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What Do We Back Our Money With?

Thu Mar 30, 2006 2:10 am

We got into a discussion in my class today when my professor said gold was the standard when trading and in the stock market as well as backing our money with gold...but didn't we get rid of that during Nixon sometime in the late 60's, wasn't it the Bretton Wood Act??

[Edited 2006-03-29 18:14:47]
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RE: What Do We Back Our Money With?

Thu Mar 30, 2006 3:04 am

Back in the 1950s (I think thats when it ended) we were backing our money with silver. If you ever got your hands on a older $1 bill from the 1950s and (maybe) 1960s, it will say "Silver Certificate" and "in silver payable to the bearer on demand."
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RE: What Do We Back Our Money With?

Thu Mar 30, 2006 5:56 am

Full faith and credit of the United States government (therefore the people).
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RE: What Do We Back Our Money With?

Thu Mar 30, 2006 7:38 am

Actually I belive the correct term for the money is Fiat Money. Definition below from internet search of the term.

In economics, fiat currency or fiat money is money whose purchasing power derives from a declaratory fiat of the government issuing it. It is often associated with paper money unbacked by fixed assets, issued without the promise of redemption in some other form, and accepted by tradition or social convention. Fiat money is called fiduciary money in many languages.

The widespread acceptance of a fiat currency is enhanced by a central authority mandating its acceptance under penalty of law and demanding it in payment of taxes or tribute. Fiat money can be contrasted with alternative forms of currency such as commodity money and private currency.

Most currencies in the world have been fiat money since the end of the international gold standard of the Bretton Woods system in 1971. However, some of the major currencies today, despite being based essentially on arbitrary decree, have become so trusted that they are termed hard currency.
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