What Money Really Is and Why you Need to Know

We all believe that money means something

We think the fact it is backed by a government that there is an underlying value which each dollar or pound represents.

Truth is, money isn’t worth the paper it is printed on

Incredibly, whether you choose to believe it or not, it hasn’t been worth anything for nearly 50 years.

In 1971, President Nixon of the United States cancelled the Gold Standard, which it had been moving away from since 1933. In short, what this meant was that the value of the dollar was no longer tied to the value of gold.

Previously, there was a commodity which underpinned the price of a dollar. Nixon enacted policy which led to the unilateral cancellation of the direct international convertibility of the United States dollar. The implication of this was not only profound for the dollar, it was for almost every other currency in the world. Consider that each is measured against the dollar, with its value often derived from it, and you being to understand that all the money in the world was now not worth the paper it is written on either.

With countries holding such large volumes of US treasury bonds they are reliant on the continued success of the USA. If the…