Deutsche Bank’s Jim Reid contends that the fiat currency system “is inherently unstable and prone to high inflation.”
China’s rapid economic emergence in the 1970s, and an explosion in the global working-age population, has allowed inflation to be controlled externally, but that period is coming to an end.
What could replace fiat currency is yet to be determined.
LONDON — Deutsche Bank isn’t known for its gold bugs, but that hasn’t stopped its strategist Jim Reid from writing a paper that discusses “the start of the end of fiat money.”
Reid’s basic contention is this: The dominance of the fiat currency system since Richard Nixon decoupled gold from the dollar in 1971 “is inherently unstable and prone to high inflation,” and an offsetting disinflationary shock that kept it afloat since 1980 is now slowly reversing.
If that’s the case, Reid says the fiat currency system — a term which describes any currency whose value is backed by the government that issued it, rather than by a commodity like gold or silver — could be “seriously tested” over the next decade.
Source/More: DEUTSCHE BANK: End of fiat money – Business Insider