Inevitable Failure of Inconvertible Paper Money

Abstract

Since the invention of paper money, it has been understood that it is difficult for its creators to resist issuing so much that it loses value. Long experience led to the single uniquely effective means of resisting this fraud: this is for the issuer to guarantee to convert their paper money, on demand, into some defined asset, such as gold, on fixed terms. With the end of the US dollar's guaranteed convertibility into gold, its value became dependent on decisions by leaders of the US government and financial system, unhindered by the need to keep it stable. Predictably, this led to unprecedented inflation of the supply of dollars, leading to ever-rising prices and continuing decline in the acceptability of dollars and US geopolitical leadership.