The dollar needs a new bonfire of the bills

Fiat money originated in colonial America, with Massachusetts being the first colony to issue it as 'bills of credit' in 1690. To instill confidence in this paper currency, governments burned tax bills collected from the public to prove scarcity and maintain value. This practice involved public events showcasing the destruction of money, demonstrating fiscal responsibility. Fast forward to today, the Federal Reserve has 'burned' about $2.4 trillion of digital dollars through reducing its bond holdings after the pandemic, but this is not as publicly dramatic or impactful as historical practices. Currently, there is concern over the rising national debt, which contrasts with the earlier practice where burned bills represented repaid tax debts. Despite a strong economy, the federal government has not reduced its debt, leading to worries about the trust in fiat money. The Fed’s recent decisions suggest a shift towards potentially printing more money, reminiscent of the colonial period, but in a far less tangible manner.

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