What Gives A Dollar Bill Its Value? – Doug Levinson

A summary of the passage is that the value of money, such as a hundred dollar bill, is determined by how much is in circulation and how it is linked to valuable commodities. The US dollar became a fiat money in 1971, meaning it is not linked to any external resource but relies on government policy to decide how much currency to print. Monetary policy is set by an independent Federal Reserve System (the Fed), which is not under the direct control of any branch of government. The Fed balances the money supply with the total value of goods and services in the economy to prevent inflation and deflation. Most economists believe a small, consistent amount of inflation is necessary to encourage economic growth.