Leading strategist of Deutsche Bank predicts the end of the era of fiat money

The recent strong growth in the market capitalization of crypto currency continues to attract the attention of an increasing number of economists and top managers from the financial sector.  Jim Reid, director of research at the Deutsche Bank AG, expressed his opinion about the future of financial markets and noted in his shocking report that "the beginning of the end of fiat money is already laid." This report greatly worried the financial community, because it was written by a person "from within" the system itself, a person who must know for sure about what he writes. Even more worrying was the fact that the author condemned the actions of central banks, which in his opinion only contributed to the development of the impending financial crisis.

Judging by the words of the manager of the Deutsche Bank, the currently dominant financial system based on fiat money, no longer based on gold and currency funds, is unstable and prone to high inflation. Its survival in recent years has been provided only by carrying out deflation "shock therapy" of the 1980s and now a reverse process can begin that will affect the whole world of traditional currencies.

According to the author of the report, the methods by which inflation was controlled, such as too soft monetary policy and excessive money issuance by central banks, proved to be only a temporary solution, and in the long run they only aggravate the state of affairs. According to Reid, if inflation again gets out of control at the world level, this could lead to the collapse of the era of fiat money, as people will finally lose faith in traditional currencies and their financial institutions.

In order to help mitigate the risks of a financial collapse, the single alternative available to us at this moment would be the use of digital currencies. Due to their decentralized nature, they are no longer controlled by the governments, but rather via the organic laws of the economy: supply and demand.

Reid also mentioned that: “Although the current speculative interest in cryptocurrencies is more to do with blockchain technology than a loss of faith in paper money, at some point there will likely be some median of exchange that becomes more universal and a competitor of paper money.” 

At this moment in time, banks, governments and financial institutions are in the middle of a debate capable of either making or breaking our financial system. Some choose to be supportive of digital currencies and their increasing popularity, whereas others believe that they mere tools for money laundering, bound to disturb the financial market.

Not long ago, the president of the Turkish Central Bank also made a statement in this regards. He warned of potential risks associated with cryptocurrencies, yet also stated that he has a positive view on their future. According to him, they can ‘contribute to financial stability’. Not only this, but the Turkish Central Bank has also reportedly set up a research group meant to further study the evolution and potential of digital currencies.