An Uncertain Future of Paper Money & The Rise of Gold

Enter your name, number and email, and click “Get Free Guide”*Valid information is required to receive this FREE Investment Guide. By requesting this guide you agree to be contacted by us via email or phone & to be added to our newsletter/email offers. You can unsubscribe at any time. We will NEVER sell your information. Please call 1 (888) 812-9892 as an alternative method to receive your free guide or if you have questions. Investment guides are sent out after verification via phone & during normal business hours. See our Privacy Policy for more information or contact us at: 1 (888) 812-9892.The possibility of a full-scale fiat currency collapse is increasingly likely as the entire economic order is upended. A deadly mix of global de-dollarization, digital currency development, and fundamental fiat weakness is prompting a record-setting rush to gold. With the overwhelming majority of savings accounts and retirement plans tied up in paper money or paper-backed assets, investors must understand these developments in greater depth. Here, we’ll look at previously collapsed currencies, the threats of paper money, and where investors are finding shelter.Collapsed CurrenciesGerman Papiermark (1914–1923)The German Papiermark is one of the most well-known collapsed currencies. Famously, people would write on the currency because it had become less valuable than paper. The costly loss of World War I along with the financial burden of the Versailles Treaty tanked the value of the Papiermark, triggering prolonged hyperinflation. The first bill produced in 1914 was worth 100 Papiermarks, and the last bill printed in 1924 had a face value of 5 billion. It was eventually replaced by the Reichsmark in 1924.Hungarian Pengő (1927–1946)The Hungarian Pengő holds the undesirable world record for the worst hyperinflation recorded in history. The Pengő dropped precipitously following World War II. At its lowest point, this collapsed currency was denominated in one million and one trillion units just so consumers could make sense of the absurd rates of inflation. The largest bill ever produced was 100 quintillion. The hyperinflation was so bad that the government used up secure paper money which limited their production capacity for the replacement currency.Yugoslav Dinar (1920–1994)The Yugoslav Dinar dramatically lost value due to geopolitical tensions and economic instability throughout the break up of Yugoslavia. Despite the introduction of multiple different currencies, nothing slowed the rate of devaluation. At one point, inflation rates reached over one billion percent year-over-year. The highest banknote printed was 500 billion dinars and even that became worthless within two weeks. Eventually, the collapsed currency was abandoned as Yugoslavia had dissolved into six countries.Zimbabwe Dollar (1980–2009)The Zimbabwe Dollar was plagued with inflation throughout its lifespan, but the worst bout of hyperinflation hit in the early 2000s. In total, this collapsed currency went through three redenominations. As the Zimbabwe Dollar became virtually worthless, people started using foreign currencies for daily transactions. Although there have been attempts to resurrect a domestic currency, the multi-currency system prevails in the country. This collapse was caused by a combination of economic mismanagement, government policies, and political factors.Venezuelan Bolívar (1999–Present)Of all collapsed currencies, American investors are perhaps most familiar with that of the Venezuelan Bolivar. The socialistic policies of the corrupt Maduro government and too much dependence on oil revenue spurred hyperinflation in the country. The Bolivar doubles in value every two days, and annual inflation rates reached 2,688,670%. The Central Bank of Venezuela even stopped reporting on inflation as the situation got so out of control. Although the government hasn’t officially given up on the currency, people have opted to use foreign currency.Note that these instances of collapsed currencies aren’t drawn from ancient periods. They all occurred in the 20th and 21st centuries, and many are still unraveling to this day. Although a small minority of people call for a return to the gold standard, most governments simply enjoy the freedom of loose-money policies too much. The weaknesses of these collapsed currencies are the same vulnerabilities in our current fiat system.“Currency collapses happen in slow motion at first. When the lack of confidence comes, it’s a waterfall effect and the currency collapses.”– Precious Metals Advisor Damian WhiteThe Weaknesses of Fiat CurrenciesA fiat currency collapse is always possible given the inherent shortcomings of paper money and the monetary systems built around them. Understanding these issues can help people make more educated and financially sound investment decisions.No Inherent ValueFor centuries, governments backed paper money with gold or silver to anchor their economic systems. They acknowledged that fiat currency was inherently worthless by itself. Precious metals, which have inherent value, make for viable economic foundations. When the gold standard was abandoned, fiat currency lost all connection to real value. A complex and highly unstable mix of loose monetary policies, empty government promises, and shaky consumer confidence is the only thing holding the fiat currency system together. If any of these artificial supports break, governments risk a fiat currency collapse.Government MismanagementThe gold standard places practical limitations on how much governments can fiddle with the monetary system given natural supply and demand constraints. All the guardrails are removed within a fiat currency system, however. As long as the Federal Reserve and Congress are in lockstep, there’s effectively no limit to how much the government can print and spend. Investors are watching the disastrous consequences of this unlimited power unravel in real time as US debt reaches astronomical levels and the dollar consistently drops in value.