I was told that there isnt enough gold to match the printed money in the world. So is money really worthless?
Answer:
Not really.
But you raised agood point..
If you look at currencies (notes) of the world, you will notice that there its a pledge written on them that says something like.."The Central bank of.(country). will pay on demand.(the amount of the note)..etc etc.
And countries are allowed to print as much money notes as reserves, especially in gold, that they may have to back it up.
Except one country.. The US..
The US $ dollars are NOT backed up by the Central Reserve Bank. Meaning that in the case that the bubble burst, its only worth the paper that its printed on.
In fact, if you observe the Dollars notes, only says." In GOD We Trust"..
Meaning to say. Only God can redeem its value.
The US $ its not worthless due to the dynamic economy that supports it.
Its a complex issue, but I hope that i was able to explain to you, and others that may want to reaed this response in a simple way.
I will charge you only TEN POINTS for my proffesional fee. heheheeheh
No it's not worthless, it's just that money has become information about money. It's become electron moving through fibre-optic cables and the numbers denoting who owns the money (i.e. bank account numbers). The paper is basically now a stock and bond traded by countries on a macroeconomic scale.
The Federal Reserve creates money out of thin air. It assigns the value of the money. So in fact, if they decide that all the bills in circulation are no longer of any value, the money becomes worthless. The American currency has no intrinsic value anymore as it is not made of gold, or tied to precious metals in any way.
Money is no longer based on the gold standard. The former head of the US treasury said the US government were having a hard time defining what money is. Now days, it's based more on knowledge and imagination than anything else. Think Pixar - you can make nearly a billion dollars off of a single animated movie - so where does the profit appear from?
It's not that it's worthless, the problem is valuing a currency correctly in an economy that isn't based on physical resources or manufacturing output that could cause a collapse that's the risk.
Money itself is worthless than the paper its printed on. The irony is, anything that can obtained with money can be 'produced' without money. The paper, metal or whatever its made of does not manufacture goods, bake bread, grow crops, teach, drive, or deliver, and has no real value at all but to seperate the classes. Sad but true.
The vast majority of the money in the world is called fiat money. It has value because a government has declared it to be legal tender and as such society as a whole agrees to use the money as a proxy for purchasing power. In a nutshell so long as people all agree that they will exchange the money for goods and services the money retains value (gold actually has value for precisely the same reason.) And yes very nasty things can happen if this social contract breaks down, but it isn't likely to do so in the United States.
The US dollar (and by extension most other currencies) have not actually be backed by gold since the 1970s. Even then all dollars in circulation were not backed 1 for 1 by gold because most people never came and demanded that their paper money be exchanged for gold.
nope!
The gold standard has not been used for quite some time. You might be interested in the following explaination for the fiat system now in use:
http://en.wikipedia.org/wiki/gold_standa.
Hope this helps!
Our currency isn't backed by gold anymore. It's value is based on peoples' willingness to accept it in exchange for something of value. The more readily acceptable it is the higher the value.
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