Paper money, why do we use it?

At one time coins had real metal value and paper money was backed up by gold. That is no longer the case. So why do we accept paper IOU's from the government as money?

2 Answers

  • 9 years ago
    Favorite Answer

    It is called Fiat money and it is easier than carrying around large round rocks (once used as money). You are right that the value of money is only there as long as people believe in it and have faith in the government that is issuing the money. Scary, isn't it?

  • 9 years ago

    gosh, idk without looking it up but I'd think that there had to be some kind of system to barter and using something produced by the government (paper or coins that corresponded with a number) would make easier for the IRS to tax people if it was a figure rather than an estimated value. Coins are expensive to produce (maybe less for paper) like even now the government is losing money producing pennies. Yes our money once was backed by gold (may even go back to that in the future if things get really bad). Wasn't it in wartime when gold was last collected from the people? Why do we accept IOU's, well I don't see them as IOU's I see them as "exchange" material. Why do you accept it as an IOU from the government, probably because you see it would allow you to buy something.

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