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Unformatted text preview: for $20. Fiat money is produced and maintained at zero cost. The nearest example is the Susan B. Anthony dollar coin. For practical purposes, our money is fiat money. According to Gresham's Law (bad money drives out good), money that is more than full-bodied does not remain in circulation long. If the value of copper in a penny was more than 1 cent, people would melt pennies down for other uses, e.g. electrical wires. So, if our money is fiat money, what backs our money? The money supply is backed by the assets of the banking system since money is debt. Currency is backed by government debt and government debt is ultimately backed by the ability of the government to print more currency. Dollar bills have value because 1. the demand for them is greater than the supply (scarcity) 2. general acceptability legal tender an item that creditors must accept in payment of debts...
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- Fall '09
- Personal Finance, fiat, market mutual funds