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Fruit vendor: You like these apples? That'll be $2. Buyer: Yeah I want them. But Fort Knox doesn't have enough gold yet, so I don't have the dollar bills right
by triceratops 1y ago
Fruit vendor: You like these apples? That'll be $2.
Buyer: Yeah I want them. But Fort Knox doesn't have enough gold yet, so I don't have the dollar bills right now.
Fruit Vendor: No problem. Bring me an IOU from your bank that says you're good for it.
(The Invention of Paper Money)
- ty6853 1y agoDollar bills under the circa pre-Nixon gold standard were IOU for gold, there was no need to have enough gold to cover them as it was a fractional reserve.
- triceratops 1y agoSo why gold? Why not buildings or factories or railroads or ports?
- ty6853 1y agoNot going to be answered in a one liner but the short answer is historically it had about the highest density of value that was relatively easy transport, divide, and the inflationary properties though highly imperfect were less susceptible than that of factories or railroads. Humanity came to it empirically. Many people have suggested alternatives such as units of energy or baskets of goods but at the end of the day there is no perfect unit, dollars being backed by essentially largely threat of imprisonment if you don't pay your taxes and scarcity of how many the government decides to 'print' is yet another arbitrary choice of backing.
- mitthrowaway2 1y agoHow do you ship fixed infrastructure to another country when they want to redeem their USD?
- triceratops 1y agoYou don't. You give them a title to the infrastructure. Exchange paper for paper. Pretty neat right?
- ty6853 1y agoDeveloped real estate titles are notoriously one of the least fungible assets in existence. Relatively uniform rural undeveloped farmland titles might work but I doubt it would get the same historical inertia since gold outlasts governments more reliably than land titles.
- triceratops 1y agoThat's a problem for any foreign holder of USD who wants to redeem it. So far they've been ok with it. (I didn't mean the government hands out land titles. The holder of USD uses it to buy assets in the country)
- deleted 1y ago[deleted]
- ty6853 1y agoI've re-read your statement several times and I'm still not quite getting it. If your point is that railroads or factories are as valid a basis as 'can be used to bail someone out of IRS agents with machine guns shooting their dogs and putting them in a little cage' than I agree with you. Although it brings me back to, you can see how maybe it was simpler historically for people to just settle in a fungible, transportable, easily dividable hard asset that had essentially as good inflationary properties as anything else they could find.
- triceratops 1y agoI can see how it was simpler historically, when factories and buildings and patents weren't worth all that much.
- 1y ago