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The alternative is to have the government say-so (fiat) to back your currency. The U.S. dollar has value because the government can levy taxes and they say it h
by Kaizyn 11y ago
The alternative is to have the government say-so (fiat) to back your currency. The U.S. dollar has value because the government can levy taxes and they say it has value. When there are physical assets backing the currency, it is less amenable to governments manipulating the value of money.
- cgh 11y agoBut isn't it the case that gold has an arbitrary value as well ("they say it has value")? It has no intrinsic value. It just sits there.
- Kaizyn 11y agoGold is durable, and it is shiny and pretty - trinkets and baubles made out of it look good. Humans throughout history have regarded it as desirable and have prized it. This sort of cross-cultural widespread agreement is what gives it its value.
- cgh 11y agoSure, but it's still an agreement. There's a cross-cultural agreement that the US dollar is worth something too. I don't really see the difference, but I'm not an economist. That said, I wouldn't make baubles out of dollars.
- MCRed 11y agoThere's a big difference between the two. Gold's price (in a free market, which unfortunately we don't have anymore) is an agreement of market forces-- supply and demand. The Dollar's price comes from government use of force to make people use it. (this includes internationally.) If you'd like to get an opinion from a good economist check out: http://mises.org/money.asp http://mises.org/money.asp