what is trust worth?

[SS69]

i was thinking about this the other day for some reason. I was thinking about the fact that our american dollars are only backed by trust. something about that doesnt really sound right to me. It used to be backed by gold and at one point silver. and i know that now they have more money than they can back by gold so its backed by the american "trust". what does that mean really. all that says to me is that the money we have is worth no more than the paper its printed on. how can you back something by trust? trust of what? and if thats so then whats to stop them from just printing up a billion dollars, and calling it a billion dollars. to do that they have to go through a process with the UN and what not, but baisically they CAN do that. i understand fully how this works but something about it just doesnt click right in my mind. Back in the days when they had nothing but the bartering system, people would trade one thing for another because they believed that what they were recieving was either equall to or worth more than what they were trading for it. but money is just paper. backed by the trust that as long as the american govt. is in tact, its still good. what the hell?

 

[cardude2004]

You are correct. Our money value is based on trust. We don't have precious metals backing our money anymore. That is why we don't have silver certificates or anything anymore. If you try to exchange your money for gold or silver, you aren't going to get anything. The money is worth at the store, the face value, or the value printed on the money. A dollar really isn't worth a dollar in silver anymore. I saw a show on TV on this subject once. They said that if you can get people to accept the type of currency you wish to use in the US, it is legal. They had some town on the show that was in the US and they didn't use US currency. The town had their own kind of currency, consisting of all coins, and people would use that everywhere they went in that town. You could go to the local bank and give them a dollar and they would give you X dollars of the towns currency type.

I don't think the coins are even worth their weight as a metal anymore. Coins like quarters, now are dipped in silver so they have silver faces, and they sandwich the copper, which makes up most of the coin. The dollar bills are like a bill that says you have X American dollars, with the X being what is printed on the dollar bill. It is like a bank statement, where the bank really doesn't have all of the money that they say you have in your account. Really the US Treasury could print a lot of bills if they wish to mess up our economy because they wouldn't need to have anything to back those bills. The only problem is that if there is too much money printed there is a large inflation. The US Treasury no longer needs more gold to print more currency so they can back it.

 

[Iceman]

and if thats so then whats to stop them from just printing up a billion dollars, and calling it a billion dollars. to do that they have to go through a process with the UN and what not, but baisically they CAN do that

I'm pretty sure the government does print money for itself, but they don't do it large quantities because of inflation. The more they print for themselves the less the dollar is worth.

 

[Danoff]

I'm pretty sure the government does print money for itself, but they don't do it large quantities because of inflation. The more they print for themselves the less the dollar is worth.

Yes, the US govt prints money on its own to pay its debts and that devalues the money currently in circulation (if the money printed is more than the money leaving circulation). There is no UN procedure required we can devalue our money all we want.

Inflation very bad. It's effectively an additional tax. It's what milton friedman called "taxation without represenation".

was thinking about the fact that our american dollars are only backed by trust. something about that doesnt really sound right to me. It used to be backed by gold and at one point silver. and i know that now they have more money than they can back by gold so its backed by the american "trust". what does that mean really.

When you get right down to it. Why is gold or silver worth anything? They're just rocks. Why should special printed paper be worth less than a special type of rock. Sure you can do things with gold and silver that you can't do with paper money, but in the end it's just a symbol - a symbol of production.

 

[87chevy]

WHOOPS!!!!!!!! i thought the title was 'what is truth worth',

nevermind.

 

[a6m5]

It is pretty crazy how the U.S. currencies are backed just by the U.S. Government, and not gold or silver. I wonder how common this practice is around the world. First time I'd heard of this was when my local radio talkshow host Lars Larsen was talking about the Social Security a year or two ago. He was concerned how Social Security is not backed by gold.

 

[TwinTurboJay]

As a Canadian, I will accept your US dollars ar par. Is that trust ?

 

[Danoff]

It is pretty crazy how the U.S. currencies are backed just by the U.S. Government, and not gold or silver.

Why is paper not backed by metal? It's arbitrary.

What's so special about silver and gold?

