From the course: Economic Tips for Everyone

Currency markets and values

From the course: Economic Tips for Everyone

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Currency markets and values

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- Currencies are issued by countries and their central banks. This includes the U.S. dollar, the Japanese yen, and the Indian rupee, as well as every other currency that's issued by a central bank and helps facilitate international trade and transactions. At one time, currencies were backed by precious metals, like gold and silver. In fact, in the United States in the 1960s, dollars had the words Silver Certificate written on them, and they could be redeemed for actual silver. But today, currencies, including the dollar, are no longer based on silver or gold. They are fiat, meaning that they are not backed by anything and they have no intrinsic value. The only value they have is in the way people and companies exchange them for labor, goods, and services. Dollars today have the words Federal Reserve Note on them. And if you take one of those dollar federal reserve notes to the Federal Reserve, the U.S. central bank, and trade it in, or if you trade in one of those silver certificate dollars from earlier times, you won't get any silver or gold. All you'll get is another dollar.

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