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2 results

  • 4 - How a Fiat Standard Works

  • Lawrence H. White, George Mason University, Virginia
  • Book:
    Better Money
    Published online:
    16 March 2023
    Print publication:
    23 March 2023, pp 121-152

  • Summary

    Chapter 4. In a fiat standard, the money is not useful for any non-monetary purpose, or redeemable for any commodity with a non-monetary use. Fiat monies historically emerged not from market forces but from default on gold-redeemable central-bank or Treasury liabilities. The quantity and purchasing power of fiat money obeys the logic of supply and demand in the special form of the Quantity Theory of Money. Central banks control the growth rate of the quantity of money and thereby the rate of inflation. In principle fiat standards could produce lower inflation, but in practice have produced higher inflation than silver or gold standards. Higher inflation imposes real burdens on the public. These burdens, especially when we include the expenditure of labor and capital to produce hedges against inflation, has exceeded the resource burden of a gold standard.

Better Money
  • Gold, Fiat, or Bitcoin?
  • Lawrence H. White
  • Published online:
    16 March 2023
    Print publication:
    23 March 2023
  • The recent rise of dollar, pound, and euro inflation rates has rekindled the debate over potential alternative monies, particularly gold and Bitcoin. Though Bitcoin has been much discussed in recent years, a basic understanding of how it and gold would work as monetary standards is rare. Accessibly written by a pioneering economist, Better Money explains and evaluates gold, fiat, and Bitcoin standards without hype. White uses simple supply-and-demand analysis to explain how these standards work, evaluating their relative merits and explaining their response to shocks, allowing for informed comparisons between them. This book addresses common misunderstandings of the gold standard and Bitcoin, using historical evidence to review the history of money with emphasis on the contest between market and government provision. Known for his work on alternative monetary institutions, White offers a reasoned discussion of which standard is most likely to provide a better money.