Does the statement mean that I can, on demand, exchange the note for its equivalent value in gold, silver or whatever else the bank may happen to have on hand?
2006-06-18 03:20:54 · 8 answers · asked by seven-per-cent solution 1 in Business & Finance ➔ Personal Finance
It's a hold over from the old days. You did used to be able to walk into any bank back in the day and demand actual gold or silver (dollars are called silver certificates) in exchange for the paper money. That is no longer the case. In theory, the worth of our bills is still backed by actual gold held by the government, but money is really more of some agreement we all have that this bill is worth something. When you think about it, we are all grubbing for a buck, and it's really just a piece of paper.
2006-06-18 03:25:08 · answer #1 · answered by Anonymous · 0⤊ 0⤋
In the UK way back in the mists of time people bartered goods or services or if they were rich enough paid for stuff with gold. Obviously, like today, there were also theives so travelling about the country with a load of gold was not a good idea. So banks were bron where you could get a piece of paper that said you did have the money at the bank and the bank would 'pay the bearer on demand the sum of X' These were often hand written and would promise any value not just the 5, 10, 20 we are familiar with. Many banks would produce these 'bank-notes' not just the Bank of England and some did print them too (In a way they were a bit like vouchers for a shop). But just like you see in emerging economies the banks weren't always as secure as they proported to be and some people distrusted the bank's notes and sometimes with good reason.
Eventually carrying gold around got to be dangerous and the printing of 'bank-notes' got centralised but 'money' is all based on a trust thing which is based on the gold reserves (in the UK this is literally a stock of gold held at the bank of England - apparently so secure that they also hold the gold reserves for some other countries too). We work for money which has a certain value. We trust our boss to pay us that agreed money and we trust that that money will buy us food etc. When people loose trust in their banks, their notes, their worth etc that's when you get massive inflation, like in Zimbabwe at the moment, when the bank's notes become more and more worthless because people are worried about the future and don't trust that the bank note given them today will buy them anything tomorrow.
As you will realise if you ever try to exchange currency the value of money isn't just based on the price of gold - otherwise all currency would be of the same value. The value of money is based on many factors such as the productivity of a country, its level of national debt and the price of goods in the shops etc etc.
In short - a £5 note is worth £5 worth of gold but you may find that in the shops you get the equivalent of a lot more or a lot les than that depending on the economic factors, the confidence of buyers and sellers and the trust that is founded in your £5 note.
2006-06-18 05:06:23 · answer #2 · answered by Leapling 4 · 1⤊ 0⤋
Untill the 1970's most countries' currency was backed by physical gold. That stoped when the governments stepped off the gold standard, and let their currencies become free floating.
You will notice that the wording of notes before that time is different to the wording on the notes in circulation today. Money without physical backing is also called FIAT money.
Bear in mind though, that gold also only has a certain value, because people attach value to it, their is no intrinsic economic value to anything.
2006-06-20 03:39:00 · answer #3 · answered by Piet Strydom 3 · 0⤊ 0⤋
In theory Yes, In practise No, Its one of those stupid laws that has never been struck from the records, but can not be enforced legally. There are lots of laws that have just fallen out of use but never been overturned in Parliament or the law courts, like my own favourite law that ever man of fighting age must practise the firing of their longbow on the 1st Sunday of every month at the direction of the local church and or land owner.
2006-06-18 03:33:22 · answer #4 · answered by citalopraming 5 · 0⤊ 0⤋
Only if its a gold or silver certificate.
Banks dont generally have gold or silver in them by the way.
2006-06-18 03:26:35 · answer #5 · answered by snakeman11426 6 · 0⤊ 0⤋
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No.
I remember.
In the early sixties, it was still possible to exchange silver certificate dollar bills for silver. By the time they ended it they had gotten scarce.
2006-06-18 03:27:04 · answer #6 · answered by hunter 4 · 0⤊ 0⤋
Did you know that it is perfectly legal to write a cheque on the side of a Pig or any other animal for that matter?
True but definately weird.
2006-06-18 10:56:44 · answer #7 · answered by Anonymous · 0⤊ 0⤋
how should i know?
2006-06-18 06:17:37 · answer #8 · answered by :)☮♥ 3 · 0⤊ 0⤋