Okay, it’s my understanding that when dealing in the market buying and selling shares of stock, there is, somewhere along the line, real currency backed by precious metals or stones packed safely away in some safe or stronghold. The paper stuff being shuffled about is only a representative of that real stuff.
So here are the questions: If all the global markets crash, I mean crash to the ground and all the markets die, where is all that real money??? Who has it? Surely it has to be somewhere doesn’t it?
Yep. But it’d be worthless. Look at the 1929 Crash. Or the times in Germany post WWI. I seem to recall that during that time, money was so worthless in Germany, they’d use it to wallpaper their homes.
So, the paper currency is worthless, but where is the gold, silver, diamonds etc. that was the true financial backing for all that currency, and who holds the viable papers of true ownership? Fort Knox is supposed to house the gold that backs United States currency and obviously there must be some value yet to that single metal OR does all that become worthless too?
Paper money is no longer backed by hard money, (gold standard). Probably because there isn’t enough gold or silver to back all of it, we just trust that too much isn’t being printed to undervalue the dollar and cause inflation. I am beginning to lose that trust.
Federal Reserve Notes are fiat currency, which means that the government is not obligated to give the holder of a note gold, silver, or any specific tangible commodity in exchange for the note. Before 1964, some notes were “backed” by silver and before 1933, by gold: that is, the law provided that holders of Federal Reserve notes could exchange them on demand for a fixed amount of metal (although from 1934–1971, only foreign holders of the notes could exchange the notes for gold on demand). Since 1964 (see Silver Certificate), Federal Reserve Notes have not been backed by any single specific asset, but are backed by all assets held in collateral by the Federal Reserve, and by the power of the government to collect assets in taxes. While 12 U.S.C. § 411 states that “Federal Reserve Notes . . . shall be redeemed in lawful money on demand” this means US coins. Thus today the notes are backed only by the “full faith and credit of the U.S. government” —the government’s ability to levy taxes to pay its debts. In another sense, because the notes are legal tender, they are “backed” by all the goods and services in the U.S. economy; they have value because the public may exchange them for valued goods and services in the U.S. economy.
So, basically, all that stuff is really ‘IOUs’..................... and if every financial institution everywhere crashes…... who gets to collect the IOUs?
So, basically, all that stuff is really ‘IOUs’..................... and if every financial institution everywhere crashes…... who gets to collect the IOUs?
Well, the same goes with the precious metals to a large degree. To most people they are precious metals merely because of their monetary value, not because the metal itself is of any use to the person as a metal. It was simply arbitrarily decided some time in the distant past that gold and silver would be used as a measure of value. Gold’s itself is not really all that useful for eating, for wearing, for warming your house, and so on. Paper money, or even electronic money, isn’t any different in that respect. They can both be considered as symbolic replacements for actual things of value. A market that deals in nothing but gold can crash as well.
And if everything, everywhere crashes to the ground and there is no currency of any value, no metal of any value (or oil either), how do all the institutions, people and countries in debt to others pay that debt off? Do(es) the country(ies) to whom we’re in debt come in and start taking goods from anywhere (homes, businesses etc.) to pay off that debt and then make all the citizens indentured slaves?
Or do all the countries and people, creditors and debtors alike come together and invent a new currency and start over again?
And if everything, everywhere crashes to the ground and there is no currency of any value, no metal of any value (or oil either), how do all the institutions, people and countries in debt to others pay that debt off?
They don’t. And that makes things difficult for the other country that is owed money, who then have their own economic problems and thus can’t pay off their own debts, and so on. . .
And then somebody has to sit down and work out a way to solve the mess, which probably depends on how the mess happened in the first place.
