http://www.zerohedge.com/article/here-why-dollar-now-effectively-worthless The currency in circulation is backed by something....no ? What exactly backs it ? Perhaps the expectation of future possible positive net trade ? If not....where from ? If from trade....at what value the dollar ? What is the inevitable comparable dollar valuation ? http://www.economist.com/node/14901104
"What Is The Dollar Worth ? " About 100 cents, exluding those who want to melt older copper pennies. If so, then about 20 nickels, 10 dimes or 4 quarters...
The value of goods is determined by supply and demand. Like anything else of subjective value, the dollar is worth whatever someone is willing to pay for it. Remember from your economics that the dollar is not money in itself, but an IOU. Even gold and silver are subjective, but their limited supply makes them more stable, especially in the face of inflation. The dollar is worth on day X whatever the majority of dollar buyers think it is worth... but just for day X. You won't know what the dollar will be worth on day Y until you get there. Supply and demand is a good indicator of future value for the dollar, like anything else, and the trend is down for decades to come, according to M3. The US currency, coin and paper alike, is not backed by anything tangible. Legally, it is backed by the full faith and promise of the American people. Which leads right back to the above paragraph. Today's dollar is worth about 3% of what it was in 1913, most of that loss due to removal from the gold standard, and the money supply being inflated by the Fed. Anytime something rare becomes common, the value goes down, including the US dollar in circulation. If you are looking for intrinsic value, there is none, since the dollar could go to zero. Look at Zimbabwe and Argentina.
The thing that backs any fiat currency is the Government's ability to collect taxes and the citizen's willingness and ability to work. All a dollar bill represents is a receipt for work performed. This is one of the things that people have used to challenge the income tax code. If a receipt is issued for work performed does that receipt represent income? The argument is work performed is nothing more than an even exchange for that receipt. Not surprisingly, this argument has fallen on deaf ears.