Like why can’t some country say something like “our country’s currency value will be 200 times that of US dollars ” . And who determines this value or how it is determined. And why it constantly changes.
In: Economics
Modern currency are backed by the economical might of the Nation issuing them. the reason why you dont have nations going :
“our country’s currency value will be 200 times that of US dollars ”
is because: unless this nation has 200x the productivity and economical might of the US, no one will take that claim seriously and trade with that nation at that absurd rate because no one reasonably believes the country is worth that much in the market..
at the end of the day: a currency is only as worth as your country’s ability to back its value up.
something as simple as a bill is nothing more than a promissory note that says: “at any point you can come to a bank and trade this note for x value”, if people dont have trust in this promise, they simply wont trade with you in that currency.
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