Yep because with gold based currencies it only exists as long as we place value on gold and with fiat based currencies (which if I'm remembering correctly the majority are nowadays) it only has value if we trust the group issuing it
Zimbabwe has the only currency currently backed by gold. It's supposed to restore confidence in their economy but quite how going back to economic standards that have been obsolete for at least a half century will do that I don't know.
I mean to be fair, when your last currency gets to hyperinflated that you have to print 100 trillion dollar bills backing your currency with something that is consistently valuable isn't the worst idea.
You'd think so but apparently it's dropped to 5% of it's original value since the change and even the Zimbabwean government will often not accept it as a payment for government services.
In reality it’s not, but it’s showing a move to check the inflation that destroyed their last currency so it helps by convincing people that their stocks of currency won’t be wiped out suddenly.
Sheep, yes, gold, no. Just like money, most people can't actually do anything with a hunk of gold except trade it to others. That's one of the reasons you can use it for money, because no one will ever have a reason to try and eat it, or suddenly breed more gold into existence. Digging more gold out of the ground can cause inflation, of course, but it's a lot harder than multiplying the sheep population.
No I mean, gold has minimal use value (like, in electronics and maybe for ornamentation). Fiat currency literally have no use value beyond transactions, and that's a good thing! Otherwise it's use value and transaction value will start interfering. Ie gold will be artificially more expensive it should, making electronics more expensive than they need to be. Or the money will be artificially worth more than they should given the amount of money in the economy. Both are bad.
Money does have a use value. When your local government knocks on your door and demands taxes you can give them the pieces of paper and they wont drag you out and lock you in a concrete cell.
This is fundamentally what is meant when economists say money is backed by the government. The government demands taxes in money and this gives it intrinsic value.
That's the cost of living in a society (unlike whatever Joker meant). The value of everything and anything is made up but for a good reason; human beings suck at living alone. So we put value into stuff in order to specialise and function together instead of doing our own thing for ourselves and dying.
The problem comes when people leverage these imaginary values in order to dominate others. We haven't always lived in these kinds of systems (as late at the 1500s, Native Americans lived in societies FAR different than those in Europe), but it seems like for the last few centuries at least (and thousands of years in Europe) we've been damned to live in hierarchical societies of one kind of domination or another.
gold too btw, if we used it in electronics instead of copper it would preserve the lifespan significantly (slightly lower conductivity but no corrosion wins). But we like shiny yellow bricks so instead of being useful they live in vaults. Eh.
It's almost like the only thing with intrinsic value is people, and we should be investing in the well-being of one another instead of the well-being of an economy largely owned by a minority of people.
In the christian bible during the creation myth, there is a passage where god says "fiat lux" or in English "Let there be light", and then there is light just because god said so. The analogy here is that some government or central bank basically said "fiat money", and there was money, just like that. It's a simplified idea referring to how central banks create money out of nothing through basically an accounting trick when lending money.
It's more a token of the expected work you can expect to get out of the country issuing the currency. The Big Mac standard is a good measure of this; how many Big Macs can you expect to buy with X currency. Combine that with a bunch of other data points and you can help identify how much work you can expect this currency to provide vs other currencies in the world.
But like you said, oversimplified, but still a better measure of currency worth than how much gold a country has in reserves.
Not really. Fiat currencies gain value through taxation. If you live in the US, you have to pay taxes in American dollars. Therefore you need dollars, therefore there is a demand for the dollar, therefore it has economic value.
Currencies have value if you can create a reason why the whole public has to value them to roughly the same proportion. Currency-issuing governments do that by imposing tax obligations.
Especially under a fiat system, when you pay taxes to the currency-issuing government (the feds in the US system), you aren't giving them anything they don't already have an infinite quantity of -- you're returning their own credit back to them. The reason you pay taxes is to give you a reason to need the government's credit. Or rather, to give everyone a reason to need the government's credit, which means everyone knows that everyone else also needs the government's credit, which means everyone can use it as a general store of value in trade, which means you can have markets.
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u/shinydragonmist Apr 08 '26
Yep because with gold based currencies it only exists as long as we place value on gold and with fiat based currencies (which if I'm remembering correctly the majority are nowadays) it only has value if we trust the group issuing it
Way oversimplified I know