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Exactly that was what I thought, GDP should back the currency right? But I’m not an economist to know the answer
by rukshn 6y ago
Exactly that was what I thought, GDP should back the currency right? But I’m not an economist to know the answer
- perryizgr8 6y agoI kind of doubt it. Because China has the second largest GDP, and it is quite comparable to US. But Chinese Yuan is basically worthless outside of China. Almost all international trade, even when involving China, is done in USD. So definitely there has to be some other factor apart from GDP which gives value to a currency.
- rukshn 6y agoBut isn’t there a static exchange rate right between Yuan and USD according to economy inflation or GDP? Or proof of work for Bitcoin, so what backs bitclout?
- IndySun 6y ago>Almost all international trade, even when involving China, is done in USD. What will happen to US and world economic trade when this is reversed?
- perryizgr8 6y agoThen we go to war. - USA, probably
- RobertoG 6y agoIn a first approximation, what back the currency is that it's accepted to buy things that are denominated in Dollars. But in a deeper sense, what back the currency is that it's the only currency accepted by the USA government to pay taxes and other liabilities (1). If tomorrow, people decided they not want to use Dollars, they would still have to get Dollars in order to pay their taxes, that would grant demand for Dollars. (1) - https://neweconomicperspectives.org/2014/05/taxes-mmt-approach.html https://neweconomicperspectives.org/2014/05/taxes-mmt-approa...