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by bmh_ca
2978 days ago
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> It is backed by the obligation to pay your taxes in that currency. If it's a reserve currency, as the U.S. is, it is also backed by the demand of other states to hold U.S. dollars to stabilize their non-reserve currency. Indeed, some argue that a reserve currency is not subject to ordinary balance of payments criteria. This is sometimes called exorbitant privilege.[1] All to say, the U.S. currency is not just backed by assets of the nation, but by demand that other states have for local-currency stability. Somewhat aside, some argue that this creates a perverted incentive to destabilize the world because unstable states and regions have a higher demand for a reserve currency. [1] https://en.wikipedia.org/wiki/Exorbitant_privilege |
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