The value of gold is based on the same thing: the idea that people believe it is valuable. Gold is useless. It's okay for the dollar to have the
value that it does because people believe in it enough for them to trade goods and services in exchange for it. Ultimately all currencies' value is
determined exclusively by the beliefs of the people who use it. If people believe it is valuable, then it is - by definition - valuable to them. It
doesn't have to have some "objective" value, I don't know what that would even mean.
Currency is in stead of directly bartering for goods and services. That means that it is not the same as a good or service, which in turn means that
the currency itself will not have any innate value. We imbue it with value, and as long as we agree - or at least as long as enough people agree -
then the currency is useful, its value is legitimate, and it doesn't have to be backed by anything more tangible than a shared belief. The same is
true of gold, it's only valuable because people believe it is.
Edit, to add: So, I suppose the title of your thread is correct, it is based on voodoo and superstition. But it's a very strong voodoo and
superstition, and its no less legitimate than any other belief. And as long as enough people subscribe to the same voodoo and superstition the dollar
can provide the basis for a highly functional system, which is all that it is intended to do. All laws, ethics, and religions are based on voodoo and
superstition too(in the sense that there is nothing objective in reality on which we base these things - they are all beliefs), so combine that with
the nature of currency and it turns out that pretty much all of society is based on voodoo and superstition. I don't think that realizing that
diminishes it though.
[edit on 28-1-2010 by OnceReturned]









