Board Thread:Micronations/@comment-5942598-20131214120720/@comment-24285185-20131220173219

OrangeHills wrote: How does one "Back" a currency? I am curious. Having a supply/reserve of a physical item that has physical and usable value that holds up the face value on the coins and notes. One can print a trillion dollar bill, but all it is is a piece of paper or cloth, but it you had a trillion dollar supply of gold, then the gold is actual wealth. Money and value are based on trust, a subconcious agreement of sorts. When a nation's people have an idea of value based around a piece of gold or cloth, then they are going to agree to base the value of items on it. We think a single dollar is a small amount, so when a guy looks at a car, a machine that took a lot of resources to be build, then he is going to think that it must be worth a lot of dollars. Value is subjective, and having a standard to base a currency off of will strengthen the idea that your dollar is worth what you say it is.

Someone could object to the idea that your piece of paper money is worth anymore than what it is made of, but if you have something to back it up that they find to be valuable, then they are going to think the note holds actual value beyond what they think a piece of paper or cloth is worth. It increases their trust in the value you claim your money has.