Sure, it has no real backing beyond that though, it’s just paper and maybe plastic or other fabric and numbers on a screen/in a database at the end of the day.
That’s my only point really, that if not for the backing by the state or people’s belief in it, it would hold no value.
It’s backed by the full faith and credit of the US government. And personally, I do not have very much faith in the US government and have not had much faith in it for a very long time. The other thing that backs it is the barrel of a gun, which they will point at you if you do not wish to use it.
Money backed by precious metals is the same fabric with numbers on it, and sure the idea is that you can always exchange it but if the government/bank refuses an exchange what are you gonna do? The exchange guarantee is backed by the state as much as the value guarantee is for fiat.
Say you buy literal gold and use it for transactions, it’s value as a currency is still based on the trust that people will accept it in exchange; gold is not intrinsically valuable to an everyday person the way for example water is, so it’s value comes down to how much you expect to be able to exchange it for later, which is just taking currency faith the long way around, and in addition you need to consider purity concerns and the like.
When you use crypto, you at minimum trust that it won’t be forked, and probably need to trust that the exchange mediator won’t rug pull. You also to some extent trust that the currency will be about as valuable tomorrow as it is today.
Expecting your currency to have a “real backing” based on a physical property is just ignoring the basic fact that all exchanges of goods revolve around a debt relationship between at least two parties, which always requires some level of trust.
When people trust a currency held by a state, it’s not just based on whether the state keeps its word, but also based on the fact that the state will use it’s monopoly on violence to maintain the integrity (large fines/prison for currency fraud) and value (requiring taxes to be paid in the currency) of that currency, which is a guarantee no other medium of exchange can have.
This is not wrong, and I used to think this way*. But to understand how the world really works, it’s very helpful to understand how money really works, which you’ll never learn from popular culture, popular media, or the prevailing neoclassical economic theory.
Unlike the shitty pretend physical money.
Not that I’m for crypto either, but all money is fake in that it holds no intrinsic value, it is a belief system as much as crypto is.
You don’t think being backed by the state has helped the dollar achieve widespread adoption?
Sure, it has no real backing beyond that though, it’s just paper and maybe plastic or other fabric and numbers on a screen/in a database at the end of the day.
That’s my only point really, that if not for the backing by the state or people’s belief in it, it would hold no value.
Yeah, but that’s the crucial difference that fully explains why people use dollars and don’t use crypto widely (and likely never will).
It’s backed by the full faith and credit of the US government. And personally, I do not have very much faith in the US government and have not had much faith in it for a very long time. The other thing that backs it is the barrel of a gun, which they will point at you if you do not wish to use it.
See, I have quite a lot of faith that their guns work.
True, but at least in the United States, we have the Second Amendment for a reason, and they know that.
You can pay US taxes with it.
¯\(ツ)/¯
That’s… Always true though?
Money backed by precious metals is the same fabric with numbers on it, and sure the idea is that you can always exchange it but if the government/bank refuses an exchange what are you gonna do? The exchange guarantee is backed by the state as much as the value guarantee is for fiat.
Say you buy literal gold and use it for transactions, it’s value as a currency is still based on the trust that people will accept it in exchange; gold is not intrinsically valuable to an everyday person the way for example water is, so it’s value comes down to how much you expect to be able to exchange it for later, which is just taking currency faith the long way around, and in addition you need to consider purity concerns and the like.
When you use crypto, you at minimum trust that it won’t be forked, and probably need to trust that the exchange mediator won’t rug pull. You also to some extent trust that the currency will be about as valuable tomorrow as it is today.
Expecting your currency to have a “real backing” based on a physical property is just ignoring the basic fact that all exchanges of goods revolve around a debt relationship between at least two parties, which always requires some level of trust.
When people trust a currency held by a state, it’s not just based on whether the state keeps its word, but also based on the fact that the state will use it’s monopoly on violence to maintain the integrity (large fines/prison for currency fraud) and value (requiring taxes to be paid in the currency) of that currency, which is a guarantee no other medium of exchange can have.
Yup. Currencies that use materials not immediately useful to (most) people are always trust/belief based.
This is not wrong, and I used to think this way*. But to understand how the world really works, it’s very helpful to understand how money really works, which you’ll never learn from popular culture, popular media, or the prevailing neoclassical economic theory.
.
*I still do, but I used to, too.
Second link doesn’t work for some reason.
All that I have learned and seen of money is that it’s a belief system/religion, heck, even the stock market works primarily this way.
I will read the one working link, however.