Re: Long article on the dollar -- but worth reading

Rumpelstiltskin wrote:

It didn't make a difference while governments were at least making a good try at balancing the money it spent with the money it brought in through taxation and other means, but the
temptation to run up excessive debt because there's nothing like "gold" to force governments to keep accounts in line with the real state of national wealth has now poisoned the well of
trust in viability.

I certainly agree that the fiscal irresponsibility of government is reprehensible, but what does that have to do with the concept of 'money'? Many commentators rail incessantly about 'fiat money', but how would backing a currency with commodity X improve the deficit/debt situation? Whether I obtain a good or service with government notes or bits and bytes seems immaterial to the willing exchange I make with the vendor. Whether or not the government takes in enough in taxes to support its spending habits is a totally different animal.

If there were sufficient a supply available of a commodity such as gold to represent the 'national wealth', there would have been no valid reason to discontinue commodity backed currency. There is no way that the world's total economic worth can be expressed in such a manner. That is a big reason why the reputation of country 'X' is so important in world markets. For instance, the wild speculation that the U.S. government will repudiate the debt represented by the bonds it issues is totally laughable. If the bonds and notes issued by the government represent 'fiat money', so be it. They are backed by the full faith and credit of the taxpayers.

--
Harlow
.

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