Posted on 05/07/2016 12:20:37 PM PDT by Lorianne
Not counterfeit.
Because of rampant (hyper)inflation in the local currency, their people have taken to using the USD for trade amongst themselves. That way, when you receive a USD today for something, you can be reasonably confident that that USD will be worth about the same amount tomorrow.
Problem is that there aren’t enough of those little green pieces of paper in their country for everyone to be able to commence trade (and that once people have them, they prefer to take them out of the country).
Say I want to buy a dozen eggs from you, and you want to use that money to buy a loaf of bread, and the baker wants to use that money to buy...etc. If I don’t have a few Washingtons handy because they are in short supply and someone else happens to be holding them at the moment, the whole exchange can never get started and the best we could do is try to work out some complicated barter system. We don’t have enough “liquidity”.
So some agency that has money to back it up is going to issue a bunch of pieces of paper that effectively say “The Bank of XYZ will exchange this piece of paper for 1 actual USD note” (probably at some time in the future, I barely skimmed the article). This increases the number of notes that can be used so that trade can commence.
It almost seems like the “perfect” combination of the gold standard and fiat money, in a sick kind of way. The currency is backed by something relatively fixed in value (compared to the local economy at least), and yet it’s also backed by something that has value only because our government says it does.
The Norks have been printing fake US $100 bills for years.
Well, it was 1983.... I think.
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