Hi guys, i was recently reading what has government done to our money

i liked the end summary steps of exactly how we ended up with the shitty fiat mess we're in today so thought i would post a condensed version of them here for anyone who hasn't read the book or doesn't know much, apart from Bretton Woods etc

(the tldr is that governments cannot be trusted and broke the gold standard because they are pieces of shit and couldn't resist printing money to fuel wars).

During the classical gold standard era, Western economies experienced stability as currencies were backed by gold. This standard provided a self-regulating, inflation-resistant system since governments and banks were restrained from creating money beyond gold reserves. This period is seen as an ideal due to its natural check against inflation and its encouragement of balanced trade and stable exchange rates.

However, as economic pressures mounted with industrial growth and increased international trade, certain limitations emerged. Governments and central banks grew frustrated with the constraints imposed by gold, as it limited their ability to respond flexibly to economic crises and pressures for expansionary policies.

World War I marked the beginning of the end for the gold standard, as warring nations left the standard to finance military expenses through increased money supply, causing inflation. In the war's aftermath, many economies faced severe inflation and instability as they attempted to rebuild while managing the new, unbacked money in circulation.

Attempts to re-establish the gold standard after the war struggled due to the inflationary imbalances created during the conflict. As countries returned to gold, they found it challenging to maintain pre-war exchange rates, resulting in economic instability and leading to public distrust in the monetary system.

The gold exchange standard allowed some countries to back their currencies with gold indirectly, relying on reserves of stronger currencies like the British pound or U.S. dollar instead of gold directly. While this initially provided some stability, it was less robust than the classical gold standard, as it allowed central banks to create money beyond actual gold holdings.

The system eventually collapsed due to the Great Depression, which severely impacted the credibility of reserve currencies. The disconnect between currency values and gold holdings caused a breakdown in confidence, leading to competitive devaluations and further economic hardship.

The breakdown of the gold exchange standard during the Great Depression led to the adoption of fiat currencies with fluctuating exchange rates. Countries devalued their currencies competitively to boost exports, which led to “currency wars” and strained international trade relations.

Without a fixed standard, exchange rates became unpredictable, exacerbating global economic turmoil and contributing to the economic instability that defined the prelude to World War II. This period underscored the risks of fiat money and the instability it could bring to global markets when unbacked by tangible assets.

The Bretton Woods system established the U.S. dollar as the global reserve currency, pegging it to gold at $35 per ounce, while other currencies were pegged to the dollar. This setup aimed to create stability while allowing some flexibility in exchange rates, helping rebuild war-torn economies through monetary coordination.

Initially successful, Bretton Woods struggled as U.S. deficits increased and inflation rose. As the U.S. printed more dollars without increasing gold reserves, the system grew unstable, with countries losing confidence in the dollar’s value, setting the stage for the collapse of the gold-dollar peg.

Mounting U.S. inflation and spending pressures caused other countries to lose faith in the dollar, leading to a global rush to convert dollars into gold. This strain exposed the limitations of the Bretton Woods system, as the U.S. couldn’t meet gold redemption demands.

In response, the U.S. imposed restrictions on gold transactions to maintain the dollar's value artificially, but these efforts were insufficient. The dollar continued to lose credibility, and the system's foundation began to deteriorate under pressure from rising U.S. deficits and inflation.

In August 1971, President Nixon officially ended the dollar's convertibility to gold, effectively terminating the Bretton Woods system and transitioning the world to a fiat currency regime. This decision was prompted by European central banks’ demands to convert dollar reserves into gold, which the U.S. could no longer sustain.

This shift to fiat currencies resulted in fluctuating exchange rates, marking the beginning of a new era of international finance. With no gold backing, currencies became vulnerable to inflation and market speculation, leading to economic instability and frequent crises in global trade and investment.

The Smithsonian Agreement, hailed as a groundbreaking monetary accord, attempted to stabilize exchange rates through fixed rates without gold backing. Countries pledged to maintain exchange rates within specific limits, and the U.S. made a token devaluation of the dollar to $38 per ounce.

This agreement quickly fell apart as inflation continued and the dollar remained overvalued relative to European and Asian currencies. By early 1973, the inability of the Smithsonian system to stabilize currencies was apparent, leading to another shift toward freely floating fiat currencies.

With the collapse of the Smithsonian Agreement, the world adopted a system of fluctuating fiat currencies, supported by economists who argued it would allow better control over domestic monetary policy. Initially, the system appeared beneficial, as countries could theoretically avoid balance of payments crises.

However, the fluctuating system brought volatility, as exchange rates became increasingly unpredictable. This instability fueled inflationary pressures and economic imbalances, leading Rothbard to criticize fiat money as a deeply flawed solution compared to a stable, commodity-backed currency like the gold standard.