How do Governments control the value flow in the world?
How Paper Money Works?
A century ago, our ancestors used to carry bars of gold around the world, trusting that it represents value. Although, at some point banks and governments took over by printing paper money. And so, paper money was presented as an instrument of practicality and convenience. People gave their gold, let’s say worth of $100 to the banks and governments and in return they received receipts certifications worth of $100 dollars, better known as bills.However, as time progressed and due to macroeconomic changes the bond between paper receipt and the gold it stands for was broken. Although, people stopped trading gold and they started trading receipts that were backed by nothing but government’s promise. Why did that continue to work? It was continued simply by the trust of people. Even though there is no actual commodity backing paper money, people trusted the government and that is how fiat money was created. Fiat money is known as “legal tender” coins or bank notes that must be accepted if offered as payment. That is how the value of the today’s money actually derives from a legal status, given to it by the government (central authority). Although fiat money has 2 disadvantages.
The 2 main disadvantages of fiat money
• It is centralized, since you have banks or governments that controls and issues.
• It is unlimited by quantity, since the bank can print as much as they want to whenever it is needed.The answer to our initial question is that by printing money and inflating the market, the value of each currency drops, which makes your own money worth significantly less. This is how the banks control people’s value, something that makes them having absolute power. Power corrupts absolute power corrupts absolutely!... (time for thinking bitches).