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<p>[QUOTE=&quot;medoraman, post: 1307770, member: 26302&quot;]You are completely correct about coinage being gold and silver and not having to worry about the other party making good on promises. Paper currency, however, started in every civilization as a debt. Think about it, what does paper currency stand for? It is an IOU stating that if presented to the issuer they will pay you in &quot;lawful money&quot;. Look up the very first US issued currency and see it was small value bonds. This worked so well the US then issued regular currency that did not pay interest, people accepted it because nominally they were promised gold or silver coins in exchange if they traded them in. Later they broke their promise to redeem in gold or silver, but by then people were used to using currency.</p><p><br /></p><p>Bottom line what is a FRN? I mean, ignore the fact others treat it as money. Legally, what is it? It is a claim on the assets of the Federal Reserve, with as much rights to those assets, (fractionally), as all other debt holders. That is the underlying &quot;asset&quot; the FRN entails. A US note or treasury has as its &quot;asset&quot; a right to the assets of the US. If General Electric issued currency, their notes would be claims on their assets, identical to all other lenders to GE.</p><p><br /></p><p>Point being sir all currency in the world is a debt instrument that simply does not pay interest. Why would one debt instrument, a FRN, be called a &quot;dollar&quot;, but not other ones? Answer is they are all US dollars, its just some US dollars are FRN, but most are not.</p><p><br /></p><p>I hope that is clearer. Its a very common misconception.</p><p><br /></p><p>Chris[/QUOTE]</p><p><br /></p>

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