[IggleSniggle]

Fiat currencies (that is, currency that has no intrinsic value) has existed for at least 1300 years, if not longer. They are not based on air, they are based on trust in an institution and its ability to maintain its value through whatever means it has available.

Rare metals are natural exchanges of value even then gold has no utilitarian value for most people because they are scarce and the quality in circulation does not usually change dramatically. Thus, it can become a medium of exchange. Government backed currencies have similarities, but instead of mining the earth, a government (or corporation in the case of company stores) can "mine" its coercive power to produce more currency.

The point is, fiat currencies are ephemeral, but so are intrinsically backed currencies. The inherent power of exchange for something like gold is not especially more powerful or reliable than the inherent power or reliability of the US Govt with regards to a medium of exchange.

[1996]

> Government backed currencies have similarities, but instead of mining the earth, a government (or corporation in the case of company stores) can "mine" its coercive power to produce more currency.

The solution is software limitations, as found in crypto, which can implement a fixed inflation schedule, as was proposed by some economists.

One government could try to force a change, but the coordination problem of getting all to force the same change means it will not happen.

[peisistratos]

> Fiat currencies (that is, currency that has no intrinsic value) has existed for at least 1300 years, if not longer. They are not based on air

If paper currency got bootstrapping 1300 years ago, then why were American and European currencies gold backed half a century ago? Apparently the bootstrapped currency needed to be bootstraped again.

Gold is an ordinary commodity with practical uses (electronics, tooth fillings etc.) Its special qualities that make it a good currency candidate are its durability, portability, uniformity and divisibility. Gold is valuable due to its practical value, but is often exchanged due to its commodity qualities.

> an institution and its ability to maintain its value through whatever means it has available

The means a half century ago was to trade the paper for gold. Now that is implicit. The US stores tons of gold in Fort Knox and elsewhere - why? Obviously it implicitly backs the currency, even if the M1 supply is very large.

[IggleSniggle]

It got bootstrapped again because the government backing the currency fell, or the trustworthiness of the government fell.

Gold has a different "durability index" than "government coercion," but it's also not constant, and its rarity can be manipulated by anyone, whereas the rarity of a government backed currency can only be manipulated by the institution that backs its value in the first place.

I'm not making an argument that government backed currency is strictly "better" in all scenarios, only that it is not substantially "different" for most intents and purposes; ie it is not based on air, but a real-world quality: the coercive ability of an institution to maintain the value of the currency.