Keith Weiner makes the interesting point that the dollar has value because, and only because, of the necessity to service debt.
“The dollar does not have value because of some fragile, collective faith. The dollar has value because of the struggles of the debtors. What are you willing to sell, in order to avoid foreclosure on your house, repossession of your car, or bankruptcy of your business? Your labor and the products of your effort. As much as you need to sell, in order to service your debts and avoid default.” Keith Weiner
Debts must be serviced; all debts – individual, corporate and sovereign. It is that demand that gives dollars their value.
Yes, they have a value because of the underlying asset on the Central Banks ledger – bonds, but that is not a value that can be realised by the holder of the debt note. No more so than a dollar that is ‘backed’ by Gold. If it is not redeemable for Gold, it is of no real value. And anyway, the value of the bond is denominated in dollars.
The problem with today’s currencies being made redeemable for Gold, is that they are still created by debt and it is this debt that will remain the core asset. The debt will never run out, the Gold can and probably will.
Only a free market in money can work. In a free market, no sane person would accept anything but Gold, or its surrogate silver, or notes that are instantly redeemable in the same.