Someone could say "no, I don't think that dollar is worth as much as you think." just as easily as they could say "no, I don't think that hunk of gold is worth as much as you think."

How about an oil based standard? No good right, because you use it up.


You can find gold and silver lying on the ground if you look hard enough. Finding new deposits of gold and silver would devalue the existing supply. At least with paper money we can ensure that only one thing (that's theoretically under our control) could devalue the existing supply by introducting more.

Salt used to be very valuable. If someone was "worth their salt", that actually meant something. Now we know that salt is pretty common, but what would have happened to a society who put their trust in the value of salt as a standard?

 

[a6m5]

Why is paper not backed by metal? It's arbitrary.

What's so special about silver and gold?

I know what you're saying, but it doens't change the fact that gold and silver has values and are not just any metals. They are considered precious metals, and they are worth something.

Yes, you can find more gold and silver, but I don't believe it's as easy as it sounds, and if it were, there wouldn't be so much demand for them. Paper currency on the other hand, the government can, in theory, print as many as they wish.

 

[Danoff]

I know what you're saying, but it doens't change the fact that gold and silver has values and are not just any metals.

... and that doesn't change the fact that dollars have value and are not just any peices of paper.

Gold and silver have value because we choose to ascribe value to it.

 

[a6m5]

... and that doesn't change the fact that dollars have value and are not just any peices of paper.

Gold and silver have value because we choose to ascribe value to it.

That's true, I'm not saying that we should dump the U.S. currencies because it's not backed by gold. However, if I was an millionare, I wouldn't want my assets to be all in U.S. dollar. One big mistake by the government or some financial disaster could potentially leave you pennyless. Gold on the other hand, will still be valuable, with or without the U.S. government. That's all I'm saying.

 

[Danoff]

Gold on the other hand, will still be valuable, with or without the U.S. government.

What I'm saying is that you take a risk with gold as well.

 

[a6m5]

What I'm saying is that you take a risk with gold as well.

I realize that, but gold is more stable, has been around lot longer, and is accepted universally(at least on this planet). That risk is very minimal compared to the U.S. dollar.

 

[Duke]

That's why nobody with more than a few thousand dollars to their name keeps it in cash or cash equivalent. They invest in a variety of things, including stocks, bonds, etc. as well as commodities.

Say I convert all of my assets to cash. I'm scared by a shaky political climate, so I buy gold with my currency at the market rate. I now have, say, 10,000 grams of gold and very little cash or other assets.

Comes the revolution and the legal economy falls apart.

Am I supposed to eat gold? Throw it at invaders? Bury it and hope a civilized system of trade appears before I starve to death? It's useless except for the value we willingly place on it. The value of gold is arbitrary, not intrinsic.

 

[Danoff]

Am I supposed to eat gold? Throw it at invaders? Bury it and hope a civilized system of trade appears before I starve to death? It's useless except for the value we willingly place on it. The value of gold is arbitrary, not intrinsic.

Thank you. That's what I was trying to say.

 

[a6m5]

Say I convert all of my assets to cash. I'm scared by a shaky political climate, so I buy gold with my currency at the market rate. I now have, say, 10,000 grams of gold and very little cash or other assets.

Comes the revolution and the legal economy falls apart.

Am I supposed to eat gold? Throw it at invaders? Bury it and hope a civilized system of trade appears before I starve to death? It's useless except for the value we willingly place on it. The value of gold is arbitrary, not intrinsic.

You are missing the point. The topic is about how the U.S. currency is not backed by gold. You are making it sound like I'm telling people to go out and by gold. I may not be the sharpest tool in the shed, but asking me if we're supposed to eat gold, or throw gold at invaders, I think is an insult to my intelligence.

We are way off base here, all I am saying is, I think, in a long run, gold is more stable than any countries' currency. From my understanding, it helps to have your currency backed by gold. I never said the gold is the only way to go and paper money is worthless. U.S. dollar is one of the most stable currencies in the world. I'm not arguing that.

