How Long Do We Have?

Fiat money is only as valuable as the trust on which it is based. Trust is based ultimately on honesty and integrity. Those who refuse to learn the lessons of history are doomed to repeat them. It might be sobering to reflect on the German hyperinflation of 1923 and ask how they got that way and whether the track we are on is really any different?

The problem is not so much that we are using paper money that is unbacked by anything but promises. That is not as different from gold or other precious metal backed currency as some might think, for that is also based on promises, the promise to exchange a certain amount of precious metal for a certain amount of paper. There is never really enough gold or silver to exchange for all the paper so it's still based on trust that the promises will be fulfilled.

What if you live in a society which increasingly celebrates liars and cheaters where integrity is scoffed at and honor is an empty word? What then?

What if the banks are told to ignore the ability to pay back loans and instead loan money to people who are poor credit risks so that they can buy houses that they can't afford? Suppose that banks that drag their feet are picketed and trashed by goons and hooligans until they submit? What if people who don't know very much economics (Why is that? The schools are dominated by a single politically correct perspective. Economics doesn't fit the mold.) and they are told that housing always goes up? It isn't true of course. A big balloon develops of worthless credit and the loans come due. What happens then?

Do you let all that bad credit and those who sustained it fail? or do you throw good money after bad and swell the problem with more promises from more people whose promises have been shown to be no good in the past? Where does it end? How far is down? Who pays in the end?