In the 30’s United Kingdom Pegged the Sterling pound to the sterling pound! Instead of gold. What do this mean in reality pegging it to it’s own value?

Question

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In: Economics

Answer 1

Almost all major countries stopped backing their currency with gold in the last 100 years. The US did it in 1971, and since many/most countries use the US dollar as the international currency, basically their respective currencies are also not backed by gold (post 1971).

What does it mean? It means the UK government can issue currency backed by their treasury, or in simple terms backed by the trust that the UK will repay their debts. The gold standard provided physical assurance that the government could at least repay the debt in gold. But now, the debt is backed by a government bond. In theory, if the government (and social order) collapses completely then a currency backed by itself becomes worthless. But we’re all now operating under the assumption that this will not happen. Hope that makes sense