.
What will save the USD? Nothing. What will replace it? Probably gold.
But gold isn’t the only answer that can solve the currency riddle. Another solution, and one that’s grabbed a considerable amount of media interest of late, is Bitcoin.
My personal love affair with Bitcoin started with Minyanville’s SEOtastic April 4th article. I might never forget that day.
Since then, I’ve barely slept – such is my feverish curiosity in this revolutionary new idea. I’ve never been so excited about anything. in. my. life.
It’s a store of value, medium of trade, and an inspiring vision of the New Economy. It’s also aligns philosophically as it sways power away from nations and towards anyone with an internet connection. Bitcoin is less like fiat and more like a commodity, with a steady mining rate that currently stands at 25 Bitcoins every 10 minutes. So it can’t be printed into existence and transactions costs are less than one tenth of credit cards and PayPal. What’s not to like?
[For more background, check out my newly launched website, Bitconomy.ca. I’m afraid that CarEnvy.ca updates will be even less frequent as a result of this new pursuit. But I love cars too much to give up on you!]
Which brings me to my new car!
There, I found a Bianco Fiat 500 Sport with no sunroof and automatic transmission. Perfetta per la città! After an amazingly fluid and civilized transaction, I drove home the Protege5-replacement I’ve been eyeing since I first drove the 500 in January of last year. The 2012 model I took home was only a set of Bose speakers away from perfect. EVERY other factor – colour of steering wheel, seating material, price, mileage, and trust in seller – were unimpeachable.
Despite the Bitcoin-induced daze, I still saved C$10,000 versus the cost of a 2013. That’s a lot of Fiat for my fiat! I crack me up…
So whatever “Fiat/fiat” makes you think of, I’ll forever link it with April 2013: when I bought my newest (and cutest) car to date and had my world utterly rocked by a mysterious coin.
It’s only appropriate that I call my new car “Lira” , for the Italian currency that the Euro replaced in 2002.
In 1972, President Nixon, famously quipped:
I don’t give a shit about the Lira!
Maybe he would’ve given a shit about Bitcoin. I know I do.