Well, i dont agree that smaller countries chose to go to FIAT, they were basically forced to.
Remember, WW2 affected everyone, and the only winner of that conflict to come out was US. Other than Pearl Harbor and a few other skirmishes on US colonies, US mainland was not in danger or attacked in any shape or form. The rest of the worlds countries were decimated back to stone age basically. US infrastructure was expanded astronomically during the war, just look into the Manhattan project and the enrichment of uranium and you'll see the $$$ that was thrown at that one single project. Its insane. US was able to print money against its Gold stock simply because everyone else was too busy trying to survive to give a ****.
US was lending money out left right and center and other countries had no choice but to go with it if they wanted any sort of rebuilding to be achieved. You think Britain nilly willy gave up the GBP as the defacto world currency gladly?
US dollar being the only currency linked to gold was US idea, and nobody elses.
The rise of the petrodollar, and US firm grip on the worlds need to use US dollars, and nothing else to purchase oil from trading countries has led to its situation now.
I cant pull up exact numbers and dates but up until early 20th century, US dollars to Gold was pretty much a set amount. Inflation did not exist the way we know it now. Between WW2 and 1971, US dollar to Gold was also a pretty set amount, not changing very much. 1971 to 2013, it has gone from 32 dollars an ounce to 1400, 1500? That is frigging insane. And its not the gold thats gone ski high, since an once of gold would in todays day and age buy you about the same amount of solid goods as back in 1971 at its exhange rate.
found it.
http://www.nma.org/pdf/gold/his_gold_prices.pdf
Basically from 1833 to 1971 the price rose from $18.50 to $32.00. 138 years to double its value. Todays gold value on stock market? $1383.
Inflation is robbing everyone everyday as it devalues your hard earned money, it doesnt reward savings, it rewards risk, it rewards investing your money so other people can get rich off of it, and your return will be enough to cover the inflation cost.
Think about it. 3% return is just enough to overcome the reported 3% inflation rate (actual inflation rate is much higher).
For sure, we could all do with learning to be satisfied with a little less. Otherwise we'll be forced to.
Humans have to learn the hard way most of the time, it seems.
It does seem like there are some natural upper limits though, like the way birth rates naturally fall sharply after prosperity rises past a certain level. Whether that saves us or only causes a crisis we have to work out, well, we'll see.
Fiat money ties into that, because if you look at how much the world population has shot up in the last 200 years, you see that we need more money to come into existence if we want all those people to be able to earn incomes that are similar around the world: I.E. if you quickly add a lot more people, you need to also add a lot more money for them to use. If you don't, then the people who had all the money before (wealthier people in western nations) will just keep it (basically what we had pre-WWII).
That's probably the biggest reason the world shifted to fiat money in the 20th century, so that western governments had enough money to support the postwar population expansion and also do more trade with developing countries. Developing countries copied this as part of trying to bring their incomes up to western levels and also because "Hey, if the big guys don't have to keep up gold, why do we have to?". Of course the world trusted the currency of smaller, less stable countries a lot less, so currency crises were much more common in those places. Some of the worse-off countries then tried things like "pegging" their currency to a fixed point, like the US dollar, which removed some of their independence, but at least gave them some currency stability.
