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Archive for the ‘reserve currency’ tag

May 26, 2018

What Countries use US Dollar and Why?

Posted by in categories: bitcoin, cryptocurrencies, economics, policy

Other than the United States, 5 U.S. territories and 12 sovereign nations use the US dollar as their legal currency. (Note that Micronesia covers six sovereign countries).

Additionally, I have traveled to island nations and some countries in Asia and Pacific that peg their currency to the US dollar. In these regions, citizens accept US dollars interchangeably with their own national currency, and their governments don’t seem to discourage or prosecute such transactions.

What gives value to paper?

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Sep 6, 2017

Spell it Out: What, exactly, backs Bitcoin?

Posted by in categories: bitcoin, cryptocurrencies, economics

On August 1 2017, the value of a Bitcoin was at $2,750 US dollars. Today, just over one month later, it is poised to leap past $5,000 per unit. With this gain, many people are asking if Bitcoin has any genuine, inherent value. Is it a pyramid scheme? —Or is it simply a house of cards ready to collapse when the wind picks up?

In a past article, I explained that Bitcoin fundamentals ought to place its value in the vicinity of $10,000.* (At the time, it was less than $450, and had even fallen to $220 in the following year).

For many consumers viewing the rising interest in Bitcoin from the stands, there is great mystery surrounding the underlying value. What, if anything, stands behind it? This is a question with a clear and concise answer. In fact, it has a very definitive and believable answer—but it is easiest to understand with just a little bit of historical perspective.

At one time, G7 fiat currencies were backed by a reserve of physical Gold or the pooling or cross-ownership of other currencies that are backed by gold. That ended in 1971 when the Bretton Woods agreement was dissolved by president Richard Nixon in Ithaca NY.

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