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Fiat money is a government-issued currency that is not backed by a commodity such as gold. Most paper notes started as being backed by a reserve of valuable commodities, usually gold (the "Gold Standard"). Tying a currency to gold limits inflation and money supply.
But politicians hate the gold standard, so since Nixon's presidency, the US dollar was no longer tied to gold and money had value just because the government says so.
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We can measure the supply of money that exists in the market with main metrics:
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Banks loan money they don't have. Most hold a limited reserve to serve the few who decide to make redraws. When the majority decides to liquidate their bank accounts we have what is called a bank run.
In order to protect the banks, central banks were created to provide a gu...
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We print money digitally. As a central bank, we have the ability to create money. And we do that by buying bonds for other government guaranteed securities. And that actually increases the money supply. We also print actual currency and we distribute that through the Federal Rese...
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1933 - President Franklin D. Roosevelt had gold confiscated and people were forced to accept paper money for their gold. The government needed people to adopt the inflated paper and they used force.
1940s ...
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1933 - President Franklin D. Roosevelt had gold confiscated and people were forced to accept paper money for their gold. The government needed people to adopt the inflated paper and they used force.
1940s ...
Paper Money was pushed as a 'fiat' currency due to an attractive quality: it was guaranteed to trade by the state authority for a specific weight of gold or silver, and couldn't be melted down or devalued.
Money is a universal means of exchange. A technology that is enabled by something that has the highest proportion of trading ability to its utility (gold can be used for trade but also for jewelry & chips).
Money needs 5 characteristics. It needs to be:
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