Fiat Currency

Ever wonder why our money has value? Is it backed by anything like gold, silver, etc. which makes it "legal tender" as it states on the our paper money? The only reason our money has value in our economy is simply because our government says so - we have what is called a fiat currency.

Ron Paul and others hold that a fiat currency is unconstitutional and they point to Article I Section 10, which says, "no state shall...make any Thing but gold and silver Coin a Tender in Payment of Debts..."

However, Article I Section 8 grants Congress the power "to coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standar of Weights and Measures."

At the very least, this may be a contradiction, but I don't take the leap that it is unconstitutional. That being said, there are good reasons to be concerned for our economy being based on a fiat currency,

The first concern is the inconvenient fact that no fiat based currency has ever lasted. Each example ends with the money being devalued and its economy collapsing. The Roman empire is one such example. The dollar has only been a fiat cuurency for 40 years...Not long enough to conclude it has stood the test of time. In fact, since we abandoned the remaining ties to a gold standard in 1971, the dollar has been declining in value when compared to other currencies. Are we witnessing history repeating itself, as it it most obnoxiously tends to do?

Why does this happen? The best and most logical reason I understand is it perpetuates government spending and debt. Most examples of fiat currency collapse throughout history all have a similar theme. The governments over-reach and accunulate massive amounts of debt due things like endless wars and corruption. To combat the debt, more money is printed, devaluing it even more.

The question is are recent strategies employed by the Federal Reserve, such as quantitative  easing, the bank bailouts, and the War on Terror examples of history repeating itself. I honestly do not know for sure, but I'm certainly a little worried...