The US government lending Spree that started in the beginning of the 1990 were the US government created Fanny/Freddie (among others), is deemed by many as economists as a root cause of our current economic crisis.
I would say that Alan Greenspans actions in the 2000’s is aftermath that kept it racing in the wrong direction, but this crisis was not created during the past 10 years, but rather in the past 20 years.
Fiat currencies, they have been around since the first wave of globalisation (the colonial powers created them), and the real big change was when Bretton Woods was abandoned (-71), and was part in creating the very volatile gold markets in the 70-ies.
What would be the alternative? All currencies that are freely convertible/traded are by definition fiat currencies, and an effect of global trade.
They are traded against each other, so if you increase circulation, you will loose comparative purchasing power against the other global currencies, thus keeping a balance in the global markets (there is one exception though, see below). They makes the fiat currency a commodity with scarisy as any other (as increasing circulation/printing more money will be costly).
If you would describe a closed economic system (with a restricted/non-convertible currency) such as the Soviet Union was or some countries in the world today, scarcity would not be as balanced.
There is hardly any alternative, but fiat currencies is harder to value than currencies that are convertible to gold (as for example the US dollar was until 1971, when Bretton Woods were abandoned) as with a majority of the things traded on markets today, you never know if it’s lemon….
Which is the problem with fiat currencies, a fiat currency can be very sound, with-out a large reserve, but it’s hard to assess if it’s sound or a lemon.
The US Dollar have had a development were it was kept very low for a long period of the 2000’s, the odd thing is that the international purchasing power in the US have been very competitive (the same new Japaneese car would cost more than twice as much in Sweden compared to the US), so the US enjoyed the benefit of the low dollar, but not the loss in purchasing power (for some things yes, but for many not at all). I think this is due to the fact that the US economy constitutes 30% of the wold GDP, and many currencies are pegged to it and a majority of trade agreements have been dominated in US Dollars.
This fact have tilted the market dynamics in the favor of the US, but now we are seeing a backlash, were the US Dollar has been pressed up in value, and other lost in comparative value. This is probably a sound reaction. I would not bet my money on the US dollar being as strong as today, but it will not go back to mid 2008 levels either I think.