How many people know that our current fiat money system is a system in which the state's central bank holds a coercive monopoly on the creation of fiat central bank money, while commercial banks issue their own fiat commercial bank money based on central bank fiat money.
Who knows that fiat money is literally created out of thin air, representing a form of money creation that has no connection whatsoever to "Real savings"? And who explains to people that, from an economic perspective, expanding the fiat money supply is inflationary, leading to uneven higher prices for goods and services compared to a situation where the money supply had not been increased? It is also unknown to many that the issuance of fiat money via the credit market causes a misallocation of capital, initially triggering a boom, only to be followed by a bust; that it drives economies into excessive debt; and that it allows the state to grow ever larger at the expense of the freedoms of citizens and entrepreneurs.
The most severely affected are those who receive nothing from the newly-created money supply-they are, in effect, the ones "Sucked dry." The vampire-like redistributive effect of fiat money, which operates in the shadows, particularly benefits commercial banks that create fiat commercial bank money, as well as those in a position to take out new bank loans in fiat money.
One might argue that a redistribution of income and wealth, brought about by the increase in fiat money, would also occur in a commodity or precious metal money system.
Creating Minions Like a vampire, fiat money infects its victims, turning them into accomplices of the fiat money system.
Once people are lured into exposure to fiat money, their economic and financial well-being becomes dependent on the continuation of the inflationary fiat money system and on it being "Rescued" by the state and its central bank during times of crisis-even at the expense of those who do not benefit from the system, or benefit much less.
Holders of fiat money are the ones who lose out, as fiat money continually loses its purchasing power.
In a fiat money system, the central bank ensures that interest rates are kept artificially low-often negative after accounting for inflation-so that savings in time deposits, savings accounts, and bonds are effectively eroded.
Aversion to Light The vampire and the fiat money system cannot withstand the bright light of day; both will crumble to dust when exposed to sunlight.
Its darker aspects are concealed, with the statist education system as particeps criminis ensuring the bright light of knowledge does not shine on the fiat money system.
Just as sunlight kills a vampire, sound economic knowledge would destroy the fiat money system, especially when coupled with a simple, well-understood ethic like "Do unto others as you would have them do unto you." Until that day comes, investors should be aware of the serious economic and ethical flaws of fiat money.
https://mises.org/mises-wire/vampire-fiat-money-system-how-it-works-and-what-it-means-your-wealth
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