Typography

Over the last few years I've increasingly crossed paths with the following claim on the internet: "The average life expectancy for a fiat currency is 27 years." Is this claim true? What definitions are being used? I mean, are we talking about inconvertible paper money here, or currency that was convertible into gold, too? I finally got curious enough that I decided to chase down the source of this meme. After all, without knowing what data it is based on, it's hard to evaluate the claim's truthfulness. Below I give a description of my trek through internet history. The average-life-of-fiat meme has become particularly popular among cryptocurrency types. For instance, here is Jimmy Song, a popular bitcoin educator/developer, confidently invoking the slogan back in 2017: "When a society lacks prudence, what happens is that the society collapses or goes into chaos. It’s not a coincidence that the average lifespan of a fiat currency is only 27 years." A lo...

While our modern monetary system certainly has plenty of detractors, one of its successes is that we no longer need the services of the local gold regulator . In the late 1700s, the job of a gold regulator was to assay gold coins to determine if they were of the appropriate weight and fineness, modifying (ie 'regulating') the coin if necessary. When he was done, the gold regulator stamped the coin with his seal of approval and put it back into circulation. The job of regulating coins may seem strange to us. But it was an ingenious way to cope with the lack of standardization that bedeviled monetary systems in the 1600 and 1700s, particularly in the colonies. There was no domestic supply of coins in North America back then, so settlers relied on a bewildering array of foreign coins as their media of exchange, each with its own weight and fineness, and most of poor quality. This included not only silver coins such as Spanish dollars, pistareens, and English crowns, but also a gam...

LSD tabs like these ones have an incredibly high value-to-weight ratio When bitcoin first appeared, it was supposed to be used to buy stuff online. In his 2008 whitepaper , Satoshi Nakamoto even referred to his creation as an electronic cash system . But the stuff never caught on as a medium-of-exchange: it was too volatile, fees were too high, and scaling problems resulted in sluggish speeds. Despite losing its motivating purpose, bitcoin's price kept rising. The bitcoin cognoscenti began to cast around for a new raison d'etre. Invoking whatever they must have remembered from their old economics classes, they rechristened bitcoin as the world's best store of value . Store of value is one of the three classic functions of money that we all learn about in Money and Banking 101: money serves a role as a medium of exchange, unit of account, and store of value. So presumably if bitcoin wasn't going to be a medium of exchange (and certainly not a unit of account thanks to it...

Since they began to be produced in 1914, Federal Reserve notes have always had a promise or obligation printed on their face. But over time this promise has changed. I thought it would be fun to go through the evolution of the promise as an exercise in understanding how the U.S.'s monetary plumbing has changed. The original 1914 series of Federal Reserve notes had the above stipulation printed on it. It's tough to read, so I've reproduced it in full below: "This note is receivable by all national and member banks and Federal Reserve Banks and for all taxes, customs and other public dues. It is redeemable in gold on demand at the Treasury Department of the United States in the city of Washington, District of Columbia or in gold or lawful money at any Federal Reserve Bank." There were really four promises here. The first was that all banks who were members of the Federal Reserve system would accept notes at their counter, as would the Reserve banks themselves—i.e. t...

Now that the U.S. debt ceiling season is upon us again, I've been wondering if the U.S.'s official gold price is going to finally be revalued from $42.22. Why so? Since March the U.S. Treasury has been legally prohibited from issuing new debt. Because the government needs to continue spending in order to keep the country running, and with debt financing no longer an option (at least until the ceiling is raised), Treasury Secretary Mnuchin has had no choice but to resort to a number of creative "extraordinary measures," or accounting tricks, to keep the doors open. Here is a list. They are the same tricks that Obama used in his brushes with the debt ceiling in 2011 and 2013. The general gist of these measures goes something like this: a number of government trusts and savings plans invest in short term government securities, and these count against the debt limit. As these securities mature they are typically reinvested (i.e rolled over). The trick is to neither roll ...

Source Whenever I try to come up with a metaphor for the monetary and banking system I think about the 2010 film Inception , one of my favorite films. After falling into a dream state, the protagonists sedate themselves within the dream so that they can move to an even deeper dream level, and so on; a dream piled on a dream piled on a dream piled on a dream. Conversely, by setting up a series of "kicks," the protagonists progressively wake themselves up from each dream level until they eventually reemerge back in reality.  Like Inception , our monetary system is a layer upon a layer upon a layer. Anyone who withdraws cash at an ATM is 'kicking' back into the underlying central bank layer from the banking layer; depositing cash is like sedating oneself back into the overlying banking layer. Monetary history a story of how these layers have evolved over time. The original bottom layer was comprised of gold and silver coins. On top this base, banks erected the banknote l...

Dutch 10 guilder note. Holland and Lebanon are the only countries to have issued banknotes with bar codes. One of the interesting things that we've all learnt about Bitcoin is that it isn't actually anonymous, it's pseudo-anonymous . While anyone can deal in bitcoins without providing personal information like a phone number or photo ID, all bitcoin transactions are broadcast to the public. By analyzing these transaction patterns, it may be possible to flush a user's true identity out into the open. Bitcoin is an attempt to digitally replicate many of the features of the old fashioned banknote, but even banknotes are to some degree pseudo-anonymous. Each banknote has a unique serial number on it. By tracking serial numbers, it may be possible to connect a note to a noteholder and thereby destroy their anonymity. The process of unveiling note users occurs most often in kidnapping cases. When their young son was kidnapped in 1932, the Lindbergh family paid a $50,000 rans...

Imagine waking up in the morning and checking the hockey scores, news, the weather, and how much the central bank has adjusted the gold content of the dollar overnight. This is what a 21st century gold standard would look like. Central banks that have operated old fashioned gold standards don't modify the gold price. Rather, they maintain a gold window through which they redeem a constant amount of central bank notes and deposits with gold, say $1200 per ounce of gold, or equivalently $1 with 0.36 grains. And that price stays fixed forever. Because gold is a volatile commodity, linking a nation's unit of account to it can be hazardous. When a mine unexpectedly shuts down in some remote part of the world, the necessary price adjustments to accommodate the sudden shortage must be born by all those economies that use a gold-based unit of account in the form of deflation. Alternatively, if a new technology for mining gold is discovered, the reduction in the real price of gold is f...