Deutsche Bank’s Jim Reid Fears Fiat Currency Will Disappear Rather Soon

There have been a lot of discussions as to what Bitcoin and other cryptocurrencies may be able to achieve in the long run. This new form of money has a lot of potential, although that doesn’t mean it will replace fiat currency anytime soon. The latter category may not be around forever, though. Deutsche Bank’s Jim Reid, for one, firmly believes fiat currency will cease to exist soon.

Fiat Currency has Many Different Problems

Truth be told, it is almost a miracle that fiat currencies – which have seen very few changes over the past few decades – have been around for as long as they have. Indeed, the competition in the monetary ecosystem is heating up quite a bit. There are many substitutes for fiat currency these days, even though not all of them are officially recognized all over the world.

Jim Reid, a strategist with Deutsche Bank, seems to be aware of the problems affecting fiat currencies as we know them today. In his view, it is possible that fiat money will disappear very soon. The reasons for his somber outlook are not hard to find, first among them being increased inflation. New money is printed and brought into circulation far too often these days. Helicopter money, as this activity is known, simply isn’t sustainable over the course of multiple years.

Moreover, Reid points out that fiat currency is no longer backed by anything that has value. Until a few decades ago, every fiat currency bill or coin was backed by gold. Ever since that changed, fiat money has represented nothing more than an IOU by a government or central bank. This empty promise to adhere to the value of a given bill or coin has been widely accepted as a means of exchanging value, even though it really shouldn’t be.

Saving fiat currencies from their demise will not be easy by any means. There is no viable countermeasure to inflation, and the damage caused over the years can’t be undone either. Inflation is slowly spiraling out of control, and loose policies, overprinting of money and extensive leverage only make matters worse. When push comes to shove, the end of paper money and physical coins will occur a lot faster than people may anticipate.

Moreover, a financial collapse only seems to be a matter of time right now. While things may not get out of hand in any spectacular manner right away, it is all but inevitable that fiat currencies will disappear. Cryptocurrencies and digital assets are the likely choice to replace fiat as we know it. This includes central bank digital currencies, although new forms of money not controlled by the government or banks will eventually win over a lot of people.

How this situation will play out is anybody’s guess right now. It is certainly true the current monetary policies of banks and governments will need to change in order to save the system. Even so, it is always good as a consumer or corporation to show an interest in alternative financial solutions before things get out of hand. Cryptocurrencies may not necessarily be the answer to all our problems, but they make a very strong case for themselves.

  • No reason to fear the disappearence of FIAT fake money… Just buy the real sound money = BITCOIN.

  • Liberty88

    Celebrate the collapse of the fiat fraud. Buy Bitcoin!

  • galbraith

    DB analyst just said that we are at a cycle cul-de-sac vis-à-vis fiat money
    Believing that crypto will replace fiat money is whishfull thinking at this stage, just fueling the hype,
    As goldbug believe that gold will replace fiat soon, may the truth is in the middle : gold and crypto will kill fiat money

  • Flaim

    BitCoin is not ready to replace fiat money, even though you can use it to buy things. It is a store of ever increasing value due to it’s scarcity.
    Also if your fiat currency starts to go into a downward death spiral, then the BitCoin that you hold will be, in relative terms, soaring to the moon.
    This is why wall street wants in on BitCoin. BitCoin is totally decoupled from all financial institutions, and they are desperate for a hedge like that. It’s a dream come true for them.

  • Aiga DaSamoan

    Power back to the people!!!! BitCoin – just the seller and the buyer… .NO NEED FOR THESE THIRD/CENTRAL WANKERS!!!

  • solstar

    On BitCoin…
    “One such alternative is cryptocurrency, which uses blockchain, a much-hyped online ledger system whose primary benefit lies in the difficulty of tampering with data recorded within it.”
    “…the difficulty of tampering…”
    It does not say ‘impossibility of tampering’.
    Unlike counterfeiting, where there is a physical limit (on how much one can produce, ie. ‘stealing from the government’), any digital currency will be at risk of having unlimited amounts stolen instantly (or nearly so.
    As has been demonstrated in the past any coding/program can be bypassed/hijacked/modified by others.
    Case in point…. credit card companies pay millions and millions in fraud cases. It is simply easier (read cost effective) to pay the loss than to stay ahead of the thieves.
    Sort of like a company knowing that employees are stealing from the warehouse but the amounts stolen are not worth the effort to ‘police’ the warehouse.
    This type of ‘arrangement’ may not be possible if all the currency can be stolen in an instant.

  • JohnDSmall

    Bitcoin is just as much a fiat currency as any ‘fiat’ currency. It’s a sequence of ledger entries. And it has the same issues with inflation, if the price goes too high then it’s profitable to fork a new coin, increasing the supply. We’re watching that happening right now. As for helicopter money, how many altcoin airdrops are going on right now? Tens, hundreds?

    The critical difference isn’t that Bitcoin isn’t ‘fiat’, it is. It’s that it’s unregulated and is a co-operative venture that crosses national boundaries. Since issuing a currency is regarded as the pejorative of a nation state then it blurs the boundaries of nation states. Which some people find exciting and other people find worrying.