The collapse of an inflation policy carried to its extreme -- as in the United States in 1781 and in France in 1796 -- does not destroy the monetary system, but only the credit money or fiat money of the State that has overestimated the effectiveness of its own policy. The collapse emancipates commerce from etatism and establishes metallic money again. Ludwig Von Mises
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The collapse of an inflation policy carried to its extreme - as in the United States in 1781 and in France in 1796 - does not destroy the monetary system, but only the credit money or fiat money of the State that has overestimated the effectiveness of its own policy. The collapse emancipates commerce from etatism and establishes metallic money again. After this deflationary period, inflation once more sets in. The State then tries to buy off the merchants by issuing more paper notes which are no longer backed by gold, but merely by the trust that people place in them. Since this trust rests on nothing real it disappears with the disappearance of gold .

Source: The Theory Of Money And Credit

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