All sovereign countries started out with commodities to use as money.
People had no complaints about using silver or gold for services and countries started to prosper when the people were prospering. |
Later on, the government introduced Certificate of Deposits, which were claims checks that states the "real money" is held in the vaults.
This was good for a while because the people knew that their certificates were back by physical gold or silver. |
Now, the country starts to take on enormous debts from unfunded liabilities and military expenditures, such as war.
Citizens and neighboring countries begin demanding repayment of the gold and silver that they were promised that was stored in the vault. The government had to stop paying in silver or gold because they don't have enough to cover the certificates in circulation. And if everyone tried cashing in at the same time, it will deplete their supply almost immediately. Now, there's a serious problem when the government can't deliver on what they promised. Fiat Currency can be printed from an unlimited supply of paper, but gold & silver cannot be reproduced. Welcome to fiat currency. |