2009-01-08, 04:31 PM
Quantact is pretty much correct, except that the paper notes were a claim to a portion of the gold back in the gold-standard days. Since the notes were claims on a finite quantity of gold, and notes could be printed freely and thus never have a fixed amount in circulation, there was a lot of speculation as to the worth of the notes and the gold. This lead to the conclusion that the economy was being drawn back like Quantact said.
I find it odd that the government will still guarantee the value of the dollar, but there's nothing backing it except for the expectation that everyone will treat it as such. I suspect that, should the economy ever be destroyed for whatever reason, the country will have to rebuild its currency based on a material standard of some sort.
There's also a gold vault in the Federal Reserve Bank in New York. This vault however is a representation of some of the participating counties's claims to wealth backed by gold (and is divided as such), and it really doesn't all belong to the US in spite of being in US soil.
I find it odd that the government will still guarantee the value of the dollar, but there's nothing backing it except for the expectation that everyone will treat it as such. I suspect that, should the economy ever be destroyed for whatever reason, the country will have to rebuild its currency based on a material standard of some sort.
There's also a gold vault in the Federal Reserve Bank in New York. This vault however is a representation of some of the participating counties's claims to wealth backed by gold (and is divided as such), and it really doesn't all belong to the US in spite of being in US soil.