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Showing results for tags 'Fiat Money'.
A thought I’ve been “chewing” on is the application of the Floating Abstraction Fallacy. I would like some critical feedback on a theory I’ve been working on. First, just as a reminder, from the wiki in Fallacy of the Floating Abstraction: The fallacy of the "floating abstraction" is Ayn Rand's term for concepts detached from existents, concepts that a person takes over from other men without knowing what specific units the concepts denote. I’d add only for purposes of this discussion that any value the Floating Abstraction does have in a discussion is due to the pervasiveness (authority) of the speaker and the willingness of the listener to accept it. This will be important in a moment. Now economics and money: The gold standard is… well the gold standard of money discussion in several theories, including Oism. As a commodity it is a real value connected to wealth creation, or daily work and trade. It isn’t the actually work, like corn or a forged plow, but due to having a universally recognized value can be traded for such stuff. From there you get into pricing theory which is beyond where I want to go. What is important is that gold (or any other similar commodity) is a universal value that represents specific values in the market place. Gold as money is a universal value representing real items created or earned. Fiat Money however can be printed ad hoc and manipulated since it is not connected to any standard. There is no actual connection to real wealth in the market place, which is why it is popular as this allows it to be printed on demand. Money is a universal value which developed attached to existents in the market place, but frequently today is not attached to existents so it can be manipulated by the issuer. It is printed and has value based solely on the promise of the issuing authority and the willingness of the recipients to accept its value. You can say that Inflation is simply the process of Money returning to the intristic value of what it is printed on. That leads me to an observation: Fiat Money is the economic equivalent of a Floating Abstraction. It is detached from its existents and taken over by a Government which doesn’t know or cares about the specific concepts it denotes and came. Critical thoughts are welcome