I see this all the time, mostly when references are made about the dollar and how it was once backed by gold
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You sell stuff and I want that stuff, so I give you some pieces of paper that we both agree are worth the same value of that stuff, so you give me the stuff. But why are you OK with accepting pieces of paper which are very clearly just pieces of paper and *definitely* not worth the stuff you gave me?
Your trust in the paper comes from your trust in the government which promises to give *you* stuff. We both agree that we can take our papers, hand it to the federal government, and get stuff in return.
A gold standard means that the government is specifically promising to give anyone an amount of gold in exchange for their paper money. Gold is intrinsically valuable: it’s rare, it’s shiny, it lasts forever, it is useful for many things. Nobody has to convince you that gold is worth having. So, you trust the paper money because you know that somewhere in a big vault the government has a shit ton gold. You don’t need gold. You don’t even really want gold. But you know that *if* you ever wanted to get rid of your papers which are not intrinsically valuable or useful for anything, you could go get some gold. And that’s why you are OK with accepting pieces of paper in exchange for stuff.
However, there are some pretty big downsides to this. One is that the government has less control over the value of the money. It’s tied to how much gold they have, and how much gold exists in the world, and how much people want gold. That’s not great when there’s an economic problem like high inflation or deflation or stagflation.
Instead, money is tied to more abstract concepts like international exchange rates and international credit ratings. You are willing to accept US dollars because you trust that you can take those US dollars pretty much anywhere in the world and exchange them for Euros or Pesos or Yen or whatever. The EU and Mexico and Japan and other governments take dollars because they trust that they can continue buying things that only the US government can provide like military aid and trade agreements and whatnot. And, they believe that the US government will continue to pay its debts on money that it borrows.
Compare that to, say, the Russian ruble which is crashing because people aren’t particularly confident that their government will be able to pay its debts and give things in exchange for rubles, since it’s spending so much money sending tanks to get stuck in the mud in Ukraine.
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