The Fiat Money Revolution
With the collapse of the Bretton Woods system in 1971, the world entered the era of pure fiat money - currency backed by nothing but government decree and collective faith.
This fundamental shift removed the last constraints on money creation, allowing central banks and governments to expand credit and debt without the discipline of gold convertibility.
The period from 1971 to 2008 saw the most rapid expansion of debt in human history, creating financial bubbles, increasing inequality, and setting the stage for the 2008 global financial crisis.
Debt Expansion by the Numbers
- •Global Debt-to-GDP: ~150% (1971) → ~280% (2008)
- •US household debt: $680B (1971) → $14T (2008)
- •Financial derivatives: Near zero → $600T+ (2008)
- •Money supply (M2): $630B (1971) → $8.2T (2008)
Historical Context: Fiat Era Debt Expansion
Watch the exponential growth of debt and financial instruments from 1971 to 2008
The Age of Deregulation
The 1980s and 1990s saw systematic dismantling of financial regulations that had been in place since the Great Depression, creating an environment ripe for excessive risk-taking and financial innovation.
The repeal of Glass-Steagall in 1999, combined with derivatives deregulation and the rise of shadow banking, created a financial system that was increasingly complex, interconnected, and fragile.
Key Deregulatory Milestones:
- •1980: Depository Institutions Deregulation Act
- •1994: Riegle-Neal Interstate Banking Act
- •1999: Gramm-Leach-Bliley Act (repealed Glass-Steagall)
- •2000: Commodity Futures Modernization Act
- •2004: SEC net capital rule changes
The Housing Bubble and Derivatives Explosion
The combination of low interest rates, financial innovation, and regulatory failure created the largest housing bubble in history, fueled by complex financial instruments that few understood.
Mortgage-backed securities, collateralized debt obligations, and credit default swaps created a house of cards that would collapse in 2008, triggering the worst financial crisis since the Great Depression.
Bubble Indicators (2000-2006):
- •Home Prices: +127% national average increase
- •Subprime Mortgages: 20% of all mortgages (2006)
- •CDO Market: $500B outstanding (2007)
- •Leverage Ratios: Investment banks 30:1+
- •Household Debt: 130% of disposable income