[ashok_c741]

I have a question about how much currency can a country print. Some say it has to be backed by Gold. It seems that America has roughly 8000 tonnes of gold. So the total value is approx 3200 billion US$. The population of america is approx 32 billion. So if we print currency only up to 3200 billion US$ then each american citizen will get only 1000 US$ with him. It means currency has to be printed in many more multiples of gold value then what is the use of backing with gold. Instead why can't they print the currency based on population.

I also heard that US govt borrows the money from FED reserve. What is the need for it to borrow the money for interest when it can print the currecny itself.

[ebaines]

ashok: the US went off the gold standard many years ago. So no - there is not a pile of gold somehere that backs the currency. Instead our currency is backed by "the full faith and credit of the United States of America." What that means is: trust us, our money is good. What is also means is that the government is free to print as much of the stuff as they like. It's the job of the US Treasury and the Federal Reserve to control how much actually enters the money supply. If they print too much then the value of the dollar goes down and inflation rises. So the treasury will often decide to borrow money rather than simply print more of it.