mact3333
Member
The Federal Reserve can create dollars at will (it's literally a few computer commands), and won't let the FDIC "run out of money". Trust in bank balances is such a basic concept.
The main force that creates the value of the dollar is that U.S. citizens and corporations have to pay about ~4 trillion dollars of tax obligations per year, which can only be settled in U.S. dollars.
This is what couples U.S. economic activity to the value of the dollar: more income generates more taxes, which generates demand on the dollar, and a 200 years robust track record of this demand creates expectations of this to continue.
Nothing more, nothing less.
"Faith" plays little role, money is not a religious concept.
1. while your first point(tax collection)has some merit , that is a technicality rather than the cause...money is actually debt in a fiat system...if the dollar is a IOU that people give value to, they have to have faith that the debtor(US govt) will pay it back one day, hence the masses dont cash in all the treasuries all at once...if they lost faith, the value of debt and dollar would tank...we have faith that the US govt won't dissolve...and although it is true that the Fed Reserve could print money all day if they wanted to, in practicality they can't and would not do this as it would cause severe inflation...gas would be 20.00 a gallon and loaf of bread would 20.00 also...they have to increase the national debt in gradual increments otherwise we'd have runaway inflation...do you realize that despite our banks holding 10T of our cash in the US, the FDIC only has 25B in their reserves lol?!.....if there was a true run on the banks on a national level, sure the Fed's could print 10T to fund the FDIC, but you better have a bucket of cash handy to buy your mornings starbucks...
.I would also argue that money is beyond faith, it is our religion...we pray for it, we go to war with certain countries and kill for it(oil/money), our churches demand it, slave away 40 hrs a week when we dont want to for it, do illegal acts for it, our kids get educated because of it, allows me to travel anywhere I want because of it... ...in many ways it is our god(no disrespect to religious folks just a figure of speech only!).
You being in Vienna should understand the threats of unlimited money pumping given the previous history of your close neighbor.
Rant over, its all good...we both have teslas and believe in Elon...
