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Thursday, January 12, 2017

Why do people want money?

Answer: Because they can buy stuff with it.

Rebuttal: that's just circular reasoning. "Circular reasoning is often of the form: 'A is true because B is true; B is true because A is true.'" So people want money because they can buy stuff from other people with it, and they can buy stuff from other people with it because other people want money? That's the dumbest thing I ever heard! The truth is that today's currency is fiat money. It's valuable because the government that prints it says it's valuable.
Most of the world’s money is called fiat money, meaning it is accepted as money because a government says that it’s legal tender, and the public has enough confidence and faith in the money’s ability to serve as a storage medium for purchasing power.

A fiat system is based on a government’s mandate that the paper currency it prints is legal tender for making financial transactions. Legal tender means that the money is backed by the full faith and credit of the government that issues it. In other words, the government promises to be good for it.
This explanation assures us that our government promises to be "good for it." So, by that explanation we can conclude that money is a debt incurred by the issuing nation to the owner of the currency? Fine, I want to redeem the debt that the USA has incurred. I'll turn in my dollars tomorrow. The USA is good for it right? I'll suppose I'll take gold bullion. That's the most transportable right?
One of the long-standing myths about modern currency is that it is backed by the U.S. gold supply in Fort Knox. That is, you can trade your greenback dollars to the U.S. government for the equivalent amount of gold bullion at any time.

At one point, this was true of most paper currencies in the world. However, the U.S. took away the government backing of the dollar with an actual gold supply (known as leaving the gold standard) in 1971, and every major international currency has followed suit.

The obvious question is, "Without gold, what does guarantee the value of our money?" The answer is: nothing at all.

The only reason a dollar, or a franc, or a Euro has any value is because we have a stable system in which people are known to accept these pieces of paper in return for something valuable. Or, as Nobel Prize-winning economist Milton Friedman puts it, "the pieces of green paper have value because everybody thinks they have value."
"Gosh!," Jack exclaimed in amazed wonder. So a government says that its fancy paper is valuable and abracadabra it suddenly just is valuable. Well, by that logic why doesn't Obama declare that CO2 is valuable and then everyone will hold their breath ... global warming, unemployment, poverty, saving the whales ... problem solved solved solved and solved!

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