Quote:
Originally Posted by DWB
That is pretty much how every fiat currency in the world works. Everyone believes it is worth something because the governments and banks say it is, and tells them how much, therefor it is worth something.
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During the 1980's there was a joke in Brazil that you would know how high the inflation rate was with what people rode, a bus or taxi, on their daily commute. If the inflation rate was higher than normal, there would be more people riding the bus, and if it was lower, they would be riding the cab. The difference was that you paid the bus when you boarded, whereas you paid the cab when he dropped you off at your destination. At the time Brazil and Argentina, had triple digit inflation. The inflation was was because the people didn't trust the local currency.
The real, which replaced the older inflationary currency was a brainchild of two non-government academic-types who sold the idea of an intrinsic value on whatever currency is used. It's a good read, unfortunately, a bit on the technical side.
This is the part where bitcoin is worth whatever value the users would want it to have. The only way for any government to have control over it is if they were able to do bitcoin mining themselves. But since no government, as yet, has any large amount bitcoin in their wallet, then they can't control the value like they do with government backed dollars, euros, yen, rinminbi, etc.
Which is where a lot of people gets confused.