What is the US dollar backed by?
In: 2582
Several things:
– Trust in the US government. Both that they won’t go mental printing US dollars, and will generally manage the currency well.
– Trust in the US economy. If the US economy suddenly went to shit and collapsed, the value of the dollar would collapse. If that was liable to happen, the value of the dollar would fall in anticipation. It doesn’t look liable to happen anytime soon.
– US exports. The US exports a bunch of stuff, which means dollars being bought for other currencies. This is part of the economy, but also a key part of it.
– Men with guns. Lots of people have to pay taxes to the US government. Those have to paid in US dollars. If you don’t, eventually some guys with guns will come and take you, your things, or both away (at least if you’re in US jurisdiction). So, people pay their taxes in US dollars, which makes them valuable.
– Expectations that other people will continue to accept the currency. This is a big one, and built off the back of the all the other reasons and itself. Yup, part of why people expect it to work is people expect it to work.
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