<p>Governments issuing fiat currencies guarantee only that you can pay your taxes in the currency (in fact, they tend to require that you do so). Money primarily derives its value from the willingness of others to accept it in exchange for goods and services, not from the ability to exchange it for a particular shiny metal. </p>

<p>There's an elaboration of the differences between the gold standard and fiat currencies <a href="https://economics.stackexchange.com/q/6811/264">at this question</a>. </p>

CC BY-SA 3.0
2015-11-30T21:40:00.943Z
2015-11-30T21:40:00.943Z
2017-04-13T12:51:38.253Z
dismalscience
<p>Most central banks do not provide guarantees on their currency to the public.  In fact it can be argued that historically they were never fully guaranteed as most central banks issued more receipts for gold (or other assets) than they had, so the receipts were never fully redeemable in the aggregate.  </p>

<p>The American Fed was stressed during the great depression and had to go off the gold standard for the public in 1933.  The international gold standard was retained and dollars were redeemable for gold for a while.  This too was "overbooked" and when the rightly suspicious French started to mass redeem dollars for gold, the Americans had to get off the international gold standard as well in 1971.</p>

<p>Today the dollar is not redeemable for anything.  You can exchange paper dollars for coins or electronic dollars, but that is just changing the form of the same thing (the monetary base).</p>

<p>Because you can go to jail if you don't pay your taxes in dollars, it can be said Americans are forced to purchase dollars and thus provide extrinsic value to the dollars though public tender laws (granted still different from intrinsic value but still important).</p>

<p>Pegged currencies are a different matter and are the closest modern equivalent to perhaps what you are asking.  With a peg, a country must acquire a certain amount of an external currency to maintain a peg.  It could be thought of indirectly that the country maintaining the peg is guaranteeing a redemption of their local currency to an external one.  The idea is to somewhat stabilize the local banking systems which need a lot of artificial stability to survive.  Granted this doesn't work well as pegs often do run out of "reserves" and suffer "runs" just like a gold standard.</p>

CC BY-SA 3.0
2015-12-02T18:14:30.607Z
Yes, got it. Just like the currency crisis as happened with Malaysia due to the peg. Thanks
Sub-Optimal
CC BY-SA 3.0
2015-12-02T01:54:12.967Z
2015-12-02T01:54:12.967Z
user2662680
<p>During the Bretton Woods system, currencies were issued against gold. In contemporary times, what is the real thing against which currency is issued? What does the fiat currency actually guarantee?  </p>

<currency><central-banking>
What does a central bank guarantee against its currency?
Sub-Optimal
# What does a central bank guarantee against its currency?

(Asked by: username_0 on 2015-11-30)

During the Bretton Woods system, currencies were issued against gold. In contemporary times, what is the real thing against which currency is issued? What does the fiat currency actually guarantee?

**Tags:** currency, central-banking

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## 2 answers

### Answer by username_2 on 2015-12-02. Score: 5 | Accepted answer

Most central banks do not provide guarantees on their currency to the public. In fact it can be argued that historically they were never fully guaranteed as most central banks issued more receipts for gold (or other assets) than they had, so the receipts were never fully redeemable in the aggregate.

The American Fed was stressed during the great depression and had to go off the gold standard for the public in 1933. The international gold standard was retained and dollars were redeemable for gold for a while. This too was "overbooked" and when the rightly suspicious French started to mass redeem dollars for gold, the Americans had to get off the international gold standard as well in 1971.

Today the dollar is not redeemable for anything. You can exchange paper dollars for coins or electronic dollars, but that is just changing the form of the same thing (the monetary base).

Because you can go to jail if you don't pay your taxes in dollars, it can be said Americans are forced to purchase dollars and thus provide extrinsic value to the dollars though public tender laws (granted still different from intrinsic value but still important).

Pegged currencies are a different matter and are the closest modern equivalent to perhaps what you are asking. With a peg, a country must acquire a certain amount of an external currency to maintain a peg. It could be thought of indirectly that the country maintaining the peg is guaranteeing a redemption of their local currency to an external one. The idea is to somewhat stabilize the local banking systems which need a lot of artificial stability to survive. Granted this doesn't work well as pegs often do run out of "reserves" and suffer "runs" just like a gold standard.

> **Comments:**
> **username_0**: Yes, got it. Just like the currency crisis as happened with Malaysia due to the peg. Thanks  

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### Answer by username_1 on 2015-11-30. Score: 3

Governments issuing fiat currencies guarantee only that you can pay your taxes in the currency (in fact, they tend to require that you do so). Money primarily derives its value from the willingness of others to accept it in exchange for goods and services, not from the ability to exchange it for a particular shiny metal.

There's an elaboration of the differences between the gold standard and fiat currencies [at this question](https://economics.stackexchange.com/q/6811/264).


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