The U.S. dollar is the most traded currency in the earth and probably the most decisive seeing so many Non-native nations grasp eternal amounts of U.S. government-issued Obligation. In consequence, it is not alone Americans that hankering to clock the dollar perform flourishing, however Non-native investors demand the greenback to be beefy, extremely. Every chief currency is backed by something and we'll see what backs the dollar.
According to the Federal Reserve Bank of New York, there was $829 billion in circulation endure of 2007.
Government
Bond ratings agencies percentage the credit of nearly every entity that issues bonds, therefore governments have credit ratings. The USA has a "AAA" rating, the highest possible, meaning the government is not likely to default on its issued debt. This credit rating, in part, backs the dollar because it keeps investors from worrying about default.
Tax Collection
Like it or not, the dollar is primarily backed by the government's ability to generate revenues to pay down its debt. In other words, if the Internal Revenue Service (IRS) is collecting a lot of tax revenue, it is a good thing for the dollar. It may not be a coincidence that the Federal Reserve and IRS were created in the same year.
Fiat Currency
The U.S. dollar is a fiat currency, meaning that the dollar's value is derived from the fact that the U.S. government accepts it as a form of payment.
