How can money have value if we don’t use the gold standard anymore?

Question

Before the gold standard was dropped, it was relatively easy to understand where money got its value.

Money represented a certain proportion of gold in a country’s National Reserve. The money could be cashed in for gold, a very physical and tangible item. That all makes sense.

But we don’t use that anymore. So isn’t the money just paper? I don’t see how this system makes sense anymore.

In: 0

Answer 1

Money is, and has always been, an abstract representation of value that only has that power because enough people in society agree that it does. Even when it was backed by gold, this was still true–it’s not like gold is an inherently valuable object (other than maybe admiring how shiny it is, most people would have no use for gold if not for the fact that it’s widely agreed upon as an abstract representation of value).