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Fiat money is based on nothing, correct? (sopuli.xyz)

submitted 1 year ago* (last edited 1 year ago) by [email protected] to c/[email protected]

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Gov-issued banknotes used to be based on gold, so IIUC that theoretically meant you could always trade your cash for gold. And IIUC, that was also a control on inflation.

Then at some point the currency (guess I’m assuming USD but perhaps it applies to all currencies?) was no longer based on gold. People just simply trust the currency just because there are anti-counterfeit features, and perhaps because everyone else trusts it. Is that it? Is there nothing else to establish confidence in the value?

I ask because I saw a clever anti-cryptocurrency post saying something like:

1 coin of crypto = ½ unicorn horn = 1 faun hoof = ¼ vial of potion from an oni = 50 grams of fairie dust = ⅛ dragon egg = 1 Klingon tooth

Funny, but okay, he hopes to convince people that #cryptocurrency not being based on anything means it’s worthless. Couldn’t we just as well add USD to that equation, since US dollars are also not based on anything now that gold is out of the picture?

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[–] abominable_panda 2 points 1 year ago

Not an economist but... pretty much. Central banks sit on gold brick reserves Previous history of governmental gold confiscation

Paper money printer/ digital number on your bank account go brr