What backs money?

The most important element in creating money demand is the competence of issuer and accountability. Competence is largely composed of setting targets and effectiveness of tools used. Accountability assures people hat the monetary system is run in the interests of the public.

That’s the backing, not a metal that if the system collapses you cant usually redeem anyway.

What fundamentally backs money in the long run is transactions money demand. Taxes create some demand. Without taxes people would still demand money because of its usefulness in making payments. Taxes can undermine the monetary system if excessive or if fiscal policy is poor.

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