Monday, August 11, 2008

A Dollar

This may or may not become a larger series later, but I would like us to take into consideration something we don't often question.

Get out a dollar. Or just look at these. Note the differences.

What did people buy things with before money? Of course, they traded for it. In fact that's all we've ever done.

However, always having to carry something to trade is pretty inconvenient. So, we came up with a medium, something that everyone recognized as valuable.

The most common mediums are gold, silver, and other precious metals. They are universally recognized for their value and rareness. But, even toting gold and silver around became too inconvenient, especially for large values.

So, we created paper money that represented this gold or silver. This way, you didn't have to tote around heavy metals to buy those heavy metal albums.

At a few points in our history, this last statement hasn't been true. During the Revolution, the War of 1812, and the Civil War, the U.S. government printed paper money without actually having the gold or silver to back it up. So, why did people still use the money? Because the government promised them that it would one day (when the war was over) be worth something.

This happened at one more point in history. In 1971, we once again printed paper money with out gold to back it up because of the strain of the Vietnam war. There is one problem though. We never went back to the standard.

Why does the green piece of paper in your hand have any value? Because the government says it does.

Does it represent gold or silver or anything valuable? Not a bit.

Update: This is the first post in a series on the dollar.

1 comment:

  1. Actually, it's not only the government. It's a medium of exchange accepted by everyone. Certainly the dollar's main value comes from the government, but at the same time, if people stopped taking dollars, that would also diminish the value.

    ReplyDelete

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