Matthew Jones: Fifty years ago, the world formally entered a new monetary era. The link between money and gold had already been severed by President Nixon in 1971, when the United States suspended the dollar’s convertibility into gold. In 1976, the Jamaica Agreement formalised the new reality: currencies would no longer be restrained by a fixed relationship with gold. Their value would instead rest upon economic management, central-bank credibility and public confidence.
It represented an extraordinary transfer of trust. For centuries, money had been anchored, however imperfectly, to something governments could not create at will. Under the new system, that external restraint was replaced by institutional discipline. Provided governments borrowed responsibly, central banks controlled inflation and the supply of money remained credible, the system could function.
The difficulty is that restraint is a political choice. Scarcity is not.
Review the official historical currency records for the 50 years since 1976, add the major redenominations that retained the same currency code, and the number of discontinued fiat currency units exceeds 100. That is an average of approximately two disappearing every year. SIX, the official ISO 4217 currency-code maintenance agency, records currencies when they are created, withdrawn or materially altered.
Not every one of those currencies collapsed. Some disappeared peacefully when European countries adopted the euro. Others vanished because the countries that issued them broke apart, reunited or changed political identity. The East German mark was absorbed into the Deutsche Mark; the Soviet and Yugoslav currencies fragmented into the money of their successor states.
Yet once those orderly transitions are separated out, a substantial number remain which were progressively weakened by inflation, excessive money creation and collapsing confidence. Their denominations became too large, their purchasing power too small and their credibility too damaged. Governments removed zeros, introduced a “new” currency and began the process again.
When the Numbers Become Meaningless
Argentina moved from the peso ley to the peso argentino, then to the austral and eventually back to the peso. Brazil passed through the cruzeiro, cruzado, cruzado novo, another cruzeiro and the cruzeiro real before arriving at today’s real.
Angola discarded three successive versions of the kwanza. Venezuela removed three zeros from the bolívar in 2008, another five in 2018 and a further six in 2021. Fourteen zeros were removed in little more than a decade, yet deleting digits from a banknote could not restore the purchasing power already lost.
Zimbabwe provides the most extreme modern example. Since 2006, the country has moved through several versions of the Zimbabwe dollar, abandoned its domestic currency, revived it and then replaced it again in 2024 with Zimbabwe Gold, known as ZiG. The Reserve Bank of Zimbabwe officially replaced the ZWL currency code with ZWG as part of that transition. Reserve Bank of Zimbabwe
These currencies did not fail because pieces of paper suddenly became defective. They failed because confidence in the institutions standing behind them was exhausted. The notes were merely the physical evidence of a much larger monetary breakdown.
The Modern Printing Press
The phrase “printing money” creates an image of banknotes pouring from machines. In a modern economy, most new money is not created physically. It appears electronically through central-bank reserves, government borrowing, asset-purchase programmes and the expansion of commercial-bank credit.
The printing press has become digital, but its effect can be much the same.
Creating additional currency does not automatically create additional goods, energy, housing or productive capacity. If the quantity of money and credit expands faster than the underlying economy, more units of currency begin competing for the same pool of real assets and services. Prices rise because the measuring instrument, the currency, has weakened.
Initially, this can appear manageable. A little inflation reduces the real value of government debt and makes yesterday’s borrowing easier to repay with tomorrow’s less valuable money. It is politically less visible than raising taxes or cutting public spending.
Over time, however, the cost is transferred to the public. Cash savings buy less. Fixed incomes lose ground. Wages struggle to keep pace. The numbers in a bank account may remain unchanged, or even increase, while the quantity of real goods and services they can purchase quietly contracts.
This is why currency debasement is often described as a hidden tax. Money is not taken directly from the saver’s account. Instead, value is diluted by increasing the number of monetary units in existence.
A Currency Does Not Need to Collapse to Fail Its Holder
The spectacular currency failures attract attention because their banknotes eventually require bags, boxes or wheelbarrows. But hyperinflation is only the most visible ending.
Most currency debasement is slower and less dramatic. Sterling still exists. The dollar still exists. The euro has become one of the world’s principal reserve currencies. Their survival, however, does not mean that they have preserved their purchasing power.
A currency does not need to disappear completely to fail the person saving in it. It merely needs to buy progressively less.
This is the deeper fragility of fiat money. Its nominal value is fixed: £100 remains £100. Its real value is not. If prices rise over time, the same figure represents a steadily smaller claim on the economy.
Governments do not need to destroy a currency deliberately. They need only find repeated reasons to create more of it: wars, recessions, banking crises, pandemics, welfare commitments, ageing populations, interest costs and expanding national debts. Each intervention may appear justifiable when viewed in isolation. Collectively, they create a long-term bias towards monetary expansion.
Bretton Woods did not guarantee honest money, nor was it a perfect system. It did, however, impose an external constraint. Once that constraint was removed, the responsibility for protecting the currency rested almost entirely with the institutions issuing it.
The end of Bretton Woods did not guarantee that currencies would fail. It removed the external discipline that once limited how badly they could be managed.
Gold: The Monetary Antidote
Gold is the antidote because it possesses precisely the characteristic fiat currency lacks: natural scarcity.
A government cannot create gold to meet a spending commitment. A central bank cannot manufacture it by adjusting a balance sheet. Its supply cannot be doubled in response to a recession, an election or a debt refinancing problem. New gold must be discovered, financed, mined, refined and brought to market, a difficult and expensive process that keeps annual supply growth comparatively slow.
Gold carries no promise from an issuing government and no corresponding liability on somebody else’s balance sheet. It has survived the disappearance of empires, political systems and hundreds of currencies because its value does not depend upon the continued credibility of any one institution.
That does not mean gold rises every year or that it is immune from periods of volatility. It produces no income and should not be presented as a cure for every financial risk. Its function is more specific, and increasingly important.
Gold protects against the risk that money itself becomes less valuable.
It does not need to replace cash, bank deposits or productive investments. It sits alongside them as monetary insurance: an asset held outside the system whose supply cannot be expanded to solve problems created inside it.
This is why central banks continue to hold gold and why many have increased their reserves during a period of rising sovereign debt, geopolitical division and concern over the long-term credibility of fiat currencies. They do not hold it because the international monetary system is about to disappear tomorrow. They hold it because history demonstrates that monetary arrangements change, political promises weaken and confidence can be lost far more quickly than it is rebuilt.
One Hundred Warnings
More than 100 discontinued currency units in 50 years does not prove that every surviving currency is approaching imminent collapse. It proves something more measured but no less important: fiat currencies are temporary monetary arrangements, dependent upon competent management and continuing public trust.
Some of those 100 currencies were retired voluntarily. Some disappeared with the countries that issued them. Others were diluted, redenominate and eventually replaced because the promise behind them could no longer be believed.
Gold requires no such promise.
For half a century, the world has relied upon governments and central banks to provide the restraint once imposed externally by gold. In some countries that trust has been handled responsibly. In others, the temptation to borrow more, spend more and create more currency has proved overwhelming.
The individual saver cannot control government borrowing, central-bank policy or the future supply of money. What they can control is whether all their accumulated wealth remains entirely dependent upon it.
Fiat money is built upon confidence and political restraint. Gold is built upon scarcity.
That is why fiat remains fragile, and why gold remains the antidote.
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