Why does paper money have value?
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Look at it this way. You can do a job for me and I give you the choice of two currencies to get paid in.
You can either get paid in the Zabumban sheckle or the US dollar. Now before you choose, think on this. Zabumba is at war with all of its neighbours. It’s right on the equator so the climate catastrophe caused massive crop failure this year. And to make matters worse, the population has angrily destroyed the country’s power plants because of climate-related problems.
Right now, 10 Zabumban shackles will buy you one bread. But with grain running out and the warlords targeting bakeries, I don’t really know what a bread will cost next week. Or if anyone will even be baking bread, most bakers are fleeing to other countries.
The US on the other hand is pretty stable. It’s far from perfect but it’s fairly safe to say that today, next week and next year, the energy grid is humming, the harvests are coming in and the bakers will be baking.
Keeping in mind that you want toast and ham for breakfast every morning for the foreseeable future. Would you prefer getting paid in Zabumban sheckles or US dollars?
That’s what gives paper money value. It’s a contract between you and the society that issues it. The more dependable the society, the more stable the value of the money.
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