The Problem with Fiat Currency
Contributed by Alexander Harmon
For most of human history, money was something tangible—gold, silver, and other commodities that had real, intrinsic value. A gold coin was valuable not because a government declared it so, but because it was scarce, durable, divisible, and universally desired. Today, the U.S. dollar is none of those things. It is a fiat currency: paper (and digital entries) backed only by government decree and public trust.
This shift to fiat money did not happen overnight. In 1971, President Richard Nixon severed the final link between the U.S. dollar and gold, ending the Bretton Woods system. Before that moment, foreign governments could exchange dollars for gold at a fixed rate. After Nixon’s decision, the dollar became purely symbolic—valuable because the government said so and because people continued to believe in it.
Since then, the purchasing power of the dollar has steadily declined. A dollar today buys only a fraction of what it did in the early 1970s. Prices rise, savings erode, and wages struggle to keep up. This is not accidental; it is a structural feature of fiat currency. When money can be created at will by central banks and governments, inflation becomes an invisible tax on every citizen.
Gold and silver, by contrast, cannot be printed out of thin air. They require real labor, real mining, real cost. That scarcity is what makes them stable over time. While their market prices fluctuate, their ability to preserve purchasing power across generations is well documented. A gold coin could buy a quality suit a hundred years ago, and it still can today. Try saying that about a paper dollar.
Supporters of fiat currency argue that modern economies need flexible money supplies, central banking, and monetary policy tools to manage recessions and growth. But that flexibility comes at a cost: massive debt, financial bubbles, currency debasement, and a system that benefits those closest to the money printers—banks, governments, and large institutions—while ordinary people see their savings diluted.
The question is not whether the current system “works” in a technical sense. It does—for those who control it. The real question is whether it is fair, stable, and sustainable for the average citizen.
Returning to sound money—gold, silver, or other asset-backed currencies—would restore discipline to the monetary system. Governments would no longer be able to fund endless programs, wars, and bailouts through hidden inflation. Budgets would matter again. Savings would mean something again. Money would once again be a store of value, not a melting ice cube.
Some argue that a return to precious metals is impractical in a digital age. But technology can work with sound money, not against it. Digital payment systems, cryptocurrencies backed by physical assets, and decentralized exchanges could make gold and silver more usable than ever before.
Ultimately, the debate over fiat currency is about trust and sovereignty. Do we trust centralized institutions to manage our money indefinitely? Or do we prefer a system grounded in tangible value, market discipline, and historical precedent?
Many people are also questioning the broader legal and political framework that supports the modern financial system. Some advocate a return to traditional common law principles—systems rooted in local accountability, contracts, and individual rights—rather than centralized administrative structures that often feel distant and unresponsive. Whether or not one agrees with that perspective, it reflects a growing desire for transparency, accountability, and a system that serves people rather than institutions.
The dollar may not be “worthless” in the everyday sense—we still use it, and it still functions. But its value is increasingly abstract, increasingly fragile, and increasingly dependent on confidence in institutions that many Americans no longer trust.
Sound money is not a fringe idea. It is an old idea—older than central banks, older than fiat currency, older than modern politics. As inflation rises and debt piles up, it may be time to revisit the principles that made money a tool for prosperity rather than control.