What is Fiat Money Good For?

What is fiat money good for? This is a valid question that few critics of the dollar are likely to ask. The answer is that fiat money is an excellent incentive device. The illusory wealth it creates pushes men to feats of creative genius and manual effort that otherwise they might never attempt.

Living in Silicon Valley during the early 2000’s gave me a bird’s-eye view of how such a system can inspire people. Even then, after the dot.com crash, I still met many, many people who were working 120-hour weeks, sleeping under their desks at Silicon Valley startups. I met a man in my office one day, a computer programmer, who stated half wearily, half proudly, that he had not been home to sleep for more than six days. He would live on donuts and coffee, write computer code, and literally sleep in his office for a few hours every night before getting up early to go back to work.

Why did he do this? The answer was simple: The potential for an IPO. You see, the hope of a future IPO was the fiat currency of Silicon Valley during that time. It turned out eventually to be a nothing for most people. The counted-on IPO that served as the dream’s backing never materialized. But it was the paper embodiment of hope that kept people going, striving under intolerable conditions, working, producing in a way they never would have for mere money. Indeed, these people never would have for mere money, because there wasn't enough money in all of Silicon Valley to pay people to work like that. Years later, reviewing stories from people that did such crazy things, many had realized only later that if they would have been paid by the hour then for what they had once been doing, they would have made three or four times their present salaries. Yet back in the dot.com craze days, they didn't even make half or a third of what they made later.

They were operating on hope, working on a dream that for most never came to fruition. Was this good or bad? Many remember their adventures during that time, even the painful ones, fondly, whether they made money or not. I can understand such feelings and the memories that go with them. As a Peace Corps volunteer, I worked for two years for $10 a day. I wasn't after an IPO, however. I like to say that I was after wisdom and experience, but certainly, I was also after, to an extent, something truly unique to put on my resume that would get me into a good medical school. It was a painful, terrible and sometimes frightening time, but it was also a powerful time, a time in which I really lived.

Fiat money, or non-backed money, imaginary money, future IPO money, can do that to people, inspire them to create wealth that otherwise they might never think about or force themselves to create. Not everyone goes to the Peace Corps in search of wisdom. Most need to be pushed into an adventure that will make them better. And fiat money, along with all the imaginary wealth it creates, is a great pusher.

The problem ( or depending on how you look at it, the brilliance) lies, of course, in the last sentence. The wealth is imaginary. When the IPO doesn't come, the story ends. People move on to other, less exciting things. They work less and less hard. They no longer are willing to push themselves to do impossible things. When I left the Peace Corps I was tired, sick and changed. I’m glad I did it, but at the time, I wouldn’t have signed up for another two years for any amount of money on earth. I was exhausted physically and psychologically; I needed a rest. I just didn’t care anymore, for awhile, anyway. I had aged twenty years in two years time, it had seemed. I learned more about myself in those two years than most men learn in a lifetime, however. Still, I could not wait to get home and rest for awhile.

This present fiat currency episode in human history is about to come to an end. The episode has been about working very hard and making lots of things, creating a lot of amazing things, maybe, near the end, too many amazing things. The time for this period of creation and production is coming to an end, and there will be a great letdown when the end comes. There will be a return to simpler life, to simpler money, to shorter hair and fewer things. All the efforts and things were have made for the past several generations have worn us out as a people. We need a rest for a generation or two in a simpler place, perhaps a less innovative place.

In closing: There will be no revolution. There will be no terror. There will ultimately just be rest. Perhaps there will be a little anger and war and pain first, but then, when that’s all passed, and the blood is all dried up, just rest, simplicity and a time to re-create ourselves as individuals and a society. Thinking will come back into vogue. And think more deeply we all will, about life, and about how we can get going on the next fiat currency system to get things moving again in the right direction.