P.S. When I mentioned financial disaster, I'm not talking about the end of the world, I'm talking about the possibility of the collapse of U.S. economy and/or government. Countries and government collapse all the time, this doens't happen in the worldwide scale. If it did happen, which is worth more, gold or U.S. dollar? and yes, I know that you can't eat the gold.

 

[Danoff]

all I am saying is, I think, in a long run, gold is more stable than any countries' currency

Has been more stable perhaps.

From my understanding, it helps to have your currency backed by gold.

Perhaps, but as wealth is created you run into a point where you can't amass enough gold to back it all.

And you're still missing my point - which is that there is no fundamental difference between basing your money on paper or metal.

 

[a6m5]

Perhaps, but as wealth is created you run into a point where you can't amass enough gold to back it all.

True, I never thought about that.

And you're still missing my point - which is that there is no fundamental difference between basing your money on paper or metal.

I'm sorry I'm being so stubborn here , but gold has outlasted many countries, governments. Paper currency will last as long as the lifespan of that perticular government IMO.

 

[cardude2004]

That's true, I'm not saying that we should dump the U.S. currencies because it's not backed by gold. However, if I was an millionare, I wouldn't want my assets to be all in U.S. dollar. One big mistake by the government or some financial disaster could potentially leave you pennyless. Gold on the other hand, will still be valuable, with or without the U.S. government. That's all I'm saying.

At the time of the depression, in the 20's in American, the dollar was backed by gold. Still, people had to no money, or gold, for that matter. All of the people went to pull the money out of the bank, but the bank really didn't have all of that money, they just said in your bank statement that you had that much money. Now the US government has a plan built in if this happens again. You will get up to $100,000 a bank account from the US government if the bank can't give you that amount.

Now the value of the dollar is regulated by the market in a different way then it used to be as well. The value of the dollar used to be based off of the value of gold.

 

[SS69]

well think about this. theoretically gold is worth nothing if the govt. has it. lets say there was just enough gold and silver to back all the dollars. then all of a sudden the govt. went under. do you really think we could go trade all that green paper in to the govt. for gold? no. theyre not gonna just pass out gold to everone who has money. so really no matter what its backed by, money is only good if the govt. is intact.

 

[a6m5]

At the time of the depression, in the 20's in American, the dollar was backed by gold. Still, people had to no money, or gold, for that matter. All of the people went to pull the money out of the bank, but the bank really didn't have all of that money, they just said in your bank statement that you had that much money. Now the US government has a plan built in if this happens again. You will get up to $100,000 a bank account from the US government if the bank can't give you that amount.

If the bank goes bankrupt, yes, I'm aware of the protection by the government, but we are talking about how the value of the dollar is effected, when the government go under.

Now the value of the dollar is regulated by the market in a different way then it used to be as well. The value of the dollar used to be based off of the value of gold.

This explanation makes most sense, so far. Thank you.

well think about this. theoretically gold is worth nothing if the govt. has it. lets say there was just enough gold and silver to back all the dollars. then all of a sudden the govt. went under. do you really think we could go trade all that green paper in to the govt. for gold? no. theyre not gonna just pass out gold to everone who has money. so really no matter what its backed by, money is only good if the govt. is intact.

Interesting point, but if those dollars were backed by gold, wouldn't they still be worth something? How about Social Security? If it was backed by gold, wouldn't S.S. always be worth something too?

 

[Jmac279]

Effect = noun and Affect = verb ... We are talking about how the value of the dollar is affected.

Country's currency = the currency of a single country ... Countries' currency = the currency of multiple countries ... In the context you used, it would be singular, so you should have used any country's currency ... Think "Gold is more stable any single country's currency." ...

Just trying to help, not trying to be a jackass ...

 

[a6m5]

Effect = noun and Affect = verb ... We are talking about how the value of the dollar is affected.

Country's currency = the currency of a single country ... Countries' currency = the currency of multiple countries ... In the context you used, it would be singular, so you should have used any country's currency ... Think "Gold is more stable any single country's currency." ...

Just trying to help, not trying to be a jackass ...

Your help is appreciated. On the second one, I'm pretty sure I was trying to type, "any countries' currencies", but that still would've been confusing.