Anything is only worth as much as someone else wants it. Everything comes down to supply and demand. Currency is just a medium so you don’t have to trade fish for lumber in order to trade the lumber for some bacon. Also, pretty convenient to be paid in currency instead of fish, lumber, or bacon. You can use it to directly buy/get what you want.
If no wants to buy or sell the currency then it’s a pretty worthless currency. That’s why you can’t just crate your own currency and buy things with Bob’s Bucks.
That is how currency typically works, yes. If you want it to be backed by gold or whatever, well then what’s the gold backed by? Both the dollar and gold are only valuable because we decided they are, there’s not much meaningful difference.
Gold’s practical value to this day is still dwarfed both by its value as a subjectively pretty metal for jewelry and as an investment/storage of value. If the world at once decided that we’d no longer purchase gold unless we were part of a supply chain making a product with it (like is already the case with most non-money goods), the prices would crater. The number of people holding gold for practical reasons is pretty small, most hold or desire to hold gold because there’s near-universal demand for it because everyone else desires to hold gold because there’s universal demand because everyone else desires to hold gold… get the picture? Everyone is trying to be someone else’s middle-man, and sure some of that gold makes it’s way into practical use, but most of it is just the snake eating it’s own tail.
That’s what makes it effectively no different from paper currency, artificially inflated value is just an inherent property of any money. Any good that becomes money is going to have it’s value increase because supply decreased because all or a significant portion of a money’s owners own it only to store value without any intention of using it themselves.
US dollars are necessary to pay taxes to the US government and, currently, most oil transactions are in US dollars. This use is exponentially larger than the practical use of gold.
That’s… not how that works. It runs on supply and demand, just like gold backed currency, but it’s supply and demand for the currency instead of the underlying asset. If you want to control inflation/deflation, fiat is the way.
Only officially. The US effectivly dropped the gold standard in 1933 because it was making the Great Depression worse. Money was completely stagnant, and the federal worl projects FDR championed to get the economy moving again couldn’t be funded when the government couldn’t get access to more gold.
Currencies often run on tax law. If you earned and produced and imported valuable goods or services, you have to pay tax in your local country’s currency.
Couldn’t mine gold in the US. The Soviet Union was the biggest gold producer the world back then. So in effect, the Soviet Union controlled the West’s money supply while they were on the gold standard.
The boom and bust cycles never went away though. They merely threw up enough barriers for the commoners to believe they are safe, while also locking most commoners out of meaningful participation in the markets.
I can’t believe that Dollar (or any other currency) isn’t backed by anything and runs on hopes and believes
I think the other answers people are giving are wrong. It’s backed by debt and the enforcement of that debt.
Anything is only worth as much as someone else wants it. Everything comes down to supply and demand. Currency is just a medium so you don’t have to trade fish for lumber in order to trade the lumber for some bacon. Also, pretty convenient to be paid in currency instead of fish, lumber, or bacon. You can use it to directly buy/get what you want.
If no wants to buy or sell the currency then it’s a pretty worthless currency. That’s why you can’t just crate your own currency and buy things with Bob’s Bucks.
That’s reductive.
It’s backed by the economic and militaristic might of the issuing country.
Strongest military in the world can’t defeat tariffs.
Did they try to shoot at them though?
and if that doesn’t work, try a nuke
That is how currency typically works, yes. If you want it to be backed by gold or whatever, well then what’s the gold backed by? Both the dollar and gold are only valuable because we decided they are, there’s not much meaningful difference.
There is much meaningful difference - gold has widespread practical use, while paper currency does not
Gold’s practical value to this day is still dwarfed both by its value as a subjectively pretty metal for jewelry and as an investment/storage of value. If the world at once decided that we’d no longer purchase gold unless we were part of a supply chain making a product with it (like is already the case with most non-money goods), the prices would crater. The number of people holding gold for practical reasons is pretty small, most hold or desire to hold gold because there’s near-universal demand for it because everyone else desires to hold gold because there’s universal demand because everyone else desires to hold gold… get the picture? Everyone is trying to be someone else’s middle-man, and sure some of that gold makes it’s way into practical use, but most of it is just the snake eating it’s own tail.
That’s what makes it effectively no different from paper currency, artificially inflated value is just an inherent property of any money. Any good that becomes money is going to have it’s value increase because supply decreased because all or a significant portion of a money’s owners own it only to store value without any intention of using it themselves.
US dollars are necessary to pay taxes to the US government and, currently, most oil transactions are in US dollars. This use is exponentially larger than the practical use of gold.
The US dollar gives access to the US market. People want the US dollar because they want to buy things in the US.
Well, that is unless some president enacts some stupid policies.
That’s… not how that works. It runs on supply and demand, just like gold backed currency, but it’s supply and demand for the currency instead of the underlying asset. If you want to control inflation/deflation, fiat is the way.
Well I didn’t really gave much of a thought when writing. I was narrowminded. This makes sense
It used to be backed by gold until 1971.
And what was the gold backed by?
being deflationary I think
Greed.
Only officially. The US effectivly dropped the gold standard in 1933 because it was making the Great Depression worse. Money was completely stagnant, and the federal worl projects FDR championed to get the economy moving again couldn’t be funded when the government couldn’t get access to more gold.
And moving away from backed currencies has increased economic stability.
Currencies often run on tax law. If you earned and produced and imported valuable goods or services, you have to pay tax in your local country’s currency.
The USD is backed by the American economy.
they used to back it with gold, didn’t they? gues nixon ran out while the printing press went brrrrr
They abandoned the gold standard because it suffered from acute boom and bust cycles.
They abandoned the gold standard because they couldn’t mine enough gold to back the amount they were lending.
Couldn’t mine gold in the US. The Soviet Union was the biggest gold producer the world back then. So in effect, the Soviet Union controlled the West’s money supply while they were on the gold standard.
The boom and bust cycles never went away though. They merely threw up enough barriers for the commoners to believe they are safe, while also locking most commoners out of meaningful participation in the markets.
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