So, what is the backing? Well, fiat money transfers the “backing” from a defined commodity to the productive capacity issuing agency. Ergo, the dollar is worth what it is on the FOREX markets because of the strength of the US economy going forward, and the world’s confidence in the U.S.’s ability to meet its future financial obligations by taxing that productive capacity.
The federal government has always had the ability to issue unlimited currency via its Constitutional mandate. The gold standard never gave value to the currency, which is always one tax credit. It simply imposed an imaginary limit to such spending and reinforced the misconception of money being a “thing” that was no more than a replacement for goods and services in a barter economy. How much shiny metal we can dig out of the ground has never represented the “value” of the productive capacity of any country and was nothing more than another tool, like the debt ceiling, to prevent any benefit to the people derived from “their” currency.
As the monopoly issuer of the currency, the government never needs to “get” currency from taxation or borrowing to spend. This is why the money used to purchase bonds was never spent. It, like taxation, only removed currency from reserves (circulation) to allow spending while remaining under the value of the gold reserve in total currency supply. “ALL” spending is via newly created fiat currency, and always has been.
We can easily do without Treasury bonds, as they are now little more than welfare for banks and those wealthy enough to deal in them. We should probably do that since so many, like yourself, misrepresent them as “debt” instead of the mostly irrelevant accounting function they actually serve, which is only a record of the total “net” money supply after private sector debt is accounted for. Ironically, it is government spending that creates the excess reserves used to purchase bonds, so we are giving purchasers the money to buy the bonds and then paying them interest for doing so. Nice work if you can get it.
