Fiat currencies have come under criticism for their long history of failure. In fact, virtually every single fiat currency has failed.
Why All Fiat Currencies Fail
The biggest reason fiat currencies fail is because there are no limits to the amount of currency that can be printed up by the issuer—whether it be a treasury or central bank. Think about it. In your pocket, wallet, or purse, you likely have at least a few paper dollars. There is nothing, other than the ink on the bill, that differentiates between $20 and $50. In fact, it costs just as much to make a US $50 bill as it does a $1 bill, about $.03. Crazy to think about, huh?
Failure of Fiat Throughout History
Some of the most notable failures of fiat currency are the Colonial United States, the Weimar Republic, and Rome. The colonial United States had a currency long before the US was even a country. However, to pay for war, the colonies printed up huge amounts of currency, devaluing each dollar held by the public and redistributing money from the average person to the government. The Weimar Republic followed a similar path during WWI in which small denomination bills were worth more for their paper than they were for their purchasing power. The Weimar Republic is known worldwide as an example of fiat currency failure due to inflation.
Fiat Currencies Are Prone to Inflation
One of the biggest failures of fiat currencies is that they can be inflated to no end, often times without consent of the public. In Wiemar Germany, a single US dollar was worth 12 Marks in 1919. However, just four years later, the same $1 could buy as much as 4.2 trillion Marks. As you can see, inflation is clearly one of the biggest failures of fiat currencies.