In the old days, currencies were redeemable into gold or silver (usually). In order for currency issuers (e.g. central banks) to honor their agreements, they would have to own more than they owed. Occasionally, it would be revealed that currency issuers owned less than what they owed. In these cases, their currencies would fall to discounts to par.


It is my contention that irredeemable fiat currencies virtually always trade at discounts to par. The implications can seem paradoxical, hence they can be potentially profitable.


But, what do I really mean by ‘discount to par’?


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