Summary of Saifedean Ammous's The Fiat Standard

By IRB Media

Please note: This is a companion version & not the original book.

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#1 The Fiat Standard has survived for 50 years, which makes it unreasonable to dismiss it as an irredeemable fraud on the brink of collapse. Understanding how the fiat standard works and how it frequently fails is essential knowledge for navigating it.

#2 The first seven chapters of The Bitcoin Standard explained the history and function of money, and its importance to the economic order. With bitcoin showing us how an advanced monetary system can function independently of government control, we can better understand the properties required for a monetary system to operate on the free market.

#3 The fiat system was not a carefully designed financial operating system like bitcoin, but rather it evolved through a process of compromise between political constraints and expedience in managing government default.

#4 The fiat monetary system was a solution to the gold standard’s low spatial salability. It allowed governments to transfer value across space without having to worry about the gold standard’s constraints. But it allowed governments to exploit their citizens by giving them easy fiat tokens that they could use to pay their taxes.

• Language: English
• Publisher: IRB Media
• Release date: Mar 24, 2022
• ISBN: 9781669368922

IRB Media

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Insights on Saifedean Ammous's The Fiat Standard

Contents

Insights from Chapter 1

Insights from Chapter 2

Insights from Chapter 3

Insights from Chapter 1

#1

The Fiat Standard has survived for 50 years, which makes it unreasonable to dismiss it as an irredeemable fraud on the brink of collapse. Understanding how the fiat standard works and how it frequently fails is essential knowledge for navigating it.

#2

The first seven chapters of The Bitcoin Standard explained the history and function of money, and its importance to the economic order. With bitcoin showing us how an advanced monetary system can function independently of government control, we can better understand the properties required for a monetary system to operate on the free market.

#3

The fiat system was not a carefully designed financial operating system like bitcoin, but rather it evolved through a process of compromise between political constraints and expedience in managing government default.

#4

The fiat monetary system was a solution to the gold standard’s low spatial salability. It allowed governments to transfer value across space without having to worry about the gold standard’s constraints. But it allowed governments to exploit their citizens by giving them easy fiat tokens that they could use to pay their taxes.

#5

The second part of the book focuses on the impacts of fiat money. It explains how government-granted debt is used as money and how this affects individuals, families, education, food, science, health, fuels, and international geopolitics.

#6

The Bank of England began the global monetary system’s move away from a gold standard on August 6, 1915, when it issued an appeal to the public to use notes instead of gold coins whenever possible.

#7

The Bank of England’s problems started at the dawn of the Great War. On July 31, 1914, large crowds stood outside the doors of its Threadneedle Street headquarters looking to convert their bank balances and banknotes into gold coins before the August bank holiday.

#8

In the prewar period, the bank had also offered its own currency as a reserve for the central banks of its colonies, under what was known as the gold-exchange standard. The bank had exported its inflation to the colonies, financing its operations but placing itself in a precarious liquidity position.

#9

The Bank of England decided to continue the gold standard, but its dwindling stockpiles meant it had to figure out some way to stem the tide of redemptions. It declared an unofficial war on gold, and instructed banks to collect coins and hold them in reserve to be at the disposal of the Treasury.

#10

The British government confiscated 14,684,941 ounces of gold, or around 455. 2 metric tons, during the war. The entire operation cost £5,516, at a rate of a little over £1 per £10,000 collected.

#11

The Bank of England used the war to suspend redeemability abroad and discourage it at home, which allowed the bank to finance the war effort without officially coming off the gold standard. By controlling banks and confiscating gold, central banks could create money by fiat.

#12

The British pound was overvalued, which caused problems for the average Englishman when prices increased. The war’s end brought millions of military servicemen home, but the price and wage controls made it difficult for the economy to accommodate their return to the workforce.

#13

The British economy was unable to return to the gold standard after the war, as union demands would not allow wages to