Please don’t tell lies. To present as ‘truth’ something of which you are ignorant is a form of lying. You appear to be completely ignorant regarding the functioning the monetary system of the U.S.

It is false to write, “There is nothing stopping our banking system from creating more dollars whenever the mood strikes.” That simply is not the way the system works.

Like many people, you seem to equate “fiat” with “fake.” The two are not the same. Fiat, as you correctly noted, means ‘by decree’. This goes to your first ‘point’, “U.S. dollars are not backed by anything other than the faith of the fools who accept it as payment and of other fools who agree in turn to accept it as payment from them. The main difference is that, for the moment at least, the illusion, in the case of dollars, is more widely and more fiercely believed.”

In our monetary system ‘fiat’ is a synonym for ‘legal tender’. The government has established by law that Federal Reserve Notes are legal tender. That means two things. One is that only those Notes are accepted for paying taxes; the other is that banks are required to accept those notes for repayment of loans. Sure, in actual transactions our money changes hands in the form of digits more than material currency, but that is a distinction without a functional difference.

As for Bitcoin (etc.) it is not a virtual currency. It is virtual gold. I can understand why its inventors chose to call it “currency.” Who would exchange Federal Reserve Notes for ‘virtual gold’? Like gold, Bitcoin is mined. Like gold, there is an unknown but finite amount of it. Like gold, new supply is random in time and quantity. Like gold, as an ‘asset’ it can be used for transactions, if all parties agree, but its primary financial function is as a store of value/speculation. Its inventors even made its logo look like gold. The only difference is gold’s materiality, which gives it functions unrelated to matters of finance, such as its uses in manufacturing.