Bullion Buyer’s Guide
Then, as they say, it all changed. World Wars 1 and 2 wreaked havoc with the world’s economies, and one by one, nations began to abandon the gold and silver standards that they once had, unlinking the bank note from the precious metal it represented, and turning the currency into what is known as fiat currency. Currently, today, a United States bank note (or dollar, as more commonly called), is linked to absolutely nothing. It is not redeemable for anything except a) goods, b) services, and c) more paper notes. This presents a very interesting point of conversation: paper notes only have value because people believe they do. In and of themselves, they are only paper, and they only have value because they can be redeemed for something else. You cannot eat, shoot, build with, or heal with paper notes.
Wait- can’t the same be said about gold, silver, and other precious metals? Don’t they also have value because people simply say that they do? Yes and no. There is one key difference between precious metals and paper money: precious metals are rare, and paper money is not. Read that sentence again – governments may print as much paper money as they like until they exhaust all the forests in their lands, however, they cannot manufacture gold, silver, platinum, or any other precious metals. They must find these metals in the earth, and the earth is only giving up so much of them, which is why they are rare, and which is exactly why they have value.