Some questions about american currency...?

Question

my husband was telling me that the american dollar is only worth 50cents.and thats part of the reason that gas is so expensave because in the world market are money isnt that great.i dont know how much i believe this...whats ur opinion/knowledge?another question is...does the u.s. still have gold and silver in the federal reserve or is there nothing to back our money?my husband said we stopped keeping gold and silver back when roosevelt was president.please help.thank u!

Answer 1

your hubby is right, except for the dollar varies depending on what countries currency you compare it to. but the dollar has been weak everywhere lately

Answer 2

The price of oil from the oil-producing nations is often expresed in U.S. dollars per barrel.  So when the exchange value of a U.S. dollar falls, relative to other countries' currencies, the people selling the oil want more dollars in order to get the same relative "value" for the oil they are selling.  That should make sense to you.  The "worth" of the U.S. dollar is relative to other currencies, or maybe to the buying power of a dollar, now, versus its buying power, say 10 years ago.  But it makes no sens to say a dollar is worth 50 cents - fifty cents from when?

A commodity, like gold, does not "back" a currency in any way.  The "gold standard" was an attempt to set some sort of arbitrary value for gold, in hopes that people would accept that as an implicit value of the currency, but economic factors (including people's interest in owning things made of gold but, more importantly, the economic health of a country) determines the value of a country's currency.   Currency is really just a promise to pay, and if the person making the promise seems to be having a hard time, would you trust his promise?  You would probably want a "bigger" promise before accepting.  That means that the value of his promise (his currency) has been devalued, compared to your own currency.  This changing exchange rate is in almsot constant flux.  When a country tries to hold their currency's exchange rate at some level relative to other country's currencies (or against some arbitrary price of gold), then there will be people who buy and sell that currency on the black market, at some value closer to its "real" value.

Most countries in the world stopped trying to abide by some stupid "gold standard) back in the early 1930s, when FDR first took over the presidency.