Saturday, November 13, 2010

Debt and Patriotism

The U.S. dollar is not backed by gold. It is backed by federal debt. And this is okay, because you are a patriot and you love your country.

It is okay also, because the quantity of money needs to grow along with output and population -- and along with prices too, for that matter -- and there is not much chance of gold production fitting that requirement very well.

But when you think about it, it's kinda funny: Given that our money is backed by government debt, if we reduce the federal debt to zero, we can have no money at all!

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