~"The current dollar is only a derivative of real money but backed by nothing."
~"Fiat currencies are backed by the reputation and strength of the governments and nations that issue it."
As far as I understand the world, The system we have with central banks holding a basket of each others currency in reserves is a global general demand factor, because they run a local system of currency, and they work together to define the rules for international trade, diplomatic stance, war, and guarantees for settlement of taxes to their citizens, so locally, its a promise that society has an agreement on a single reference unit, locally.
Their are so many factors, but local use and guarantee as unit of trade, choice for international investment diversity for store of value (you dont have to HOLD your own local currency, but you DO have to transact in it), combined with national competition and floating rates underpins de-monopoly, of the otherwise central issuance by that countries government and monetary instructions, who issue loans in the local currency too... so its YOUR promise on loans that also backs its value.
So long as international settlements in a nations issued currency exists, the $ £ ¥ of the countries will have value, consider this hypothetical:
$ for local wood source and refinement..
¥ used locally in the construction of graphite..
£ for rubber and paints.
... other currencies leveraged for local input for product, which after final assembly is distributed to a variety of other currencies also, where upon sale, those international trades are settled.
Extend this to sourcing > refinement > processing > construction > distribution spanning dozens of countries... then the interlink of international cooperation is required.
Currencies grant the political powers a target for trade policy effects that allows them to effectively govern the relationships and power balances.
I contrast this more complex interdependent viewpoint with the idea of central bank currency dominance... i.e: USD as the worlds currency idea...
American centric view of moneys value comes from USD being "top-dog"...
and is an equivalent local reference viewpoint of ANY individuals worship of their own particular country's currency...
But if you bring your local currency where its not guaranteed by the local gov for trade.
It has no "rights" for attribution of value.
Nobody outside of $ land has to accept $.
Nobody outside of £ land has to accept £.
Nobody outside of ¥ land has to accept ¥.
Their value is NOT
only tied to the capability for a local country to tax, loan and issue for government expenditure.
But its relationship to all other countries with a 'like' model, for relationship management across the globe.
Gresham's law explains why concurrent currencies (pre-45, post-45 & decimal) cant coexist as legal tender on equal footing, in a single region of use.
Because the one with the highest quantities of the "store of value" components will be hoarded, and the least valuable ones transacted.
Therefore we have currencies.. because they are devaluing all the time and, strictly, are the worst...
We trade them because we want to get rid of them... and we trade FOR them, because doing so doesnt put as at a disadvantage of not being able to trade them back because their value is well known to be managed to specific levels of debasement/inflation, which is also why we go into debt in them...
Nobodys going to buy a house indebt to bitcoin for the sake of verification that its NOT paid back on an immutable blockchain, where the price to repay is MORE in the future than the past...
because the value of the house and car as a 3d object seems ok.. but as a 4d one (including the time for its utility) over time the house and car devalue and degrade, wears out, degrades, rotts....
so its actual 4d value aspect, is as a diminishing return asset for which your determining its value to you for shelter and transport, over time it becomes worth less, as does the money you are paying back for it. and both.. more subconsciously, but truly, are known...
What you would want to argue is that housing and stuff goes up... but you KNOW it doesnt... its the CURRENCY devaluing that give you that illusion. and its the greedy leverage of the promise to pay the loan back, that is where people find the value...
the exposure to the devaluation of the currency, in your favor, why: for a house... at the expense of maintaining a loan... why would governments be happy to do this for us?
So we are incentivized to WORK in their local environment.
the house and cars for which loans are common... and most planned redundancy economy items, are not 3d objects.. and its not priced as one.
inflation and interest are also relative time considerations, and thats tricky too because its part of the gov and banks control, where by it is evident that the rotting tree-house of global politics isn't really smart enough to maintain a great balance as we rapidly advance and try to sustain the planet.
