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>This "fiat currency is backed by the government" is being thrown around a lot, but what does that actually mean? It means the government will do it's best to

>This "fiat currency is backed by the government" is being thrown around a lot, but what does that actually mean? It means the government will do it's best to ensure the value of its currency, the failure of which would be an existential threat to its existence. I believe many people consider this low risk, that they consider the likelihood of the government failing as much less likely than a particular company or commodity failing. (Of course that depends on the government.)

dragonwriter 13y ago
> I believe many people consider this low risk, that they consider the likelihood of the government failing as much less likely than a particular company or commodity failing. (Of course that depends on the government.) Perhaps nearly as importantly than considering it low risk in an absolute sense, they consider the risk of it with particular government currencies as being strongly correlated to the risk of money, regardless of its type, losing its utility. If the US government loses the ability to protect the dollar so rapidly that holders don't have a viable exit to alternative currencies, that probably involves a pretty fundamental breakdown in society (particularly for people located in and around the US.)
zAy0LfpBZLC8mAC 13y ago
I don't think that that is what people usually mean when they say that, and it's not really true either. The goal of the government is to maintain power and hopefully a stable society or something - money is just a tool to that end, and not a goal in itself. After all, the goal of monetary policy usually is inflation, which tends to reduce the value of money. And also, currency is not the only area where governments will interfere as they deem it necessary. Really, I think what you are saying boils down to "stuff that can have a big impact on society tends to be watched more closely by the government, and it's more likely that the government will interfere to maintain the status quo" - which is a valid point, but it's neither a particularly special thing with money, nor is there any guarantee that it's always to the benefit of the governed.

dragonwriter 13y ago

> I believe many people consider this low risk, that they consider the likelihood of the government failing as much less likely than a particular company or commodity failing. (Of course that depends on the government.) Perhaps nearly as importantly than considering it low risk in an absolute sense, they consider the risk of it with particular government currencies as being strongly correlated to the risk of money, regardless of its type, losing its utility. If the US government loses the ability to protect the dollar so rapidly that holders don't have a viable exit to alternative currencies, that probably involves a pretty fundamental breakdown in society (particularly for people located in and around the US.)

zAy0LfpBZLC8mAC 13y ago

I don't think that that is what people usually mean when they say that, and it's not really true either. The goal of the government is to maintain power and hopefully a stable society or something - money is just a tool to that end, and not a goal in itself. After all, the goal of monetary policy usually is inflation, which tends to reduce the value of money. And also, currency is not the only area where governments will interfere as they deem it necessary. Really, I think what you are saying boils down to "stuff that can have a big impact on society tends to be watched more closely by the government, and it's more likely that the government will interfere to maintain the status quo" - which is a valid point, but it's neither a particularly special thing with money, nor is there any guarantee that it's always to the benefit of the governed.