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 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.