What “backs” today’s money?
Steve Saville
email: sas888_hk@yahoo.com
Posted Jun 7, 2011
Below is an excerpt from a commentary originally posted at www.speculative-investor.com on 5th June 2011.
All of the major central banks hold currency reserves in the form of gold or other national currencies, but it is not strictly true that these reserves "back" the associated currencies. For example, if the US' gold reserves or Japan's US$ reserves disappeared tomorrow, the US$ and the Yen wouldn't be worth any less than they are today. What, then, backs today's fiat money?
That's a trick question, because money isn't backed by anything. Money is what it is -- the most commonly used final means of payment within the economy. For example, when the US was on something close to a genuine "gold standard" during the last quarter of the 19th Century, gold was money and the gold wasn't backed by anything. Pieces of paper known as dollars circulated within the economy during this period, but the paper dollars weren't money; rather, they were receipts for money (gold) held in a vault somewhere. Of course, banks created more receipts for money than there was actual money, but this fraudulent practice -- known as fractional reserve banking -- is a separate issue.
Full article: http://www.321gold.com/editorials/saville/saville060711.html
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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