# Interesting Article:



## Catavenger

https://www.forbes.com/sites/pascalemmanuelgobry/2013/01/08/all-money-is-fiat-money/#357e7c603dd5

Make sure you read until the end.
Also read the comments as they make some good points.



> t's important to understand how money works, and it's  counterintuitive. One aspect which is missed in the debate between  commodity-backed currencies and fiat currency, that is to say currency  which is not backed by a commodity or anything else, is the fact that  all currencies are really fiat currencies*.  Nothing illustrates this better than this story in New York Magazine that reports that Tide detergent has become a black-market currency in the drug trade.
> It's become a meme in pop culture that cigarettes are often used as  currency in prison (I have no idea whether this is still in fact true).  We all instinctually understand how a cigarette-based currency system  would work, right: people would mass cigarettes, use them as a medium of  exchange and store of value, etc., but we don't think about the  implication.
> 
> In both cases, what makes Tide detergent, or cigarettes, or the US  dollar, or Bitcoin, or whatever, a currency, is simply common agreement  that these an item of currency is valuable. What makes it possible to  buy drugs with Tide is not because Tide is useful as a detergent. It's  because drug dealers and users have agreed that it is currency.
> This is, of course, equally true of gold. Gold's uses in industry are  marginal to its appeal. What makes gold valuable is that we've all  agreed since time immemorial that it's valuable.
> Switching to a gold-backed currency regime does not mean switching  away from fiat currency, it means switching to a fiat currency system  where the money supply is linked to a commodity.
> This is one of those things where our instincts fight our good sense.  We want to believe things have intrinsic value, whereas value in a  marketplace is determined by supply and demand, not anything intrinsic.  It's scary to think that the US dollar is backed by "nothing", until you  realize that any currency system is backed by "nothing", or rather by  the same thing, which is a common agreement to use the currency.
> (* Actually, properly understood, no currencies are "fiat"  currencies, since the word "fiat" refers to a government decree that  makes money money, but in reality, while the government fiat matters, it  is useless without the consent of the currency users. But insofar as we  use the expression "fiat currency" to refer to currencies that have no  "intrinsic value", then all currencies are fiat currencies.)


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## waybomb

It's why I am not nuts on metals.
If something goes to shit, you can't eat, drink, our heat with gold.
Only those people with gold will value gold.


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## Catavenger

Yes I kind of wondered why gold was such a hot item. It's shiny and pretty, otherwise . . . ?
 When the U.S. was on the gold standard it was a quasi gold standard anyway since citizens  couldn't own it.

 As Thulsa Doom said: 





> _Thulsa Doom_:    Ah. It must have been when I was younger. There was a time, boy, when I  searched for steel, when steel meant more to me than gold or jewels.


Still I wouldn't mind some gold.

I think I posted this before:
As long as long as the U.S. dollar is the reserve currency for oil the dollar will be propped up.




> After the 1970s, the world switched from a gold standard and gave birth to the rise of petrodollars. These extra-circulated dollars have helped elevate the U.S. dollar to the world reserve currency. The petrodollar system also facilitates petrodollar recycling, which creates liquidity and demand for assets in the financial markets.


​http://www.investopedia.com/articles/forex/072915/how-petrodollars-affect-us-dollar.asp

Of course right off I can see several downsides to that:
1) We have to cater to the whims of the Arab world.
2) As long as the dollar is pegged to oil there is no incentive to find alternative fuels (for cars etc.)
3) the whole thing could fall apart at any time.
(Perhaps something like the Euro could supersede it.)


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