Will Never Fail

October 1929 was a significant time in the history of our civilization.  The stock market crashed and banks began to fail.  Consequently, this resulted in an era known as the Great Depression that nearly devastated the global economy.  

October 19, 1987 is another important date for the world economy.  The stock market crashed again.  Though the effects were not as severe as encountered 1929, it was still a troubling time.  

More recently, 2008 A.D. marked the beginning of another global financial crisis with the failure of large banks, insurance companies, and mortgage companies.  World markets plunged marking the beginning of the Great Recession.   

There are, however, a couple of dates in the history of the world that may prove to be just as significant as those previously mentioned.  Have you ever heard of Bretton Woods or a Fiat system??  

The Bretton Woods system was developed in July 1944 at a meeting that included international delegates from allied and associate countries in Bretton Woods, New Hampshire.  With WWII coming to a close and in an effort to stabilize the world economy, delegates at this meeting decided to designate the US dollar as the new international reserve currency.  

In a nutshell, prior to July 1944, international currencies were backed by gold.  This meant that as countries conducted business (primarily via central banks) with one another they could exchange their currency (Indian rupees, Spanish peseta, British pound, etc.) for a specified amount of gold.  However, as these conversions took place it became increasingly burdensome to ship gold from country to country.  So, a system was developed by the delegates attending the Bretton Woods meeting whereby each country’s currency would be fixed to the US dollar which, in turn, could be converted to gold if so desired.  This new system was widely accepted because at the time the US dollar was “as good as gold” and it made it feasible for large transactions to occur.

Over time though, the US became involved in foreign wars and amassed deficits.  The US government’s response to these issues was to print more money.  As a result, other countries became concerned that the US was printing more money than it had gold reserves.  This fear led to countries exchanging their dollars for gold.  

In an effort to curb the “run” on US gold and to stabilize the US economy, on August 15, 1971 President Nixon suspended the convertibility of the dollar into gold.  It’s a common saying that “the only thing economists agree on is to agree to disagree”, but most all economists agree that August 15, 1971 was a historic day.  From that day forward the US dollar was/is essentially backed by nothing.  Enter the fiat currency era.

Fiat is a Latin term translated “let it be done” or “it shall be done”.  Basically, in a fiat system it is only by force or government law that fiat currency obtains its value.  The action taken by Nixon on August 15, 1971 is a prime example of a government giving value to a currency by law or to simplify in playground talk…”the dollar is valuable because we said so”.  

What’s interesting about a fiat currency is that it has no intrinsic value.  Without the government’s guarantee of a dollar’s value and the public’s confidence in the government making good on that promise, it’s worthless.  It’s just a piece of paper.  

Furthermore, most economists agree that all fiat systems eventually fail; at least that has been the historical trend.  Failure comes about whenever a government no longer guarantees the value of the currency.  Most often this withdrawal of promise is directly linked to the public’s loss of confidence in the currency’s value.   Are you concerned yet?  Note:  The suspension of converting US dollars into gold is still in effect.  The dollar is still backed by…”because we said so”!

My intent is not to spread fear, criticize our government, or propagate more doom and gloom.  Mine is only to provoke thought and perhaps engage the revelation of how imperfect we are.  Of how fragile we are and our need of something much bigger and better than this world could ever offer.

Also, through all the uncertainty that we encounter each day on earth there is a silver lining.

As disciples, we serve a God whose love never fails.  Our trust in and obedience to Him is backed by the blood of the covenant (Mark 14:24).   His currency is perfect and will never perish like gold (1Peter 1:18).  He has given us the Holy Spirit as His guarantee of what is to come (2Cor 5:5).  

Lastly, His promises never fail.  

This is good news.  So be it!

Todd Adams

Dublin, Tx