The Fiat World Order

A History of Fiat Money from Ancient China to CBDCs

“All money is a matter of belief.” – Adam Smith

The Illusion We Spend

The shiny surface of modern finance hides an inconvenient the truth—most of the world’s money isn’t real. It’s not gold, silver, or anything tangible. It’s fiat: money by decree, a legal fiction.

Fiat isn’t a modern invention. The idea of value without substance dates back to imperial China. Today’s fiat-based, debt-driven monetary system is less a product of progress than the result of centuries of monetary experiments—many ending in collapse.

Of the approximately 775 fiat currencies ever created, over 600 have failed—an 87% failure rate. There are currently 180 recognised by the United Nations. According to monetary historian Mike Hewitt, the average lifespan of a fiat currency is just 27 years. While the British Pound and US dollar have endured, both have suffered dramatic devaluation.

China – The Paper Empire

Fiat’s first documented use traces to Tang Dynasty China in the 7th century. Merchants, seeking to avoid transporting heavy copper coins, issued private promissory notes known as jiaozi. By the Song Dynasty (960–1279), the state monopolised the system and issued paper backed solely by imperial decree.

Jack Weatherford, in The History of Money, called this both a brilliant and disastrous innovation. For a time, this intangible money fuelled trade across the empire. But by the 13th century, the Yuan Dynasty had issued far more paper than they could back, creating rampant inflation.

Marco Polo marvelled at this system, noting its enforcement by decree—and death. Eventually, public confidence collapsed. The Yuan’s fiat experiment died with them.

European Monarchs and the Rise of Fiat Disguised

In medieval Europe, fiat returned in a subtler form. While currencies were nominally tied to gold or silver, rulers frequently debased their coinage—reducing metal content but keeping face value.

Historian Niall Ferguson describes this as a "covert tax levied on the public." French kings and Holy Roman Emperors issued billon coins with minimal silver content to finance wars—at the cost of public purchasing power.

True fiat resurfaced in 1694 with the Bank of England’s notes, which promised redemption in gold. These promises became currency, though convertibility still restrained the system.

In 1716, Scottish financier John Law proposed a central bank and paper currency system to the Duke of Orleans. Law created the Compagnie d’Occident (Company of the West) to develop France’s Mississippi territories, monopolising trade and issuing shares in exchange for government securities.

Speculation surged. As confidence soared, so did the printing. By 1720, reality struck—panic ensued, and a run on the banks collapsed the system. France spiralled into deep economic depression.

The Gold Standard and Fiat’s Repression

By the 19th century, after repeated fiat failures, major economies sought stability through the gold standard. Currency convertibility to gold provided a natural check on state excess and inflation. Under Britain’s classical gold standard, the Pound Sterling anchored global trade.

The US formalised its gold link in 1900. As Ferguson notes, this era delivered “the most stable form of international finance the world had ever known.” Yet the lure of fiat never disappeared. War would soon bring it back.

The 20th Century – Fiat Resurrected by Force

World War I shattered the gold standard. Nations printed money to finance war, abandoning convertibility. Germany’s Weimar Republic became the archetype of fiat collapse, with hyperinflation rendering its currency worthless by 1923.

The gold standard returned briefly between the wars, only to be replaced by the Bretton Woods system in 1944. Currencies were pegged to the US dollar, and the dollar to gold at US$35/oz.

It worked—until it didn’t. US deficits, war spending, and growing foreign claims on gold forced a reckoning. In 1971, President Nixon suspended gold convertibility. As Weatherford wrote, “In a single weekend, money lost its anchor to reality.” The dollar—and the world—became fully fiat.

The Fiat World Order

Since 1971, the world has operated under a global fiat experiment. The US dollar—backed by nothing—has become the de facto reserve currency, enforced by military and petrodollar arrangements.

Fiat has enabled central banks to dominate economies, using interest rates and liquidity as levers. Global debt has exploded—from $11 trillion in 1980 to over $315 trillion in 2024. Governments have financed wars, welfare, and bailouts well beyond their means. The system is fragile—a house of cards built on confidence.

Fiat's Future

Fiat is now evolving into something even more powerful: central bank digital currencies (CBDCs). Governments from Australia to the EU are piloting programmable, traceable currencies—marketed as efficient, but designed for control.

CBDCs allow for surveillance, expiration dates, and policy enforcement by code—be it carbon limits, automatic taxation, or stimulus deadlines. As Ferguson warns, fiat is a tool of empires—its misuse a path to collapse.

For bullion investors, this is no longer a monetary question—it’s one of civil liberty. In a digital-only fiat world, gold and silver remain instruments of financial freedom.

Gold’s Revenge

No fiat currency has ever endured. Whether Yuan paper, John Law’s notes, or modern central bank IOUs, fiat rests on faith. And once that faith breaks, it’s near impossible to restore.

Bullion investors are not speculators—they are stewards of value in an age of illusion. Gold and silver are rooted in history, immune to manipulation, and anchored in reality. They are not just a hedge—they are a lifeboat.

As Jack Weatherford says: “When the illusions of paper vanish, the solidity of gold remains.