Demi-mini History of Currency: God currency—Government currency—Democurrency（part 1）

 III. Government currency (fiduciary currency)

From the perspective of issuing mechanism, government currency belongs to fiduciary currency.  

The first fiduciary currency is certainly not government currency, but government currency has the most extensive circulation. So, from the perspective of the issuer, we can generally classify fiduciary currency as government currency.  

Fiduciary currency is issued by a person or an organization with its credit as collateral.

Initially, fiduciary currency is just a carrier of God currency, a kind of anti-counterfeiting product manufactured with advanced technology to represent a certain amount of God currency. People can exchange their fiduciary currency into God currency with the issuer.

Compared to God currency, fiduciary currency is much better in portability and ease of storage. After the emergence of telephone technology, fiduciary currency’s remote transaction speed is 100 times faster than God currency; this discrepancy became even larger with the advent of network technology. In addition, storage cost of fiduciary currency is close to zero.

The biggest drawback of fiduciary currency is the risk that it is not honored. Once the issuer does not honor, fiduciary currency is just garbage. As a result, people need an issuer with higher credit; consequently, the government naturally came into play.

After the government took over fiduciary currency, they gradually discovered the mystery of fiduciary currency: When the whole society accepts only one fiduciary currency, net currency exchange volume from fiduciary currency to God currency is very small or even negative (i.e. constantly accepting God currency and issuing more fiduciary currency). Then, government-issued currency will no longer need God currency reserves to back it up, so issuing fiduciary currency just became a tool for the government to collect money, this is the real “cash cow".

No one can resist the temptation to get addicted with "cash cow", so around the world, throughout the history, the governments always issued more money than God currency they reserve. When the money is too much, currency devaluation will occur, "credit" is gone, the money will fade away from the stage of history, and people will resort to God's currency again.

However, on August 15th, 1971, one of the world's most important day in the history of currency, governments around the globe disconnected fiduciary currency from God currency together ; the governments began to "expel" God currency in an organized way. As of today, gold and silver have, in fact, stepped out of monetary arena and become a kind of quasi-currency.

Originally, the God currency served as an "anchor" for fiduciary currency which devaluates when over-issued. Now God currency has been abandoned, all fiduciary currencies have become floating boats at sea, they don’t have absolute value, only possess relative value. Therefore, governments around the globe over-printed money synchronously and the first long-term global inflation in world’s financial history emerged.

Of course, people around the world are dissatisfied, they are angry. But people cannot form a strong force to contend with the government, they can only vote with their feet.

There is no possibility of returning to God currency right now, because God's currency simply cannot meet the needs of the current economy.

 As a result, people can only create the next generation of currency through technological innovation.