is the value placed on the goods and services we export and trade?
If followed properly, it could work- much like communism. Every currency system has some limitations.
Our system's problems:
1) The government has the ability to spend as much as they want. As we see increased government spending, you will see more availability of money to be loaned. In our system money is created for the loan and destroyed upon its repayment, minus the interest. Which leads us to our second point.
2) Banking institutions are loaning money they don't really have to people. Thus, a multi-billion dollar lending industry is born managing money without adding any direct value into the economy. These people provide no good or service. Obviously some banking is legit, investors who invest real money, entrepreneurs, accountants. The Lending industry is the problem.
3) Eventually, inflation wins. Bankers and politicians can keep the system afloat for a while, but eventually the overprinting of the dollar catches up to the market and it implodes. It loses all value because people do not believe that it is a legitimate representation of the goods and services in the economy.
No fiat currency system has ever lasted more than a few decades. Its just the way it works. No government accepts fiat currency if the plan to control spending. They embrace is because they plan to do just the opposite. Without a restraint on the amount of currency they can print, they will print till all value is sapped from the currency. Who does this hurt the most? People on fixed incomes, people who save money, and small businesses.
What limit is there for money today? What prevents the government from issues a 100 Trillion Dollar Bond, and the Fed turning it into a security and writing a check for it?
