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Declaring certain currency notes to be valueless doesn't change the demand for currency. It reduces supply. But people still need it to pay taxes and the gover
by rswail 5y ago
Declaring certain currency notes to be valueless doesn't change the demand for currency. It reduces supply.
But people still need it to pay taxes and the government will only pay for services with it.
In most developed nations, the government is responsible for 20%+ of the total GDP, so that's an inbuilt "floor" to the value of its currency.
So yes, the government can change the currency and the notes, but they control the supply and demand of whatever they deem to be the currency.
- bko 5y agoRight, but it doesn't really help me as someone holding the currency. I can have X dollars in my bank account, government can then declare these dollars are worthless or you have to change it to this new currency at some rate that is set by the state. Neither of these things are good for me and I would hardly call that the government "backing" the currency that I hold.