Tuesday, August 16, 2011
I'm busy researching for a project and dug some fun stuff up.
In class, I piped up when someone asked how the value of money is measured. I mentioned that the world uses gold to back up their currencies and cited examples like Fort Knox and various recent events to back that up. Basically, I was pulling stuff outta my ass and cruising on hearsay.
The textbook mentioned a few pages later that South African hadn't used gold backing since the 70's. The teacher's mentions I'm wrong and that lovely girl I have a crush on faints in mock-shock (<3). I made it sound so real, apparently.
Turns out, the truth is much worse.
We've been running on a thing called Fiat money in recent history. Inflation has caused gold backing to become worthless, because $1 to 0.0000000002 ounces of gold is probably a bad idea. Or some other absurd number like that. Only the Swiss have currency with any gold/silver backing. The rest are using Fiat money.
Fiat is Latin, meaning 'let it be done,' so "Fiat lux" means, "Let there be light."
I like to think it means, "Make it so." which it kinda does.
It got it's name because the Fiat money has very little or no backing. It has value because governments say so. The government tells the people to use the money. If foreigners come into play, the government promises that this money has value. They just say, "Let there be money." and it happens.
So when you hear boring people on TV go on and on about 'Confidence in the US dollar dropping,' what they actually mean is, someone realised it was a bad idea to trust people up to their top hats in debt with even more loans and they're getting less confident about those promises of being paid back.
Which basically means that the world's largest nations and greatest leaders, buying, selling and loaning billions per day and occasionally run into debt are dishing out IOUs to each other.
Even EVE Online players did better. When hauling contracts were signed (have my stuff, take it somewhere for me), there is always collateral. If the cargo does not reach its destination, then the delivery guy loses a predetermined portion of money. So even those guys who do pull Number 7 and Number 1 have more to back their promises than our esteemed leaders.
Economics is destroying my faith in the world, rather than showing me that there is enough money and resources in circulation to solve most of our problems.