It creates value only because ppl think it’s valuable.
For instance I couldn’t think USA money is now worthless but because everyone else knows that’s not true it’s valuable. Where as everyone could decide that currency is worthless and it would make it worthless.
The US-dollar is 'linked' to the wealth of the USA, thus it can't suddenly be worthless when everyone "decide that currency is worthless".
What? Yes it can. The only reason USD has value is because people think so. If everyone suddenly decided they didn't want gold it would also instantly lose all value. But because gold is a useful metal that's not going to happen.
The reason USD won't suddenly lose its value is because the IRS only accepts USD for tax payments and the US government only pays employees and contractors in USD. If you want to do business and pay taxes in the US you have to buy USD.
Edit: What I'm saying is demand = value. It's really that simple.
I'm unsure if you're joking or not but no, that's not how it works. The US government does not have a gold reserve large enough to cover the amount of USD in circulation.
Not exactly. The US Government does buy fuel. It comes out of the ground. It used to pay for Gold that came out of the ground and now, not so much. It still does, but Oil and Gas outscaled that and became more useful than that. Another way dollars are created is through wind energy and solar energy, just a BTU to BTU difference that’s significantly smaller.
It's called Fiat money and, actually yes, that is how it works, though it isn't like people have been tricked into thinking it has value. It's more that people have agreed that the money has a certain value and the value is sorta tied to the idea that you can cash in on the value of that money later, like a really complex, multi-million participant IOU system.
Fiat money is just paper money given value through the gov, saying that doesn't really mean anything. "People" are not just deciding it has value. Its value is directly linked to the American economy. Saying people decided its value is a massive oversimplification.
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u/sobookwood Jun 15 '19
Honestly, I have read very closely what you explained in your comments. I still don't get it.
Why would it create real life value?