National sponsorship is not a requirement for a currency
What exactly does it mean when people say that a currency is backed by a government? ”Backed” to me implies, e.g., redeemable for gold which is clearly not the case for the US dollar. Is it that the government issue bonds denominated in that currency? But that has nothing to do with the money supply per se...?
Please explain.
The US dollar, if you live here, can be traded for a bit of freedom - pay off the IRS and avoid jail time. It's also good to settle a debt - the government will force the creditor to accept USD.
If I try to buy a macbook in cash in Portugal, that is illegal. I will be fined for it.
Does that mean the euro is not a currency?
What is it about being backed by a nation which makes a currency more valid?