When the world left the gold standard in 1971, it did more than change the technical mechanics of money — it changed the very incentives that shape economies, governments, and individual lives. Fiat money, created by decree and backed only by trust in authority, has consequences that ripple far beyond finance. To see them clearly, we need to understand three key issues it creates: inflation, debt, and distorted incentives.

Inflation is the most obvious symptom. In a fiat system, governments and central banks can create money at will. Unlike gold, which required labor and time to mine, fiat money is conjured with a keystroke. This constant expansion of the money supply steadily erodes the purchasing power of every unit already in circulation. A dollar today buys less than it did a decade ago, and far less than it did in 1971. To ordinary people, this means the quiet theft of savings. Hard-earned money sitting in a bank account loses value year after year, punishing savers and rewarding those who spend quickly or speculate.

But inflation is more than just rising prices. It is also a redistribution of wealth — what economists call the Cantillon Effect. Those closest to the money printers, such as large banks, corporations, and governments, receive the newly created money first. They can spend it before prices adjust. By the time it trickles down to ordinary workers, the cost of goods and services has already risen. In this way, fiat money systematically favors the wealthy and connected, widening inequality over time.

The second consequence of fiat is the explosion of debt. Easy money makes borrowing cheap, and governments, corporations, and households have responded by piling on record levels of debt. Under a gold standard, reckless borrowing was constrained, because repayment had to be made in hard money. In today’s fiat system, however, debt can always be refinanced, rolled over, or inflated away. Governments no longer fear bankruptcy in the same way; they can issue bonds indefinitely, with central banks stepping in as buyers of last resort. This fuels a culture where living beyond one’s means is not the exception but the norm.

Debt-driven economies create distorted incentives. Instead of saving and investing cautiously for the future, people are encouraged to borrow and consume now. Time horizons shrink. Why save money if it loses value each year? Why delay gratification when tomorrow’s dollars will be weaker? Economists describe this as a rise in time preference: societies shift from long-term planning to short-term thinking. In the past, when money held its value, families could save across generations, and civilizations built cathedrals, roads, and institutions that would last centuries. Under fiat, the focus turns to quarterly earnings, political election cycles, and personal consumption.

These broken incentives ripple outward into culture. Housing bubbles form as people treat property not as shelter but as a speculative hedge against inflation. Education and healthcare costs spiral as cheap credit chases limited supply. Even art and entertainment shift toward instant gratification, reflecting the values of a society living under easy money. The money system silently shapes the choices of individuals and nations alike.

Fiat money, then, is not neutral. It is not simply a tool we use for exchange. It is a system that reshapes behavior at every level. It rewards the powerful at the expense of the ordinary. It discourages saving, encourages debt, and makes short-termism a way of life. It replaces the discipline of sound money with the politics of money printing.

This is the problem that Bitcoin addresses. By fixing supply at 21 million, Bitcoin removes the ability of governments and central banks to debase the currency. It restores a form of money that cannot be inflated away or manipulated to serve the interests of the few. But before we look at Bitcoin as the solution, it is important to fully grasp the sickness of fiat. Only by understanding the corrosive effects of inflation, debt, and broken incentives can we appreciate why Bitcoin represents not just new money, but a new chance to rebuild the foundations of a healthier economy and society.