👉 Suggested Reading: What Happens if the US Defaults On Its Debt?Volatility & UncertaintyWith no inherent value and whimsical government intervention, fiat currency systems are highly volatile. The lack of a valuable foundation means prices are always freely floating without any reliable structure. That’s why the stock market, housing market, and other traditional markets suffer disastrous crashes every few years. Even when fiat currency does increase in value, the violent upswings and downturns make it nearly impossible for investors to find any stability.Modern Causes of a Fiat Currency CollapseModern Monetary TheoryAs mentioned before, a purely fiat system exposes economies to the risk of government mismanagement. Lately, fiscal incompetence has been on full display as the US government operates according to the experimental Modern Monetary Theory (MMT). In short, this controversial economic theory presumes there are no consequences to limitless spending. This inevitably leads to staggering inflation which weakens the value of paper currency. No matter the obstacle, the solution is to simply pump more money into the economy. This produces a never-ending inflationary cycle that directly threatens to cause a fiat currency collapse in the US and anywhere it’s practiced.Digital DollarsThe rapid shift towards a digital dollar is another significant risk of a fiat currency collapse. Currently, 130 countries are at some stage of exploring or developing a central bank digital currency (CBDC). While many governments try to reassure their citizenry that a digital currency wouldn’t replace hard cash, not many people are buying it. Unlike a digital bank account which is a representation of your money, a digital dollar would be a completely separate currency without any physical counterpart. Somehow, our financial czars have found a way to replace the entire financial system with something worth less than a piece of paper.De-DollarizationSince the world went off the gold standard, the world’s strongest currency became the de-facto basis of the global financial system. For nearly 80 years, the US dollar has held that prominent position as the world reserve currency. However, a recent push toward de-dollarization is threatening to knock the dollar off its pedestal. This would have ruinous consequences not only for USD but for all currencies which rely on the strength of the dollar for their value. With no currency strong enough to replace the dollar, its absence could spark an entire fiat currency collapse across all economies.👉 Related Read: Could the Dollar Become a Casualty of a Reserve Currency War?Dollar DevaluationA fiat currency collapse might happen gradually, but the warning signs are painfully apparent. Since the beginning of the 20th century, the US dollar has lost over 98% of its value. The government has effectively given up on trying to maintain the dollar’s value, preferring the money printer over austerity measures. At this rate, the US dollar collapse is more of an inevitability than a possibility.Debt AccumulationThe ever-increasing national debt is a ticking time bomb for the stability of the US dollar. The US deficit stands at a mind-blowing $34 trillion, and the current pace of borrowing puts debt at $50 trillion by 2033. One of the largest expenses on the country’s balance sheet is servicing that debt as interest piles up. This vicious cycle of higher borrowing, higher debt, higher interest rates, and higher printing is weighing heavily on the value and stability of the dollar.“When you get to these levels of debt and default, you start to lose confidence around the world in the dollar. A lack of confidence is what starts major currency collapses.”– Precious Metals Advisor Damian WhiteThe Rise of GoldThe entire world is feeling the ramifications of running an economy solely on worthless paper money. Instead of waiting for a complete fiat currency collapse, there’s been a momentous shift toward precious metals. Central banks have been buying gold at record rates for years to shore up their countries from pervasive economic uncertainty and pressure. Ironically, the experimental fiat system which intended to replace the gold standard is forcing a return to it.“Gold has always been the safety net. Despite all the rhetoric, [central banks] are still telling us that’s still true.”– Precious Metals Advisor John KarowSavvy investors aren’t waiting around to suffer the blowback from the government’s failed fiscal policies. Instead, they’re placing their money in physical gold assets such as gold coins and gold bars to hedge against the incoming fiat currency collapse.If you’re interested in learning more about protecting your wealth with gold, grab a FREE copy of our Precious Metals Investment Guide. It covers everything you need to know about diversifying with physical metals assets.