Fiat money or the paper money that the majority of society uses today is convenient, easy to understand, and overall has made the buying and selling of goods and services easier. Like everything fiat money has its issues or disadvantages which are rather overlooked the most. What are three of these disadvantages of fiat money?
The first disadvantage of fiat money is that it can inflate. Because the government is in control of the money supply, and how much money is to be printed, prices of things can go up or fluctuate and reduce the value of the money. This is a common theme unfortunately today, where something ten years ago was cheaper than the same thing would be today. Another disadvantage that comes along with inflation is that fiat money can drop to zero value, and when that happens that money’s value cannot rise again.
The final disadvantage I must note is that because fiat money is controlled by the government, it increases the power of the government over the people. Money is very important and pretty much everyone relies on it one way or another, if the government has control over that money when it comes to printing, that government has a pretty stronghold on the people. The people can only use the money that the government makes themselves.
Fiat money is the norm in the majority of today’s societies and has been in use for some time. Unfortunately, fiat money has many disadvantages including the truth that it can inflate, has a risk of dropping to zero value, and gives governments the opportunity to have more control over their people.