> It seems to me that you are conflating two issues: fungibility of currency with pegging that currency to a commodity. Nope. > The US government is not the o

> It seems to me that you are conflating two issues: fungibility of currency with pegging that currency to a commodity. Nope. > The US government is not the only entity that sees value in USD The US government doesn't see value in the USD at all. It sees value in the resources it wants to divert to the public sector by spending the USD, which it creates. > So long as other bodies, especially commercial bodies, see value in USD, it will continue to be used as an exchange medium The sole reason that the USD has value is because people in the US must pay taxes in USD. > Same for any other currency - just look to South America for examples where people have stopped trusting in the value of a currency and that currency failing, despite being able to pay taxes with it. It's different depending on the specific nation you're talking about but when a nation issues debt in a currency other than its own (in which of course it is logically impossible for it to borrow since the currency is already a liability of the issuer) and if a country relies on imports then it loses the ability to control its interest rate and price stability. In a sense this is like the liabilities being imposed by the foreign sector exceeding the domestic tax base, or another way of looking at it is that the resources required to provision government are not available for sale in the currency it issues. There's also issues like corruption in the tax system itself to contend with in some circumstances.