Quote from: drsaul on June 15, 2011, 12:23:02 PM

why would the managers of a currency design it to fail? if it were me i'd rather keep it going and rake in a bit of profit on it in the meantime.

I'll give you a quick example.

Benny banker wants to make enough money so that his children, and his children's children never have to work. There aren't many capital goods available, and they are not profitable. Benny banker then makes a local currency called Benny Bucks. At first it is backed by gold and silver, but over time that backing wanes and is eventually removed completely. At this point nothing is stopping Benny from printing as many Benny Bucks as he wants, so he does. Benny then prints up money and gives it out as fast as he can in the form of loans. He prints and he prints and he prints as everyone holding a Benny Buck loses buying power.

Sooner or later people start to notice the system is rigged. By that point Benny already got everyone to sign over all of their capital goods to him for loans of Benny Bucks. He then collects all of the real capital, while driving the value of the Benny Buck to the center of the earth. As this happens over a period of years more and more people are forced to get loans from Benny in order to survive. When people finally refuse to use Benny Bucks because he destroyed them, he now sits on all of his newly collected capitol, while everyone else has worthless scraps of paper.

There is not a single case in history where a fiat currency didn't end in horrible failure. Also by creating this fictitious money, people were persuaded to go to work and create real capital when they would otherwise have not have incentive to do so. The owners of the currency then scoop it all up, and start over with another fiat currency to begin the cycle all over again.