Fair, enough. But it seems what you just described is a ponzi scheme. It works right up to the point that it inevitably fails: people lose faith.
Fiat is a commodity. As such, the value of the commodity decreases as the supply increases, as you correctly pointed out about the interest rates going lower as the supply goes up. Ultimately, you end up with negative interest rates.
Your thinking assumes a "better" economy has an ever faster velocity. I don't think that. This is the same thought process that rationalizes high frequency trading: front running trades.
Today, the fed is trying to taper the ponzi scheme by raising interest rates. I'm sure we both agree that won't end well.
Faith isn't required. Everyone already knows the US dollar is fiat and yet it holds value. I'll PayPal you a dollar if you can tell me the single most correct answer why. Ha!
The "correct" answer can be whatever you think: I've heard the military referenced many times. I've heard oil (petro dollar), although the Bretton woods accords are falling apart now.
My own opinion is federal reserve notes are simply accepted everywhere and they are ubiquitous. Other countries accept federal reserve notes because their own currencies are weak.
All of this is rapidly coming to an end. The well connected are trading their fiat for hard commodities like gold, silver and real estate. They want the currency to collapse because they are in a position to become much wealthier as us deplorables get poor from being in debt. Once fiat collapses, these people will take our property.
So if you know the answer, why do you insist that it's faith? Sounds like you might just be repeating propaganda that you know doesn't hold up to scrutiny.
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